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In Byzantium, as in the Roman Empire, the laws governing exchange were predicated upon the idea of free contractual negotiation. In law, exchanges are made, and the sale price is established, through negotiation between competent parties, acting freely, that is, without fear or under threat of force, and involving things of which they are the proprietors.36 Ruse or force annuls the contracts in law; in practice, acts of sale are often preceded by a formula that states that the seller acts freely, without constraint or fear. “Ruse” in this context means actual fraudulent misinformation regarding the items exchanged. While this is forbidden, it is permissible for the two parties to try to outwit each other (se circumvenire, perigra´fein ajllh´lou”) in establishing the sale price. In the medieval West, this statement caused a good deal of problems to canonists, Romanists, and theologians, since it seems to legitimate lying, which in any case was seen as an integral, and negative, aspect of commercial exchange.37 There was, however, an important corrective, which existed already in Justinianic law and was considerably extended in the middle Byzantine period. It consists of the notion of laesio enormis (literally, “enormous damage”), an extreme or unacceptable (economic) damage done to the seller, if the sale price is less than half the just price. In such a case, the contract is annulled, unless the seller agrees to pay the full ( just) price. This legal limitation on free negotiation and exchange was reinforced by the Christian and patristic idea that negotiation necessarily involves lying, and is therefore morally wrong, as well as the more general idea that cupidity and greed are sinful for Christians.38 As a result, there are, in Byzantium, two conflicting ideas regarding just price and price formation: one that is based on free negotiation and one that puts moral and eventually social constraints on negotiation, so that extreme damage to individuals may be avoided.
The very notion of laesio enormis presupposes and rests upon the following concepts: a concept of the just value, which is independent of the specific negotiation; an acceptance of free negotiation as establishing the actual price; a limitation placed upon free negotiation when the sale price is under half the just value of a commodity. In Byzantium, free negotiation coexisted with the limits mandated by ideas of justice. The limitations deriving from the concept of laesio enormis are primarily evident in land sales and labor contracts, and were in practice most visibly in the middle period, to be weakened in the Palaiologan period and even earlier. The legislation of the Macedonian emperors on land sales to the dynatoi had, as one of its legal bases, the protection afforded the seller by the laesio enormis, whose effects were extended beyond their original and rather limited intent. This is quite clear in the novel of Romanos I issued in 934 that states, among other things, that if the sale price of land acquired after the famine was less than half the just value (dikai´a ajpoti´mhsi”), the sale was annulled and the buyer lost the money he had paid. If the sale price was not quite that low but nevertheless resulted in great harm (perigrafh`n kai` bla´bhn) to the seller, the sale was still annulled, although the buyer had the right to recover the money he had paid.39 In the same period, a protection similar to that of the law regarding the laesio enormis was extended to laborers who made contracts regarding their wages. If it was found that the negotiated and agreed upon wage was less than the just wage, then the contract would be annulled and the work evaluated; if the negotiated wages were higher than that, the contract remained valid.40 Therefore, in the middle Byzantine period the freedom of negotiating prices and wages was assumed, but it was also tempered by the intervention of the state acting in the interest of social and economic justice, and on the basis of the idea of just value and just price. Beginning with the eleventh century, there was considerable attenuation of the protection afforded by the laws on laesio enormis. Thereafter, echoes of this protective legislation are mostly found in formulas in sale contracts, where the seller renounces the protection, and even in sales agreements (all of the extant examples concern the sale of land), where it is specifically stated that if the land is worth more than the price paid for it, the remainder constitutes a donation. The documentation is clearest for the thirteenth century and later; by that time, free negotiation had become paramount in establishing the sale price, and intervention on behalf of economic justice had been reduced. By that time also, and in a process that began probably in the eleventh century, the just value and the just price had become identical with the market price, despite the voice of moralists who occasionally complained about this phenomenon.41
Ideas regarding the profit of the merchant were based on similar general premises and followed a similar evolution. In the middle Byzantine period, the prevailing ideology admitted a legitimate profit for the merchant, profit conceived as the reward of his labor and recompense for the risks he ran in the exercise of his trade, that is, a cost-plus-labor theory of profit and, by extension, of price.42 But the other side of this position is the equally firm belief that there is just and unjust profit, and that profit of any kind has certain legitimate levels, which it should not exceed. Profiteering, taking advantage of the misfortune of others—for example, by selling grain at very high prices in times of famine, or buying land at excessively low prices in hard times—was condemned and unlawful; so was stockpiling, especially of foodstuffs, and hoarding of commodities with a view to raising the price and acquiring unreasonable profit (para´- logon ke´rdo”).43 This was the firm position of church and state during the middle Byzantine period and into the eleventh century. Quite aside from the fact that profits deriving from stockpiling commodities, or from fraudulent practices, were illegal, the just profit was considered to be not what the merchant could gain in the course of a free negotiation, but, rather, something that was subject to noneconomic constraints and regulations. A canon attributed to Patriarch Nikephoros I (806–815), but whose attribution is insecure, states clearly that the just profit is 10% (it is not clear whether this is calculated on the purchase price or on the purchase price plus expenses).44 In the Book of the Eparch, the rates of profit are legislated by the state in the case of the butchers, the fishermen, the bakers, and the grocers. The price of wine is to be established between the tavernkeepers and the eparch, proportionately to the purchase price. While the rates of profit permitted to the various guilds by the Book of the Eparch vary, the general idea is clear: maximizing profits by taking full advantage of the forces of supply and demand is not permitted. Thus, although there is no price regulation in the Book of the Eparch, there is certainly regulation of profit, at least in Constantinople where the provisions of this text were applied.45 As has already been suggested elsewhere, the result was that merchants could maximize their profit primarily by increasing the volume of their transactions, not by taking advantage of fluctuations in supply and demand.46 If, in the tenth century, just profit had been conceived as having a value independent of the bargaining mechanism, by the late eleventh century there are indications that the idea of free negotiation was gaining ground. A greater degree of freedom crept into economic exchange, and the noneconomic view of just profit was attenuated. It must be admitted that the clearest indications are to be found in practice rather than in ideological statements, although late eleventh- and twelfth-century commentaries on Aristotle’s Nicomachean Ethics may provide an analytical and theoretical basis.47 Indications may also be found in negative statements, whereas the only positive remarks as to the validity of any negotiated price come from the patriarchal court of the fourteenth century and concern land transactions.48
By negative statements I mean asides such as that included in a letter by Tzetzes, in which he complains of monks who sell apples to the emperor at exorbitant prices—three to four pounds of gold for one apple or pear! This grotesquely exaggerated anecdote is followed by the statement that such practices would inflate the price of apples, with the result that the poor would die without tasting fruit.49 The point is that Tzetzes is thinking of a world where prices are normally set in the marketplace, and where the emperor’s misplaced generosity will play havoc with the normal functioning of the market. Similarly, as already pointed out, when Symeon the New Theologian speaks of the merchant’s profit, there is no indication at all that he is thinking of a controlled “just” profit. It is not surprising that there is a dearth of positive statements to the effect that the merchant’s “just profit” would be what he could realize in an honest transaction, however high it might be, or that, by extension, the just price is reached through the mechanism of supply and demand. Such an overt statement would have run counter to a powerful ideology that continued to survive even after the tenth or eleventh century. One may see this ideology in the same letter of Tzetzes, well known and sufficiently commented upon, which shows that in twelfth-century Constantinople the expectation still was that the just profit of a fish vendor should be exactly that posited by the Book of the Eparch.50 The ideology is also much in evidence in periods of crisis: for example, in early fourteenth-century Constantinople, when, in the midst of famine, the patriarch reminds the emperor that there is a just price and a just rate of profit, and demands state intervention in order to stop merchants from stockpiling grain and bakers from realizing extravagant profits.51 The ideology of justice in exchanges was powerful indeed, even after the just price had become equivalent to the market price. In sum, then, in Byzantium there was always the coexistence of the ideas of free negotiation and social and economic justice; the latter was meant to moderate the effects of the former, but the weight of these two ideas varied according to the times, which is to say, the economic conditions, and to some extent according to whose voice is expressed by our sources. All of this suggests that price formation was the result of the interplay of these ideas, when they were put into practice; but there is no theoretical statement regarding price formation, except possibly in an undated commentary on the Nicomachean Ethics. Any discussion of medieval economic thought must include the society’s views on usury in its medieval definition, that is, lending at interest. The brief discussion that follows does not address the evolution of interest rates, which have already been discussed in other chapters.52 It is still necessary, however, to say a few words about the ideology and economic ideas underlying the Byzantine attitudes toward lending at interest. It is a particularity of Byzantium that it was the only state, both in the Muslim Near East and in western Europe, that permitted lending at interest; it also regulated the rates of interest. The fact is important, for the Byzantines disposed of exactly the same texts, from the Old and the New Testament, on which the prohibition of usury in medieval western Europe was based. They also shared the same Aristotelian texts regarding usury. Necessarily, there was a certain suspicion of lending at interest, even in the minds of the Christian emperors who permitted it but who, since Constantine I, tried to regulate it in accordance with both economic principles (the highest permitted rates were, at first, those that applied to loans in kind, and always those on the highrisk sea-loans) and noneconomic ones, such as the status of the lender or of the borrower. This suspicion was voiced most strongly by ecclesiastics, especially the theologians or moralists, rather than the canonists.53
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Angeliki E. Laiou
36 The main texts are CI 4.46.2, 4.44.2, 4.44.6, 4.44.8 Bas. 19.10.78 (77); see also CIC, Dig. 4.4.16, no. 5; cf. M. Kaser, Das ro¨mische Privatrecht, 2 vols. (Munich, 1975), 2:388–90. On the laesio enormis in Byzantium, see E. Papagianni, JH nomologi´a tw’n ejkklhsiastikw’n dikasthri´wn th'” buzantinh'” kai` metabuzantinh'” perio´dou se´ qe´mata periousiakou’ dikai´ou (Athens, 1992), 1:70; cf. A. Sirks, “La laesio enormis en droit romain et byzantin,” Tijdschrift voor Rechtsgeschiedenis 53 (1985): 291–307, whose discussion differs from mine on several points.
37 J. W. Baldwin, The Medieval Theories of the Just Price (Philadelphia, 1959), 9–10 and passim.
38 Sirks, “Laesio enormis,” 304, considers that the limit of the half price was established by preJustinianic commentators and owes nothing to Christian ideas.
39 Svoronos, Novelles, Novel 3, chap. 5.3.
40 Das Eparchenbuch Leons des Weisen, ed. J. Koder (Vienna, 1991), 22.3.
41 See Laiou, “Byzantine Economic Thought.”
42 See, for example, J. B. Pitra, Juris ecclesiastici graecorum historia et monumenta, 2 vols. (Rome, 1864–68; repr. 1963), 2:323–24. On the value placed on labor, see also the peculiar justification, by John VI Kantakouzenos, of a heavy tax placed on merchants who bought from the peasants and imported foodstuffs into Constantinople, because, among other things, “they make great profit from the work of others without exertion”: Ioannis Cantacuzeni Eximperatoris historiarum libri quattuor, ed. I. Schopen, 3 vols. (Bonn, 1828–32), 3:80–81 (hereafter Kantakouzenos), ajmoghti` ejk tw’n eJte´rwn po´nwn aujtoi` pollaplasi´w ta` ke´rdh fe´rontai.
43 On stockpiling and hoarding, see Synopsis Basilicorum P 24, with reference to Bas. 60.22 (or 69.6). Cf. Eparchenbuch, 10.2, as well as 11.3, 13.4, 16.5, 20.3. On thesaurization as a form of hoarding that leads to a decline in prices, cf. C. Morrisson, “Manier l’argent a` Constantinople au Xe sie`cle,” in EUYUCIA (as above, note 9), 557–65.
44 Pitra, Juris ecclesiastici, 2:323–24.
45 On this and on state regulation in general, cf. Dagron, “Urban Economy,” 410ff and passim, and N. Oikonomides, “The Role of the Byzantine State in the Economy,” EHB passim.
46 See Laiou, “Exchange and Trade,” 735–36.
47 Cf. ibid., 745, especially the story from the vita of St. Auxentios. Cf. Laiou, “Byzantine Economic Thought.”
48 See, for example, MM 2:365.
49 Ioannis Tzetzae Epistulae, ed. P. A. M. Leone (Leipzig, 1972), ep. 57, pp. 78–80, 82 (hereafter Tzetzes).
50 Tzetzes, ep. 57, pp. 81–82; G. Dagron, “Poissons, peˆcheurs et poissoniers de Constantinople,” in Constantinople and Its Hinterland, ed. C. Mango and G. Dagron (Aldershot, 1995), 70–73.
51 A.-M. Maffry Talbot, The Correspondence of Athanasius I, Patriarch of Constantinople (Washington, D.C., 1975), letter nos. 93, 100, 106.
52 See Laiou, “Exchange and Trade,” 702–3, 726–27, 749–50; D. Gofas, “The Byzantine Law of Interest,” EHB 1091–96.
53 On the 12th-century canonists, see Laiou, “God and Mammon.” For a full discussion of Byzantine attitudes toward lending at interest, see eadem, “Byzantine Economic Thought.” On this topic, see also Laiou, “Nummus.”