The medieval Roman Catholic Church was an economic entity while at the same time undeniably pursuing social and spiritual goals. Large and powerful enough by the eleventh or twelfth centuries for Europe to be called "Christendom," the Church took on the character of a sophisticated modern corporation. A primary task of the social sciences has been to delineate the role that institutions and technology played in the development of western civilization. Over the past 20 years, the economic role in that development has come to the fore (Ekelund et al., 1996) as part of the overall economics of religion.
Economists are latecomers in the analysis of a number of implicit markets, including that of religion. However the fundamental premise undergirding these new approaches is that economic elements come to play in all markets, implicit as well as explicit. Thus, while it may be the case that economic motives do not necessarily dominate every decision, the "science of choice" may be applied to problems that have heretofore been labeled psychological, sociological, anthropological, political, legal or religious. Increasingly, therefore, the tools of modern microeconomics, public choice (especially as interest group analysis) and property rights are being applied to issues thought to be the exclusive matter of other social sciences. The medieval Roman Catholic Church is one of these issues.
The facts of the medieval church may be stylized and put into the context of an economic model. After the twelfth century, Roman Catholicism (with only insignificant fringe competition from Jews and Moors) came to dominate large parts of Western Europe. The legal system of the Church, canon law, was beginning to supplant and eventually dominate civil law in (then) loosely organized "states" and other political entities. Ecclesiastical officials enacted laws respecting all aspects of the "supply" decision of such goods as "assurances of eternal salvation," political support from the papacy and clergy and social services of all kinds. Marriage, trade and all manner of behavior were regulated in conjunction with the supply of these services. Kings, princes and aristocrats of all kinds owed much of their power to the approbation of the Roman catholic authorities who, with full complements of upstream and downstream agents, helped negotiate trade deals, wage wars and maintain armies. The Roman Church, moreover, was immensely wealthy and was a huge landholder during the medieval period. The retail side of the church offering religious, medical and social services of all kinds was also a primary source of revenues in addition to payments (taxes and other forms of rents) from monarchs, politicians and the local religious establishments (monasteries, parish churches, etc.).
The organization of the church was that of an M-form corporation with the pope as CEO, a financial division called the Papal Camera, upstream directors (the Curia and Cardinals), and a geographically dispersed downstream retail division. The primary role of the upstream church was to provide doctrine and dogma relating to the essential principles of membership (e.g., interpretations of the Holy texts) and to collect downstream rents. It established, with authority centralized in the Pope after the Council of Trent (1545-1563) but formalized only later in the nineteenth century, the often-labyrinthine conditions for eternal salvation and the penalties for violating any of those conditions.
Downstream were the geographically dispersed purveyors of local Roman Catholicism. These included the regional mendicant and contemplative religious orders, monasteries, some of which were as much production units of agricultural and other goods as sellers of religious services, and parish priests and other local clergy. While rents were collected at all levels, primary revenues came from these retail ends of the downstream church. Enforcement policies and assigned agents of the centralized Roman authorities were necessary to prevent opportunistic behavior in distant locales of the church.
Entry control was obviously necessary to maintain the strength of demand for the Roman monopoly. Malfeasors, when caught, were subject to severe punishments. Interdict, whereby the "sinner" could not have contact or truck with other Christians, was one form of punishment. Most severe was excommunication of the wrongdoer — a total separation from the body Catholic and a sentence of eternal damnation if repentance was not made. Heretics of all kinds (those who did not adhere to the main body of Catholic dogma and interpretations) were of course excommunicants, but many were also subject to violent death through the various "holy wars" or crusades of the middle ages. Later, even more virulent punishments were meted out to Protestants and other "heretics" through Inquisitions in Spain, Rome and elsewhere. These punishments may be seen as attempts to maintain monopoly.
Doctrinal manipulations were also used by the Roman Catholic Church to make its demand curve more inelastic and/or to shift it rightward. The conditions attached to the Church’s chief product — assurances of eternal salvation — were manipulated throughout the middle ages in order to increase revenues and the number of demanders. Marriage markets, largely of secular and civil concern prior to the Church monopoly, were taken over by the Church with conditions attached to the simple contract respecting endogamy, presence of a priest, posting of bans, and so on. Regulations respecting "divorce" or marriage dissolution were intricate and varied with income and circumstances of petitioners. Such price discrimination manifestly increased the Church’s rents over the medieval period. Another doctrine that was almost manipulated out of recognition was that respecting usury and "just price." When the church was a debtor, it seems, usury prohibitions were enforced, but not when it was a creditor. The same manipulations attended church rules respecting monastery thithes and taxes, the granting of indulgences, jubilee attendance, and benefices granted to bishops and cardinals. Such methods and practices of rent collection reached something of a limit in the sixteenth century precipitating the Protestant Reformation (Ekelund et al., 2002).
The economic view of the medieval church featuring the principles of public choice, industrial organization and microanalytic behavior, while still under construction, offers new insights into the development of western institutions. The old Weber-Tawney view of the church, as least as popularized, was that the Roman church and its policies had a negative impact on economic growth and development, a view that contrasts with that of Sombart and Schumpeter. The new microeconomic perspective eschews, to a large extent, these important macroeconomic issues. Rather, a theory of rational behavior permits an understanding of the church as an economic entity — one that benefited from increasing secularization of European society but one that recognized that science, technology and humanism would ultimately weaken the kind and form of "magic" the church was selling. If "belief in Christ and Christian principles" were the main issue, it would be difficult to explain how Roman Christians issued crusades against other "Catholics," the eastern orthodox Christian church or (later) Protestant Christians of all stripes. Moreover, the emergence of fierce censorship of all kinds in the sixteenth and earlier centuries is also difficult to understand (Galileo was a devout Catholic) except in an economic context, that is, the context of monopoly rent seeking by interest groups in the Church. Economists objectively viewing these policies and doctrines see them as examples of monopoly behavior and all that the model entails. If religious organizations, in this case the Roman church, were acting solely in the public interest, they would behave as a "good government" — one that provides information, spiritual goods and social goods to the faithful at competitive, i.e., marginal cost, rates. An "economic" examination of the behavior of the medieval church does not provide overwhelming support for this view.
