What does the Reformation have to do with economics?

In recent days, the newest inflation statistics were announced and, while down somewhat from June’s highs, the numbers are very high. CPI inflation, the most frequently cited measure, came in at over 8 percent compared to a year ago. Core inflation, which leaves out volatile food and energy prices, was the highest since 1982, which puts to rest the claim that the Russia-Ukraine war and resulting energy price spikes are to blame for the spate of high prices. Producer Prices, the prices that businesses pay for raw materials, etc., are rising faster than consumer prices. Accordingly, profit margins are squeezed.. So much for attempts by politicians to scapegoat “greedy” businesses.

But, instead of just looking back to the last economic report, Christians should look back much further to moral debates from half a millennium ago pursued by the theologians of the Reformation. While popular understanding of the Reformation tends to see it as being exclusively focused on theological disputes about the nature of personal salvation, it was far wider than that, transforming every aspect of society—including monetary policy.

The Late Medieval understanding of economics was highly influenced by Aristotle and the doctrine of just prices. Of course, the just price was determined not by the market but by top-down state decree backed by church doctrine. There were dissenting voices from the Roman Catholic side. Nicholas Copernicus, far better known as an astronomer than as an economist, nevertheless refuted the decree theory of monetary value in favor of the quantity theory. If money is excessively increased in quantity, its value declines.

Juan de Molina in his Treatise on Money argued from the account of Naboth’s vineyard that debasing of currency by government is morally indistinguishable from the seizure of land by force. Molina was part of a school of economics centered at the University of Salamanca that rejected the errors of just price theory in favor of market-determined value, which included sound money. These arguments, while sound, did not win acceptance in Catholic civilization. They did however travel North, taking hold in the reformed parts of Europe including the Netherlands, Switzerland, and eventually England.

John Calvin applied passages in the Torah decrying false weights and measures as applying also to “him who utters false coin” observing that when “buying and selling are corrupted, human society is … dissolved.” The influential (but now largely unknown) Swiss reformer Pierre Viret argued that the 8th commandment’s prohibition against stealing included “all those who clip coins and who diminish their weight,” rightly observing that the results were identical as “those called counterfeiters.”

It’s no coincidence that with the influence of Calvin, Viret, and others, Switzerland became associated with sound currency and that despite the nation’s secularization, the Swiss Franc remains even to this day a relatively “hard” currency. The rise of the Netherlands in the 17th century is tied to its stable, gold-backed currency, which lowered borrowing costs and encouraged foreign investment in a nation with stable currency. Eventually those ideas traveled across the English Channel along with the Dutch-turned-British King, William of Orange. Later John Witherspoon, the American Founder and Presbyterian theologian, argued during the constitutional convention for hard money as part of the U.S. Constitutional order.

America does not have an inflation currency because officials lack the technical expertise to avoid it. It has an inflationary crisis because the Reformation heritage of sound money has been forgotten. The ruling class has not stumbled into inflation inadvertently. Government policy was intentionally inflationary, because inflation is seen as the remedy to slow growth and flagging “animal spirits” in the markets.

The order of magnitude was unintentional, but the direction was not. It is imperative that public theologians, Christian statesmen, and even pulpits once again declare the Reformation truth that sound money is not just a policy option, but it is in fact a moral imperative. Inflation is theft, unjust weights and measures are an abomination. If the church does not proclaim those truths, how can we complain that the state doesn’t heed them? October, the month when we celebrate Reformation Day, is a great time to start.