Medieval Ideas about Coins and Money
Implementing the standard formula required both a theory of convertible tokens and a technology for producing counterfeit-proof small denomination coins. Having described the history of the relevant technology, we now recount theoretical developments that culminated in the discovery of the standard formula. This chapter summarizes the contributions of medieval jurists and how they constructed and then gradually qualified a money-as-commodity view. The next chapter then tells about the fresh approach and new findings about monetary theory brought by the Renaissance. In both chapters, we can’t help seeing theorists discovering features of our model and arguing about its parameters.
Our story begins in 1100, when pious lawyers and monks trusted God for many things, but not to support the values of coins. For that they trusted only silver and gold. It ends near 1900, when philosophers proclaimed that “God is dead,” but monetary theorists had discovered how a limited supply of currency saying “in God we trust” could be better than gold. Theorizing about small denomination coins contributed in many ways to that discovery.
Medieval jurists as advocates of Arrow-Debreu
All modern theories of money begin by observing, as Hahn (1965) did, that the competitive equilibrium model of Arrow (1951) and Debreu (1954) has no role for fiat money, an asset that is valued only because it facilitates exchange. In the Arrow-Debreu model, all exchanges occur through a frictionless credit system. Credit works so well that no coins or notes are ever required for exchange. The Arrow-Debreu model would make coins worth the metal they contain.
Modern theories of money try to explain how intrinsically useless fiat money can have value. All such theories point to frictions in the environment that inhibit credit.1 When theories of fiat money are applied to coins, they explain how a coin can have a market value that exceeds that of its metal content. In our model, this happens any time the price level is lower than the melting point of a coin.2
We begin our account of monetary theory with the medieval jurists, who wrestled with a range of legal problems related to money. Remarkably, their starting point was the coins-as-commodity view of Arrow and Debreu. The jurists applied a type of linear pricing argument now common in finance, valuing a coin by unbundling it and additively pricing its constituent elements. We describe how they originally came to this view, how they applied and then slowly modified it as they confronted practical problems created by an increasingly diverse set of coins.
Romanists and Canonists
We trace the evolution of thought through two groups of jurists: the romanists, who specialized in Roman law, and the canonists, who studied the law of the Church.
Romanists developed their view of money in the context of a doctrine to handle disputes about repaying money loans. Roman law classified contracts according to the nature of the object lent. When disputes about money loans first arose, romanists classified money as a fungible, then applied the rules governing consumption loans. They settled on the principle that money should be valued by weight.
When they adopted this principle, the romanists chose from among several relevant but conflicting passages of Roman law. Parts of Roman law viewed money as deriving its value from government authority, or from its usefulness in overcoming the difficulties of barter. The romanists downplayed and distorted such passages to minimize possible conflict with the principle of valuation by weight.
They went so far as to prescribe that minting should be subsidized by the government, by setting the seigniorage plus the brassage rate to 0. In our model, that collapses the interval bounding the price level to a point, and makes valuation by tale identical with valuation by weight.
Valuation by weight applied easily enough to the relatively simple cases that arose in the single denomination coin system that prevailed before 1200 based on the Carolingian penny. But after 1200, more difficult cases arose because monetary systems grew more complex with the appearance of multiple denominations (large and small silver coins); coins of different metals with fluctuating relative prices; debasements, enhancements, and demonetizations; and units of account based on different coins. For a long time, valuation by weight survived these tests. In the early sixteenth century it was still called the “communis opinio.” But over time various jurists allowed qualifications and exceptions, some of which were seeds for later ideas about token and fiat currencies. Some of these, such as legal tender laws, or the liquidity value of an object that solves the double coincidence of wants problem, are central to modern theories of money. Thus, here and there individual authors carved out exceptions and introduced nuances, making the commodity-based view of money increasingly difficult to apply, beset by special cases, and less and less based on a universal principle.
Meanwhile canonists developed their own views of money. On the subject of loan repayments, they were content to adopt the romanists’ doctrine. But as students of church law, they approached money from other points of view, closer to public law than to private law. They thought about the morality of debasements, the conditions under which governments could and should levy a positive seigniorage rate, and what seigniorate rate to set.
The next chapter describes how the Renaissance brought an attempt to break away from the traditional interpretation of Roman law. Money then became a subject of its own, not merely an incidental to the law of contracts. More intent on basing law on reason than rationalizing existing law, humanists returned to the texts of Aristotle and also drew on monetary experiences recounted by historians and travelers. They considered the validity of valuation by tale. Coincidence or not, the Renaissance also witnessed a new technology that made it possible to experiment with a new idea: money worth more than its weight in silver.
The remainder of this chapter is organized as follows. In the next section, we recount the construction of a common doctrine on debt repayment based on valuation by intrinsic value or weight, and we describe how well the doctrine handled the practical cases presented to it before 1200. The following section describes a series of questions that arose to challenge the common doctrine along with the monetary complications following 1200. These included the following questions: How should pennies issued by different states be valued? If a state redefines a penny, how should it be valued? How should metal bullion be valued in terms of coin? How should demonetized coins be valued by creditors? Should valuations be aligned with observed market exchange rates? How should settlements of debt contracts respond to debasements, currency reforms, and the spread of alternative “units of account”?3 And how could debts owed in units of one currency be repaid in coins of another? The common doctrine of valuation by weight tried to provide a workable unified framework that answered these questions. We then describe how a question arose from public law: What should the seigniorage rate be? Divergent answers to this question further undermined the common doctrine. Finally, we show how important elements underlying the concept of fiat money were discovered, preparing the way for the replacement of the common doctrine.
Construction of the medieval common doctrine
The shape of the common doctrine owes much to the way in which medieval jurists worked. It was created neither by legislatures nor by judges, but by scholars who tried to make a long-forgotten text relevant to the world in which they lived.
Sources and methods of the romanists
In the High Middle Ages, western societies were governed mostly by customary law imported by the German tribes who had invaded the Roman empire. In the late eleventh century, some Italians rediscovered the law of the Roman empire in books written under the emperor Justinian in the sixth century: the Code; the Institutions, a first-year textbook for law students; and the Digest, a compilation of the works of Roman jurists. These three books, collectively known as the Corpus, represented an enormous body of material (rules in the Code, explanations of the rules and legal reasoning in the Digest and the Institutions) to apply to the new commercial situations encountered during the economic expansion fueled by Italian traders. Traders needed rules for contracts. Roman law provided them. People in Italy, Germany, southern France, regions nominally part of the Holy Roman Empire, progressively adopted Roman law.
In the late eleventh century, Roman law was just a collection of books. To bring it to life required judges and lawyers who thought in terms of this law. So people devoted themselves to reading and applying the Code and the Digest of Justinian. They told other people about it. They started universities where they read the law.
Romanists were jurists who specialized in Roman law. They read, compared, synthesized, and refined the Corpus. Reading a passage of the Corpus made them recall another passage connected by similarity or contradiction. They made notes (glosses) in the margins of the manuscript, at first merely references or grammatical clarification, later discussions of the similarities or contradictions. They distilled similarities to derive general principles. They used contradictions to refine these principles.
Glossators read each other’s glosses, cited them, and commented on them. The work of the glossators continued from 1090 to 1260. By then Azo (d. c1220) and Accursius (d. 1260) had completed their Glosses, critical compilations of existing glosses. The Gloss of Accursius, called the Ordinary Gloss, became a standard part of Roman law and was studied along with the Digest.4
After Accursius, romanists continued to study and comment on the Corpus of Roman law. These later romanists are known as the post-glossators or commentators. Their works are usually presented as Commentaries on the Code or the Digest, in which case they follow the arrangement of the original text closely, or as “Summae,” organized thematically.
Money in a legal doctrine of loans
Romanists focused on questions of private law. Their monetary doctrines emerged from contractual issues involving monetary obligations, mainly loan repayments but also debts arising from rents, fees, and fines.5 Romanists’ view of money developed in the context of a particular loan contract called the mutuum.
The mutuum applied to loans of fungibles, as opposed to a deposit (depositum) or a loan of an asset such as a house or a plot of land (commodatio). Unlike the latter two, the mutuum contract did not prescribe that the borrower return the very same object that had been provided by the lender.
The Digest explains that “the mutuum loan consists of things that are dealt in by weight, tale (number) or measure” (Dig. 12.1.2.1). The Institutes gives examples: “such are coins (pecunia numerata), wine, oil, wheat, bronze, silver, gold. Those things we give out by counting, or measuring, or weighing them, so that they be received and that at some time, not the same things but others of the same nature be returned to us” (Inst. 3.14). The text suggests that the Romans considered coins as subject to the mutuum contract. But it also suggests that they viewed coins as objects that were counted, not weighed; other passages in the Digest and the Code confirm this. Of course, the Roman monetary system had coins of different denominations, and ratings of the coins were set by law, so it was natural for the Romans to evaluate coins by counting them. But the glossators’ world was limited to the single penny (Tӓuber 1933, 209, 338).
One could not expect the exact same fungible object to be returned, since it could be of value to the borrower only by his consuming it. So an equivalent object should be returned. The glossators considered money to be a fungible because the actual coins had to be spent by the borrower to be of any use. 6 Thus, they naturally included money loans under the mutuum class, but treated them as commodities that are measured and weighed.7
The main rule governing repayment of loans in the mutuum class came from the Digest (12.1.3): “the debtor is not allowed to return a worse object of the same nature, such as new wine for old wine” and, even in the absence of an explicit clause to that effect, “the thing paid back must be of the same kind (genus) and quality (bonitas) as the thing given.”8
The glossators took the example of wine literally, and decided that in the case of coins, “same kind” meant silver for silver, and “same quality” meant the same fineness. Thus coins were merely metal objects (Tӓuber 1933, 196), to be treated as commodities like wine or wheat. The shape or imprint of the coin was irrelevant. Some applications refined this doctrine.
Tests in a one-coin environment
The coin-as-commodity doctrine served well in the first practical cases faced by romanists. Until the thirteenth century, the simplicity of the monetary system limited the range of cases. A single answer to fit all cases prevailed, summarized in a slogan known as Azo’s brocard: “the same money (moneta) or measure (mensura) is owed that existed at the time of the contract” (eadem moneta vel mensura debetur, quod erat tempore contractus, Tӓuber 1933, 328). Azo’s brocard made money a commodity.
The penny was the only coin locally, but after the breakdown of the Carolingian empire the content of the penny varied from one location to another. Could one penny be repaid for another?
A passage of the Digest (46.3.99) stated: “a creditor cannot be compelled to accept coins in another form, if he is to suffer some loss by it.” Likewise, Digest 12.1.2.1 stated that the creditor cannot be repaid something for something else against his will. Glossators decided that different pennies were merely the same thing in another form, and therefore not “something else” (Tӓuber 1933, 196–97). Thus, Accursius’s gloss (to Dig. 46.3.99; cited in Tӓuber 1933, 197) cited as allowable the repayment of pennies of Bologna for Milan’s denari imperiali, at a rate of 3 for 1.9
Similar decisions were reached by popes in disputes about the unit of measure or the coin in 1185, 1200, and 1206, and included in the parts of canon law called the Compilationes and the Liber Extra (2 Comp. 3.25.3, X 3.39.20, X 3.39.18, respectively; see Tӓuber 1933, 85, 105–13). These decisions were incorporated into canon law. The glossator Azo spotted the pattern and generalized these decisions into the brocard mentioned earlier, which gained wide acceptance among romanists as well as canonists.
What if the units of measure changed over time? Early on, jurists considered the following hypothetical question. A field had been rented in exchange for an annual payment of ten Bolognese bushels of wheat, and later Bologna had reduced the size of its bushel. Which bushel should be used to mete out the rent? Bulgarus (d. 1166) argued for the original bushel, and later glossators agreed (Tӓuber 1933, 219–20, 225–28).10
The question of repayment of money by weight or by tale first arises in a text from around 1180 by Pillius, who taught in Bologna. The text is a collection of question-and-answer sessions that Pillius held with his students on Saturdays. Pillius’s hypothetical question was inspired by the recent 50% debasement of the penny of Lucca: one man lends pennies of Lucca to another for five years, during which time the penny of Lucca is unexpectedly debased.11 Should the creditor accept repayment in the new, debased pennies, or may he insist on the original pennies? Pillius applied the rule in Digest 12.1.3, requiring repayment of the same kind of object, in this case coins, and the same quality, in this instance the same intrinsic content. Therefore, only the original pennies would free the debtor, and not the debased pennies.
The last test to arise in a single-coin environment was the payment of bullion for coin. Hugolinus (early 13th c.) thought that because bullion was weighed and coins were counted, bullion represented a different genus. Therefore he said repayment of bullion debts in coin would violate the standard rule. But Azo and Accursius said coins are the same genus as bullion so long as they have the same fineness (Tӓuber 1933, 163–64, 195–201, 315). This position fit other aspects of the glossators’ doctrine. Writing in Dig. 32.78.4, Rogerius (mid-12th c.) argued that the term “gold” or “silver” included coins as well as bullion: “wool and cypress-wood and similar things lose their name when they are given form. But metals even when they are shaped can return to their raw mass and do not lose their name. For a ring is no less called ‘gold’ than ‘golden’; but clothes are never called ‘wool,’ but ‘woollen,’ and a ship is called ‘wooden,’ not ‘wood’” (Tӓuber 1933, 337). Later jurists noted that flour could not be converted into wheat, but coins could be converted into bullion, and were therefore of similar type (Tӓuber 1933, 196).
Multiple currencies and denominations
The prevailing view in 1200 of money as metal commodity had evolved when monetized exchanges were only one and not necessarily the predominant form of exchange, and when only one form of coinage existed, the silver penny. We have seen how the commoditybased view of money view readily handled disputes arising from the debasement of a penny and from the repayment of pennies of one location with pennies from another location.
Then more complications arose. One came from the appearance of different denominations of coins, and coins of different metals, after 1200. That raised the issue of how to treat market exchange rates between those coins. Another complication arose after debasements, when governments attempted to fix exchange rates between various coins, or to make particular coins illegal to use altogether.
In this section, we review some of these complications and challenges, in the face of which romanists upheld the doctrine of Pillius and Azo with such consistency that as late as the fifteenth and sixteenth centuries, it was still called the “communis opinio.” Bartolo da Sassoferrato (1313–57), the greatest of the post-glossators, represented this opinion. But the consensus wore at the edges; a new complication often led some jurist to explore a different approach or to voice a doubt. Over time, these voices grew louder.
During the thirteenth century, Western societies began to issue more than one denomination of coin. Should these different denominations be valued by weight?
Large silver coins were introduced first. Around 1200, Venice and other major cities of northern Italy issued high-grade silver coins of about 2g. The new coins, usually called grosso (groat, groschen) because of their size, were not intended to replace pennies, whose value they far exceeded, but to circulate concurrently. By the end of the thirteenth century, every area of western Europe (except England) had larger denomination silver coins circulating alongside the traditional pennies.
Because the penny was the original money, the larger coin’s value was expressed in pence. When the grossi were first issued, they were assigned silver contents that made them exact multiples of the existing penny. Thus, the Venetian grosso (1201) was probably intended to be worth 24 pence, or 2 shillings. The silver fiorino of Florence (1237) and the sou of France (1266) contained the silver equivalent of 12 pence, or one shilling. But authorities in Venice and elsewhere soon found that it was not easy to maintain a fixed parity between the two coins, as we shall see in chapter 10.
Romanists covered the cases of multiple denominations and of multiple currencies with the passage of the Digest protecting creditors from incurring a loss upon repayment (Dig. 46.3.99). The condition was open to interpretation: must actual damage be proven for the creditor to refuse the tender, or does this clause give the creditor the option to refuse any tender other than the original coins? Pursuing this question and examining possible forms of “loss” to the creditor led some jurists to think of coins in terms of other than their metal content. For example, Jacopo de Arena (d. c1296) considered the following case: “I lent English sterlings to you, you want to repay me with other pennies, and it is not in my interest to accept them, because I want to go to England and they are not worth as much there as they are here—and I am not obliged to accept them, because it is my interest to have them in the form I lent them” (in Inst. 4.6.28; Tӓuber 1933,197).
The majority opinion adhered to intrinsic content: silver was silver, in whatever shape, and the creditor was only entitled to receive silver for silver. Most romanists required that the alloy be of the same grade (Bartolo, to Dig. 46.3.99, §4; 1570–71, 6:103r). But some, such as Paulo de Castro (d. 1441), even accepted tender of coins of different alloy, as long as the requisite amount of pure silver was tendered (Tӓuber 1933, 199). The spirit of Pillius’s solution remained, however.
Multiple metals
Another tier was added to the denomination structure around 1250. Although gold coins had been in use in previously Muslim areas such as Sicily and Spain, the nearly-identical gold coins of Florence and Genoa (1252), and Venice (1284) and their imitations in the rest of western Europe in the fourteenth century were new. As with the large silver coins, the gold coins were often issued to represent, initially at least, a round number of the local silver pence (8 shillings in Genoa, 20 shillings or 1 pound in Florence).
Could a loan of gold florins be repaid with silver soldi?Baldus (1327–1400) asked the question (to Dig. 12.1.2.1; cited in Tӓuber 1933, 273–74):
Is it possible to repay number for number in different material, such as the number of soldi that a florin is worth in repayment of a florin? The gloss says no, because the difference in matter is seen as a difference in kind (genus). I respond that they are to be interpreted as being the same, because all quantities fall under the category of things that are dealt in with number, so that number as category (genus) encompasses quantity of any matter and form and the congruence in category alone suffices. And in coins it is not the intrinsic quality that is considered, but the value, as with other things.
The last sentence opens the door to valuation by tale. Nevertheless, Baldus concluded by stating the point of view of the gloss, and in other places he also sides with the majority opinion.
Fluctuating exchange rates: the stationary case
Although the larger denomination coins were issued initially at some convenient multiple of existing pennies, over time the actual exchange rate varied. Large coins were quoted on a daily basis in terms of small coins (Bernocchi 1978).
The standard view recommended ignoring those variations and treating the large coins as any other commodity. Commenting on feudal law (see page 97), the Neapolitan jurist Andrea d’Isernia (1220–1316) wrote: “If I lend you a measure of wheat in May when it is expensive and is worth perhaps 3 tarini, and I reclaim it in July after the harvest when it is worth perhaps 1 tarino, it is enough to return the measure of the same wheat in kind, even though it is worth less; likewise if it is worth more, for example if I lent it in July and demanded it in the following May … the same reasoning applies for money as it does for wheat and wine” (to Usus Feudorum, 2.F.56; 1541, 98). Similarly, Bartolo wrote: “Whenever the intrinsic quality is unchanged, but its value varies: as when the florin is worth more or less than it was, that is not taken into account, except in case of overdue payment” (Bartolo, to Dig. 12.1.3, §17; 1570–71, 2:7r).
However, the canonist Panormitanus (1386–1445) argued that if ex ante the creditor’s expected loss was zero, then no adjustment should be made ex post: “when the alteration [in value] is not permanent, but for a time, as it happens everyday, when a florin is worth more one day than another, that is, when its value rises and falls according to circumstances, it is commonly held that no attention should be paid to this variation. Just as the creditor would want to be repaid if the coin was worth more, so he should receive the same money if it is worth less, since he can expect an increase” (Panormitanus, to X 2.24.18, §12; 1617, 4:141r).
Even though “pound” initially meant 240 pennies, the word took on additional meanings in the Middle Ages, particularly in Italy. When coins other than the penny appeared, it was natural to count them in pounds as well, so that “a pound of X” meant 240 coins of type X. In Venice, a lira di piccoli contained 240 piccoli denari or pennies, a lira di grossi contained 240 grossi.
When the exchange rate e between two coins X and Y (where e represents coins X per coin Y) remained stable for some period of time, the two coins were treated equivalently in payments, and a pound of X could be paid with 240/e coins of type Y. Thus came about another use of the word “pound” in the form “pound of X in Y.”
In Venice, in 1250 a lira [di piccoli] a grossi was worth 240 piccoli but contained 9 grossi and 5 piccoli, reflecting an exchange rate of 26
piccoli per grosso. In 1328, a lira di grossi a oro was worth 240 grossi, but contained 10 gold ducats, reflecting the rate of 24 grossi to the ducat. In 1350, a lira di grossi a monete contained 640 soldini (which had replaced the piccolo as small coin or moneta), reflecting a rate of 
soldini per grosso.
Similarly, in Florence, the lira [di denari] a oro equaled 1 gold florin, reflecting the florin’s original valuation at 240d. per florin. After 1279, the lira [di denari] affiorino consisted of 
florin, reflecting a florin at 29s. Each of these “pounds” was then subdivided into its own shillings and pence: the Venetian grosso was the denaro of the lira di grossi, and the Florentine denaro a oro was 
of a gold florin, a unit without any corresponding coin.
Units of account of the form “pounds of X in Y at e” sometimes survived even after the exchange rate between X and Y had long since deviated from e.12 The lira affiorino, for example, was used in Florence well into the fifteenth century when the florin was worth 80s. or more, rather than the original 29s. The lira a grossi was still used in Venice in the 1330s, when the grosso had reached 44d. rather than 26d.
In this way, the expression “one pound” represented different amounts of silver or gold at different times and in terms of different coins. Nevertheless debts were expressed in such units of account as pound, not always accompanied by an explicit reference to a specific coin.
When a debt was expressed in such a unit of account, the meaning of “pound” was in most cases resolved by an appeal to local custom. Bartolo (Bartolo 1570–71, to Dig. 46.3.99, §1; 1570–71, 6:102v) wrote:
When I promise £100, in what coin do I make this promise? In that money that is current in the city, with respect to which the shilling and the pound are determined. What if in a city there are two monies, with respect to which the shilling and the pound are given, as is the case in Florence? Indeed, sometimes shilling and pound are determined with respect to the small old florins, in which the gold florin is worth 29s. But there is a new money of theirs, the new florins, in which the gold florin is worth £3.13 If I promise you £100, which is understood? This will be decided according to the custom of the city, and the likelihood of the situation. When I say “custom,” I mean this: here it is the custom that, for fabrics and silk, “soldi” and “lire” refer to old florins, and in other matters they are understood to mean new florins. And when I said “likelihood” I mean this: if we were to interpret [a sum] in old coin, it would happen that a thing of small price would be given for a large price. Therefore we must always consider the likelihood based on the nature of the thing.
Occasionally states demonetized coins, making them into pieces of metal. How should debts denominated in a demonetized coin be repaid?
For such cases, jurists sought whether to apply a passage of the Digest that incidentally states: “false coins do not absolve the debtor” (reproba pecunia non liberat solventem, Dig. 13.7.24.1). In medieval Latin, demonetizing or decrying a coin was called reprobare, so that a demonetized coin was reprobata pecunia, and the passage appeared applicable to cases of legal manipulation of the coinage. Pillius had invoked it when he classified debased coins as “partially” reprobata, and thus not acceptable tender. But what of the case of a complete repudiation of a coin? This passage seemed to contradict Digest 12.1.3 and the doctrine of exclusive consideration of intrinsic content, since a demonetized coin is unchanged with respect to its intrinsic content.
Two romanists, Odofredo de Denari (d. 1265) and Jacopo de Belvisio (1270–1335), held that the debt must be discharged in coin current at the time of repayment, instead of the decried coins. A later jurist (Cino da Pistoia, to Cod. 2.40.3; [1578] 1964, 1:104v). reported their opinion as follows:
Some, like Ja[copo de Belvisio] and Odofredo, hold the contrary opinion, that is, that I must pay in deniers or money now current, and I will not be quit otherwise; because there are things whose quality (bonitas) is considered with respect to matter (penes materiam), and the debtor will be quit by repaying those in the same amount, and by taking into account the intrinsic quality with respect to the matter. But there are things in which quality is considered with respect to use (penes usum). Suppose indeed that first, for a denier tournois now current I can have one measure, or one weight of something, but now I cannot have as much for a tournois. Certainly, having considered the extrinsic quality with respect to use (bonitas extrinseca penes usum), I will not be quit when repaying this money which is not current now.
But that remained a minority opinion. Pierre de Belleperche Demonetized coins (d. 1308), Cino da Pistoia (1270–1336), and Bartolo ruled on the upheld basis of Digest 12.1.3 that the debtor was discharged by tendering the decried coins. In Bartolo’s words, “the debtor is freed from providing that coin in its shape (forma), but at least he must provide it in material. For in coin and in any kind of metal, the material is considered directly, and it draws the shape to itself more than the shape draws the material to itself” (to Dig. 12.1.5, §6; 1570 71, 2:8r). As a practical matter, Bartolo accepted that “if [the coin] cannot be found, or its circulation is totally forbidden, the estimation (aestimatio) of this old coin must be repaid” (to Dig. 46.3.99, §6; 1570–71, 6:103r). In 1328, the Parlement of Paris handed down a judgment conforming to this principle (Stampe 1930, 7).
Overdue payments and extrinsic value
The notion that there is more to a coin than its intrinsic value had, in fact, already been developed in the context of overdue payments, as a result of a misunderstanding.
Medieval doctrine distinguished between repayments made on time and those overdue (in mora). An overdue debtor had to compensate a creditor for any losses suffered because of the delay. When it came to monetary debts, romanists misinterpreted a passage of the Digest and unwittingly opened the door to the concept of extrinsic value (Tӓuber 1933, 177–93).
Roman law prescribed that any payment or fine ordered by a court be in monetary form, even in the case of a commodity loan. Thus, if a debtor failed to return a loan of wheat or wine, the creditor could sue and secure a judgment against him, but would receive money instead of wheat or wine. A passage of the Digest (12.1.22) dealt with the question of converting the original commodity loan into monetary value, that is, determining an assessed value (aestimatio).
Glossators were unaware of the procedural aspect underlying the passage in Digest 12.1.22, and they interpreted it as referring to the case of mora or negligent delay in repayment.14 They nevertheless had to reconcile the consideration of the aestimatio of a good, which clearly depended on time and place, with the fact that repayment was due in a very specific form. They thus arrived at the concepts of intrinsic and extrinsic quality, bonitas intrinseca and bonitas extrinseca, which became part of the Ordinary Gloss (to Dig. .12.1.3, v. bonitate, and Dig. 12.1.22, v. cum petitum esset; Corpus juris civilis, 1598, 1:1423, 1444). Bartolo (to Dig. 12.1.3, §16; 1570–71, 2:7r) wrote: “You must know that there is something called the intrinsic quality of a thing: in the case of wine, what its taste is, and color, and such characteristics. There is the extrinsic quality: for wine, how much it is worth. This comes from outside: because it is the same wine and of same quality, when it is worth more as when it is worth less: but that, by which it is worth more or less, comes from accident. That extrinsic quality is not taken into account, except from the inception of a delay (a tempore morae).”
Romanists applied Digest 12.1.22 by saying that, in case of overdue payment, the extrinsic value of a debt must be taken into account. Bartolo reinterpreted this requirement as a measure designed to compensate the creditor for a loss suffered because of the delay.15 The question was how to measure this loss: his answer was to look at the value of the coins in terms of pennies. In his words: “if you suppose that I owed you 100 gold florins on January 1, and the florin was worth £4, and now that you are repaid it is worth less, I say that from the time you became overdue the risk is on the debtor. The reason is, that since the florin is estimated by small coins, and the estimation of the florin has changed, it appears that the florin is degraded in estimation, as we say for wine or other goods. Likewise I say for any large coin which is estimated by small coins” (Bartolo, to Dig. 46.3.99, §8; 1570–71, 6:103r). But since the penny could not depreciate in terms of pennies, debts expressed in pence (units of account based on the pennies) were repaid penny for penny.
Followed by many romanists, Bartolo’s theory was an attempt to remedy the glossators’ misreading of the Digest. It was inconsistent with his attachment to the intrinsic content when the debt was not overdue. It thus introduced more difficulties in the doctrine, and opened the door to valuation of coins by standards other than content. 16
Trends in exchange rates
Repeated depreciation of pennies, debasements of large silver coins, introductions of other coins, and changes in the relative price of gold and silver all meant that changes in exchange rates could have permanent components. Permanent changes in the market value of a coin, without any attending change in its intrinsic content, posed a serious challenge to jurists. The commodity-based view of money came into conflict with their strong interest in preserving contracts and protecting creditors (Dig. 46.3.99).
Jacopo de Arena was the first to distinguish between a fall in value due to a change in the intrinsic content, in which case the debtor must deliver more coins, and a change in the external valuation of the coin, in which case the debtor must deliver the same number of coins as owed (Cino da Pistoia, to Dig. 12.1.3, §9; cited in Tӓuber 1933, 324–27). Jacopo’s solution remained based on sole consideration of the intrinsic content. But other writers saw a permanent loss in the external valuation of the coin as analogous to a partial demonetization. Thus, the canonist Antonio de Butrio (1338–1408) and his student Panormitanus sided with Odofredo in considering the purchasing power of the coins: if it had been permanently lowered, the debtor should be obliged to repay a larger number of the same coins (Butrio, to X 2.24.18; 1578, 3:78–80).
Debasements and currency reforms
Could the king alter the prevailing unit of account? The common doctrine said not. Events in France under King Philip IV the Fair provided a test of these views. Starting in 1290, the French penny was debased so that by 1302 its silver content had fallen by two thirds. In 1306, the king decided to return to the old standard and minted new “strong” pennies that were officially rated at 3d. (in the debased pennies). Then it was announced that, as of October 1, 1306 the “strong” penny was to be the standard of account, and that all sums expressed in pounds, shillings and pence should be understood in terms of the strong money. An ordinance of Oct. 4, 1306 prescribed that “All rents shall be paid in good money. Transactions will be settled in the coins current at the date of the transaction. If contracts were written such that payments were to be made over several years, each payment will be made in the coins current in that year. Housing rents will be paid in current money, but if the rent was so high that the tenant would be burdened, it will be paid in the coins current at the time of the rental contract” (Saulcy 1879–92, 1:165). At Christmas 1306, when landlords in Paris demanded their rent payment in strong money, riots erupted, and the king passed another ordinance allowing for payments of the next three quarters’ rents in weak money.
Romanists unanimously accepted that a contract that called for repayment of specific coins should be honored. Cino da Pistoia cited the French episodes we have just described and adhered to the intrinsic-content view. Oldrado da Ponte wrote a brief based on the same view in a particular court case between two French abbeys in 1320. It was repeatedly cited by later jurists of canon law.17
But when repayment was specified in units of account, or in the cases of fines or dues set by laws without explicit reference to a coin, what coin should be used? Guillaume Durant (1231–96) argued that fines, salaries, and other sums set by law in units of account should be interpreted in terms of the money current at the time of payment (Speculum Judiciale lib. 4, §3, n. 9; Durant 1574, 361–62; cited in Stampe 1928, 28). Thus, although he adhered to the intrinsic content doctrine in matters of debt contracts, here he departed from it. His opinion, which Bartolo did not follow, was often cited but sometimes disputed by other canonists (Stampe 1928, 66–67, 113).
Jean Faure (d. 1340), who taught in Montpellier, extended Durant’s position. “If you contracted with me in a time of strong money, which the king then altered and replaced with a weaker money, will you be quit by tendering this weaker money? It seems that no, and that you must repay such value as there was at the time of the contract, as noted by Durant. I believe that if the prince has decreed the latter currency should circulate for the former, although it were weaker in value, the debtor is freed by tendering it, if he had contracted in pounds and shillings. Certainly the king has powers in such matters, and he is competent to set the rate (cursus) and value of money” (Stampe 1928, 52–53).
Faure was not cited much by other jurists until the sixteenth century (see chapter 6 for a revival of his ideas). Not even the French kings tried to implement his views. The legislation in matters of debt repayments (studied exhaustively in Stampe 1930) was built up during the several monetary reforms that followed debasements, from 1306 to 1358. Small denomination coins were not legal tender for debts contracted in silver or gold coins. For most debt contracts, and after the reform of 1421, for almost all contracts, the law required repayment of the original coins. If the original coins no longer existed, the debt was to be converted into current coins using the ratio of the original and current mint prices (not the mint equivalents). The law also gave parties to a contract the freedom to denominate the debt as they wished, and courts steadfastly enforced such clauses (Timbal 1973, 331–91).
Thus, Durant and Faure contributed to the penumbra of qualification that by 1500 came to surround the “communis opinio.”
A question from public law: setting seigniorage rates
Another body of doctrine about debasements came from canon law, which governed the Church. The subject of money appeared in canon law, sometimes in cases of contracts or debts between ecclesiastical bodies. The cases resembled those examined by romanists, and canonists mostly shared their romanist colleagues’ views on standards of deferred payment. But, fortuitously, the canonists were led to think about money in a broader context, that of public policy. Their contribution played a key role in the later evolution of jurists’ thinking about money.
Sources of the canonists
A canon was a decision made either by a council or by an individual bishop to govern the behavior of members of the Church. As the Church grew in size and complexity, so did the body of canons. Around 1140, the monk Gratian produced a compilation of canons called Gratian’s Decretum, thematically arranged. Further papal decrees appeared in new collections (in particular the Liber Extra of 1234) until 1315.
Canon law dealt with clerics or with lay persons in their relation to religious matters (such as marriage). Jurists were usually trained in both laws, Roman and canon, but tended to specialize afterward in one or the other. Because of this shared training, romanists and canonists used similar methods, and cited one another.
Debasements and seigniorage rates
An important case and the papal decree it prompted became the locus classicus for canonist doctrine on debasements. It dealt with a king’s oath to uphold a debased currency.
In 1196, Pedro I succeeded his father as king of Aragon and swore to maintain the currency. The oath was required of the kings upon their accession. Pedro then discovered that the currency had been secretly debased shortly before his father’s death. Pedro asked the pope to be relieved of his oath in 1199. The pope accepted his request, and the resulting decree or canon was included in the Liber Extra (2.24.18) in the chapter on oaths. The canon caused canonists to discuss money. Because the context was not contract law, but rather a sovereign’s monetary policy, their attention was drawn to a question that the romanists had ignored, the desirability or morality of debasements.
The pope had allowed the king to break his solemn oath because the currency he had sworn to maintain was “false.” Canonists sought to understand what was so wrong about a debased currency that it conflicted with the duty to uphold a solemn oath. And what was a false or defrauded coin?
Innocent IV (1195–1254), another pope and himself a canonist, was the first to comment on this decree. He said that a debased coin was fraudulent: “Money is said to be deprived (defraudata) of its legitimate weight when it has been initially ordered that a specific weight of gold or silver be put in any money, but later it has been ordered that less gold or silver be put, and that this money be spent as if it were of the same weight.” But is any initial content acceptable? He continued: “and the same is said if the money has been made from the beginning of much greater weight or value (valor) than the metal or material from which it is made is worth, with necessary and useful expenses deducted therefrom” (cited by Hostiensis, to X 2.24.18, [1581] 1965, 2:130). Thus, Innocent IV observed that, in practice, sovereigns were able to levy positive gross seigniorage, but determined that seigniorage net of production costs should be zero.
Canonists disapproved of currency manipulations. Hostiensis (1190–1271) wrote: “There is also fraud by those who hold lordship over a land and rule it, when they make a money of lesser weight and force it to be received at par with a money of greater weight, or when they decry a good money and approve an equivalent money of lesser weight, so as to have the decried money at a good price, and then have it melted and coined at the same weight or even lighter weight, with the same imprint as the approved money” (Hostiensis, in X 2.24.18, [1581] 1965, 2:130). Canonists condemned debasements in the sphere of public law, and, drawing on the romanists’ doctrine of monetary debts, tried to undo its effects in the sphere of private law by disregarding currency manipulations driven by greed. Thus Hostiensis added: “if money is not diminished but is decried solely out of greed so that it may be collected and melted and afterwards minted at the same weight, as frequently happens … if the debtor is in no fault, it suffices that he return money of the same kind and weight, and the same value in weight, even if the coin is current for less (diminuta quo ad cursum), unless specified otherwise, because contracts have force of law out of convention.”
As of 1250, then, canonists shared the romanists’ approach, but they had introduced new avenues of thought. In terms of our model, they had recognized the existence of an interval within which the price level could move, and, although they preferred it when kings kept the interval narrow, they realized that they could make it wide.
Qualifications, exceptions, and discoveries
Though they failed to overturn the dominant commodity-based doctrine at the time, various writers before 1500 set out elements that would later subvert it. We mention three related such sets of ideas: (1) that money helps overcome the absence of double coincidence of wants; (2) that in emergencies, money should exchange for more than its value as metal; and (3) that fiat money is feasible. Idea (1) points to a feature of the environment that goes far in giving coins more value as money than as metal. Discussion of idea (2) led to early versions of backed or token monies, where the backing was a more or less explicit promise to convert the money into metal sometime in the future. Idea (3) is the possibility of a valued unbacked money.
Early statement of double coincidence
The Corpus of Roman law had offered the romanists another view of money, but they disregarded it. Book 18 of the Digest is devoted to purchase contracts, and the first title, the lex origo (Dig. 18.1.1), begins with a philosophical discussion on the origin of money as a remedy to barter. The passage was due to the Roman jurist Paulus (d. A.D. 235), and contains the earliest known exposition of the double coincidence of wants problem:
All buying and selling has its origin in exchange or barter. For in times past money was not so, nor was one thing called “merchandise” and the other “price”; rather did every man barter what was useless to him for that which was useful, according to the exigencies of his current needs; for it often happens that what one man has in plenty another lacks. But since it did not always and easily happen that when you had something which I wanted, I, for my part, had something that you were willing to accept, a material was selected which, being given a stable value (aestimatio) by the state, avoided the problems of barter by providing an equality of quantity (aequalitas quantitatis). That material, struck with a public design (forma), offers use (usus) and ownership (dominium) not so much by its substance (ex substantia) as by its quantity (ex quantitate), so that no longer are the things exchanged both called wares but one of them is termed the price (pretium).
The text is obscure, as this literal translation shows. Moreover, Paulus’s explanation, that sums of money are useful and command ownership over other things by their quantity rather than their substance, seemed to confict with romanists’ view of money. Glossators were puzzled, and probably sensed the contradiction with the doctrine they were elaborating in Digest 12.1.2. They tried to make sense of the text while glossing the phrase “not so much by its substance as by its quantity” (Tӓuber 1933, 332–34).
How the glossators dealt with the troublesome issue Paulus had raised provides a good illustration of how the glossators worked. They resolved contradictions among different passages to bring them into line with the money-as-commodity view that had been developed elsewhere. The dual value of money, intrinsic and as a liquid medium of exchange, threatened the simple doctrine of debt repayments. The glossators neutralized the threat by requiring the two values to coincide.
Thus, Paulus’s statement that money has value from quantity (A) rather than substance (B), was read as “more A than B.” The glossators analyzed A and B separately and perceived A and B to be the same under the appropriate conditions. The statement was then read as “A, and also B” and then “B, which is the same as A.”
Irnerius (early 12th c.) correctly glossed “by its quantity” as “by number” (ex numero) and made a reference to “things dealt in by tale” cited in Digest 12.1.2.1. Placentinus (d. 1192) and, after him, all glossators understood “not so much … as”in a comparative sense (A more than B), not an elective sense (A instead of B): he glossed the passage as “by both, but more by quantity than by substance, and in exchange, only the quality or equality of quality was considered.” Hugolinus analyzed the two elements A and B separately, explaining how each was a source of value. He wrote: “substance: just as it is useful to have gold or silver in bullion form, so it is useful to have it in coined form; quantity: it is useful to have money which it is possible to use in buying, renting, or otherwise contracting.” Azo then incorporated Hugolinus’s glosses into his, and refined the explanation of the liquidity value of money: money, he wrote, “offers the usefulness of possessing it in two ways. One is the substance itself, because the gold or silver in the coin can be as valuable to you as if it were in bullion (in massa). Also, it can be valuable, because with coins it is easy to find everything.”
At this point both sources of value A and B are identified and ranked equally in importance in the glosses. Accursius made the final step when he wrote: “note that money offers its usefulness in two ways, the usefulness of its use and of its possession. First, from its substance, one coin is worth as much as the silver in its mass; second, from its quantity, because the quantity of the coin is equated with the value of the object, and so by the coin equality in quantity occurs.” In other words: first, a coin is worth the silver in it, say, x; second, a quantity N of coins can equate the value p of an object, so that by the coin Nx = p.
Accursius’s gloss became the standard reference for romanists arguing that a coin should be worth as much coined as uncoined. They cited the gloss on Digest 18.1.1 to assert that the seigniorage rate should be set to 0. As a typical example, Bartolo wrote (to Dig. 12.1.2.1, §6; 1570–71, 2:4r): “you must know that by common law coin must be made such that it brings as much usefulness in coin (in forma) as in kind (in materia), and as much in kind as in coin, as said in the gloss on the word praebet, Dig. 18.1.1. And thus the expenses of minting must be borne by the public.” In the elegant formulation of Bernardo Davanzati ([1588] 1807, 155), “metal should be worth as much in bullion as in coin, and be able to change from metal to money and money to metal without loss, like an amphibious animal.”
Canonists versus romanists on seigniorage
Canonists differed from romanists on seigniorage. When Innocent IV said a coin defrauded if the seigniorage rate was higher than production costs, he accepted a positive seigniorage (see page 91). Romanists took note of this disagreement. They conceded that everyone levied positive seigniorage. 18 Bartolo himself, in the passage just quoted, recognized that “today, we observe that by custom there is less in coin than in kind, because of the expenses of minting.” Acknowledging a component of value from the costs of minting opens cracks in the doctrine that coins are just pieces of metal.
But canonists went further. Innocent IV wrote (to X 2.24.18; 1570, 285v):
We believe, however, that the king, by his right, and by the fact that money receives authority and general acceptance (authoritatem et communionem) from his effigy or mark, can make money of somewhat less, but not much less value than the metal or matter from which it is made. Therefore, in the first case, when he wants to diminish a money already made, we do not believe he can do so without the consent of the people, but with its consent we believe that he can, just as anyone is allowed to renounce his right, DC.7 q. 1 c. 8. And because the business of the king is considered to be the business of all, for this reason the consent of the majority of the notables of the kingdom suffices, Dig. 35.1.97; Dig. 50.1.19. Likewise we do not believe that the consent of the people suffices for that money to be circulated (communiter expendatur) outside of the realm.
This important passage, which was frequently reproduced by canonists over the following two hundred years, allowed substantial seigniorage rates to be levied, so long as the consent of the people was secured.19 The passage comes close to viewing seigniorage as a tax. At the time, kings were expected to live from the revenues of their own lands, and taxes could only be levied with the consent of the people. The treatise on money by the German scholar Gabriel Biel (c1430–95) repeats this doctrine and adds arguments that debasement is a relatively efficient and fair form of taxation, falling on all classes alike (Biel 1930).
History offers examples of king and governed bargaining over seigniorage rates and debasements. In 1355, Jean II of France struck a bargain with the Estates of southern France, receiving tax revenues in exchange for a promise not to debase the currency; the Estates of northern France did not reach a similar agreement, and as a consequence the currency was repeatedly debased in the North but remained intact in the South.
Philosophers help
On the basis of moral considerations, canonists placed upper bounds on the seigniorage rate (and therefore on the width of the interval in our model). In this attempt at reducing the deviation of the price level p from the metal anchor γ, they were helped by philosophers.
Philosophers (theologians, moralists, logicians) took their theory of money mainly from specific passages of Aristotle (Politics 1257b–1258a, Ethics 1133a–b). The main contributors were Saint Thomas Aquinas (1224–74), Jean Buridan (c1290–c1360), and Nicole Oresme (c1320–82).20 Aquinas was inclined to view money as a human institution and under the authority of the prince. Buridan and after him Oresme agreed, but viewed money as belonging to the community; thus, the common good was to be the guiding principle of monetary policy. By that criterion, they placed strong moral restrictions on the prince’s ability to debase the currency. Buridan wrote (1637, 432, in Ethics q. 17 a. 2) that “if [a coin] were not worth as much, or nearly as much, according to the relation of its intrinsic content to human need, the king would be committing a sin, and unfairly profiting from the common people; unless he were excused of sinning because of a war involving the people, or some other public necessity.”
The cracks widen: debasements and deficit financing
The idea of high seigniorage as a form of emergency financing was developed further by a line of Neapolitan jurists, Andrea d’Isernia and Matteo d’Afflitto (1443–1523), in their commentaries on the Libri Usus Feudorum. This collection of feudal laws formed in the eleventh and twelfth centuries. It included a section on the rights of the king (quae sunt regaliae, 2.F.56), probably written in the mid-twelfth century, where the right to mint was cited. The Neapolitan jurists glossed the word “moneta” and discussed money from a public law point of view.
Isernia (to 2.F.56, s.v. “moneta”; 1541, 98) stated that kings in emergencies often make money from base material such as iron or leather and order it to be accepted as if it were good money, because “the common good is preferred to the private good.” Once the emergency has passed, the king must compensate the holders of the vile money, and accept it in exchange for good money (Isernia pointed out that the current holders of the money need to be compensated, not the original recipients). Matteo d’Afflitto, who wrote two centuries later, repeated Isernia’s arguments but also suggested that deficit financing had not been implemented successfully: “Alas! How many princes have been damned because of this, and indeed we have seen in past wars many men destroyed because they sold their goods for vile money, namely the new copper pennies; and after the peace was made those pennies were worth nothing, and men were left with them” (to 2.F.56, s.v. “moneta”; 1598, 770–71).
Oresme’s opposition to debasements was also rooted in personal experience. He had witnessed first-hand the many debasements of mid-fourteenth century France and was convinced of their ill effects. He also had little trust in sovereigns (1956, 42, 44):
A tyrant loves and pursues his own good more than the common advantage of his subjects, and aims at keeping his people in slavery; a king, on the contrary, prefers the public good to his own and loves above all things, after God and his own soul, the good and public freedom of his subjects.… Because the king’s power commonly and easily tends to increase, the greatest care and constant watchfulness must be used, indeed extreme and supreme prudence is needed, to keep it from degenerating into tyranny.
Thus, he conceded that the community could in principle decide to debase its currency for emergency reasons, and recognized that debasements could be a quick and fair form of emergency taxation. But he did not trust the sovereign to be honest in determining when a true emergency had occurred, and he was concerned that the sovereign would ultimately assume the power to debase the currency at will (1956, 34–7). The very fact that the burden would be spread broadly made debasement particularly insidious, because “an exaction is the more dangerous the less obvious it is” (1956, 32). There were other ways to finance emergencies, such as loans (1956, 39).
Concluding remarks
In chapter 1 we observed that it took centuries to understand and implement the modern standard formula that uses convertible tokens as small change. Medieval monetary theory renounced tokens. Its “communis opinio” held that valuation by weight should prevail throughout the denomination structure of coins. This chapter has described the origins of that opinion in Roman and canon law, how durable it was, and how lawyers consistently and cleverly applied it to a range of practical problems. The valuation of all coins by weight that the medieval monetary authorities regarded as ideal excluded tokens whose value in exchange far exceeds that of their constituent metals. Thus, for medieval monetary theorists, the standard formula would have been wrong and unthinkable. However, in the next chapter, we shall see how Renaissance thinkers would modify old ideas and advance a recommendation for token small coinage with enough force to persuade the monarchs of Castile to embark on a long experiment with tokens.
1 For example, see the contributions in Kareken and Wallace (1980).
2 Of course, if a theory predicts that a coin with some intrinsic value can exchange for more, it might also predict that a “coin” with no intrinsic value can exchange for a positive value.
3 Feavearyear (1963, 2) writes: “To measure prices in terms of a unit of account is not the same as to measure prices in terms of a certain weight of metal. A unit of account begins to be used as soon as coins are accepted in payment by tale and not by weight.”
4 We have used Corpus Juris Civilis (1598) for the text of the Gloss. All Roman law and canon law citations will follow the conventions described in Brundage (1995).
5 T¨auber (1933), Stampe (1928), and Dupuy (1989) have studied Roman and canon law as a source on monetary doctrines. See Trifone (1962) on Bartolo.
6 Viewing money as a fungible rather than as a productive asset helped rationalize the medieval prohibition on usury: one could charge a rent for the loan of a productive asset such as a plot of land or a house, because there was a stream of returns from which to collect the rent. Money, however, was spent and gone, and could not be said to bear any fruit. In Aristotle’s words, “money does not beget children.”
7 Post-glossators did note that, although coins could be weighed as well as counted, money had been invented for counting (Dig. 18.1.1) (see page 93 regarding how romanists handled the problem).
8 This requirement is still present in modern civil codes grounded in Roman law: French Code §1892, Italian Code §1813, German Code §607. But note that §1893 of the French Code excludes money from this requirement!
9 The imperiali had been first issued around 1160 by the emperor Frederic I fromthe mint inMilan, and the rate reflected their content (Spufford 1988a,225;1986, 102
10 Some early glossator tentatively argued otherwise on the basis of Saint Jerome, quoted in Gratian’s Decretum (D C. 32 q. 4 c. 6): “As Abraham found favor with God in marriage, so today virgins find favor in chastity. He was observing his law and his time, let us observe ours.”
11 See page 139 for the circumstances.
12 Indeed, the persistent movement in the exchange rate probably caused these units of account to arise: see chapter 7.
13 The “small old florins” are probably the grossi of 1318 and the associated unit of account, the lira affiorino, while the “new florins” are the silver guelfi of 1347; see table 9.3.
14 Their puzzlement is expressed by Odofredo de Denari’s remark to his students: “Signori, if the jurisconsult had sworn to write worse Latin he could not have done so.”
15 Medieval jurists made a curious distinction between damnum emergens, capital loss, and lucrum cessans, opportunity cost, and countenanced compensation for the former but not the latter. Canonists and romanists debated at great length whether depreciation of a coin fell in the first or second category (Stampe 1928, 123–26).
16 Bartolo’s gesture toward making all coins equivalent moved him closer to our model. Although our specification allows for the exchange rate between coins to vary endogenously over time, reflecting the reality of medieval money markets, the main cash-in-advance constraint treats large and small coins as equivalent for purchases of large goods.
17 Remarkably, courts of the French king upheld repayment in the original currency, at least in the case where the obligation arose from a single transaction. Although the French king repeatedly outlawed contracts denominated in specific domestic or even foreign coins, the courts consistently upheld them (Timbal 1973, 1:331–91; see also Stampe 1930).
18 England was the first to fully subsidize minting costs as a matter of policy, starting in 1666 (see chapter 16).
19 Note that the restriction to domestically circulating coinage practically excluded large denominations
20 See Lapidus (1997) and references therein. Oresme’s treatise on money was translated into English by Johnson (1956).