Colonial Economics

Two days ago I was flipping through a rather interesting book which contained a chronicle of all the recorded cases brought before the courts of colonial Massachussetts during the 17th century, from around 1620 to 1688. It was extraordinarly fascinating to see the type of things people were accused of back then, as well as the actions taken by the magistrates to correct them.

An interesting example is from December, 1640, when the court recorded the following case:

"A wicked fellow, given up to bestiality, fearing to be taken by the hand of justice, fled to Long Island, and there was drowned. He had confessed to some that he was so given up that abomination that he never saw any beast go before him that he lusted after it."

Looks like vice, even of the most detestable kind, was certainly not absent in Puritan America. But the record that really got my attention had to do with colonial economics. However we may dislike Puritan religious views, we cannot deny that they endeavored to be a moral people and to insist that standards of morality and decency be enforced in private as well as public relationships.

This is interesting when we come to the discussion of capitalism and the "American way" of doing economics. In Caritas in Veritate, Pope Benedict warned western nations that economics was not a morally neutral field, and that standards of charity and morality must guide the economic activities of a nation just as they should guide private interactions among persons.

The Puritans, for all their faults, understood this and made it part of their economic law. Look at this case that came before the magistracy in Boston on November 9, 1639. I'm quoting it in full [my comments and emphases]:

"At a general court held at Boston, great complaint was made of the oppression used in the county of the sale of foreign commodities; and Mr. Robert Keayne, who kept a shop in Boston, was notoriously above others observed and complained of; and, being convented, he was charged with many particulars; in some, for taking above six-pence in the shilling profit; in some above eight-pence; and, in some small things, above two for one; and being hereof convicted, (as appears by the records) he was fined £200....After the court had censured him, the church of Boston called him also into question, where (as before he had done in the court) he did, with tears, acknowledge and bewail his covetous and corrupt heart, yet making some excuse for many of the particulars, which were charged upon him, as partly by pretence of ignorance of the true price of some wares [the Puritans believed that a just price was that which was nearest to the "true price"; i.e., the price of production - they did not believe that the just price was whatever one could get for the product], and chiefly by being misled by some false principles...These things gave occasion by Mr. Cotton, in his public exercise the lecture next lecture day, to lay open the error of such false principles, and to give some rules of direction in the case. [watch - here comes the Puritan "syllabus of errors" on economics - very interesting]

Some false principles were these [read "the following opinions are condemned"]:

1. That a man might sell as dear as he can, and buy as cheap as he can.

2. If a man lose by casualty of sea, etc., in some of his commodities, he may raise the price of the rest.

3. That he may sell as he bought, though he paid too dear, etc., and though the commodity be fallen, etc.

4. That, as a man may take advantage of his own skill or ability, so he may of another's ignorance or necessity.

5. Where one gives time for payment, he is to take like recompense of one as another.

The rules for trading were these [here's what the Puritans were obliged to abide by in their economic transactions]:

1. A man may not sell above the current price, i.e., such a price as is usual in the time and place, and as another (who knows the worth of the commodity) would give for it, if he had occasion to use it; as that is called current money, which every man will take, etc.

2. When a man loseth his commodity for want of skill, etc., he must look at it as his own fault or cross, and therefore must not lay it upon another. [i.e., the business cannot "pass on" the cost to the consumer]

3. Where a man loseth by casualty of sea, or, etc. it is a loss cast upon himself by Providence, he may not ease himself of it by casting it upon another; for so a man should seem to provide against all providences, etc., that he should never lose; but where there is a scarcity of the commodity, there men may raise their price; for now it is a hand of God upon the commodity and not the person.

4. A man may not ask any more for his commodity than the selling price; as Ephron to Abraham (Gen. 23), the land is worth thus much.

The cause being debated by the church, some were earnest to have him excommunicated; but the most thought an admonition would be sufficient...In the end, the church consented to an admonition." [interesting - they thought this an ecclesiastical matter that could have possibly merited excommunication]

Well, we are not Puritans but Catholics, and wha does this have to do with us? I am not asserting that these rules should be applied to us today and that is not my purpose in citing them. The point of citing these Puritan decrees from 1639 is to tell us something about the "traditional American way" of doing business.Those fiscal conservatives who insist that a complete laissez faire capitalism without any sort of restrictions is the traditional, American way are off base. Clearly, the earliest American traditions supported the idea of economics being responsible to morality and exercised immense political and social pressure to see to it that businesses did not take advantage of their consumers.

Especially interesting to me is the very first of the condemned principles, "That a man might sell as dear as he can, and buy as cheap as he can." This is the cornerstone of American business, and one who does this suceessfully is called a good businessman! It is here the very first principle condemned by the Puritan church of Boston.

Second, two of the condemned propositions and two of the rules speak about the immorality of a business passing the cost on to the consumer. The idea that "If a man lose by casualty of sea, etc., in some of his commodities, he may raise the price of the rest" is condemned, as is the notion that "a man may sell as he bought, though he paid too dear, etc., and though the commodity be fallen, etc." This is exactly how our gas prices work - the price at the pump is determined not by how much that particular gasoline costs when it was refined but by how much the price for crude may fluctuate, where the gas station adjusts its price accordingly in an attempt to make back immediately what it anticipates losing when they have to buy more oil at an inflated price. This is why the price at the pump changes immediately, even though the gasoline in the tanks has already been bought and is in the ground. In general, these Puritan standards seem to bar any possibility of businesses "passing on" their losses to the consumer, telling them they simply have to accept it "as his own fault or cross." But again, the essence of American business is passing on losses to others.

My point in all this is to make the simple historical observation that laissez faire economics was not the traditional American way. Traditional, localized American economics was held morally accountable to the community, who had no qualms in dictating what were and were not unjust business practices and censuring them by the power of the courts or even excommunication.