histofthought1

124 Economic thought before Adam Smithbecause status and associated advantages are, so to say, a part of the salary'.Lessius also advanced the view that workers are hired by the employerbecause of the benefits gained by the latter, and those benefits will be gaugedby the worker's productivity. Here are certainly the rudiments of the marginalproductivity theory of the demand for labour and hence of wages, which wasset forth by Austrians and other neoclassical economists at the end of thenineteenth century. Indeed, Lessius's sophisticated analysis of wages and thelabour market were lost to mainstream economics until they were independentlyrediscovered in the late nineteenth century.Lessius also stressed the importance of entrepreneurship in determiningincome. This quality of entrepreneurial 'industry', of efficiently combiningjobs, is rare, and therefore the able entrepreneur can acquire a much higherincome than his fellows. Lessius also provides a sophisticated analysis ofmoney, demonstrating that the value of money is dependent on its supply anddemand. More abundant money will make it less valuable either for buyinggoods or foreign exchange, and a greater demand for money will cause thevalue of the currency to rise: 'For example, if great princes are in urgent needof money for war or other public purposes, or if a large quantity of goodscome on to the market; for whenever money is urgently needed for matters ofgreat moment, so is it more highly esteemed in terms of goods.'In his application of moral principle to trade practice, Lessius had a liberatingeffect on trade. This was particularly true of usury, where Lessius,while formally continuing the traditional prohibition, was actually a highlyinfluential force in its ongoing destruction. Lessius provided the most sweepingdefence so far of the guaranteed investment contract, and he treatedbenignly even high rates of return on capital. He also removed all the remainingrestrictions on lucrum cessans. First, he widened the doctrine to apply,not only to specific loans that would otherwise have been invested, but to anyfunds, since they are liquid assets that always might have been invested. Thusthe pool of funds can, as a whole, be considered opportunity cost foregone ofinvestment, and therefore interest may be charged on a loan to that extent.As Lessius puts it:Although no particular loan, separately considered, be the cause, all, however,collectively considered, are the cause of the whole lucrum cessans: for in order tolend indiscriminately to those coming by, you abstain from business and youundergo the loss of the profit which would come from this. Therefore, since allcollectively are the cause, the burden of compensation for this profit can bedistributed to single loans, according to the proportion of each.But this meant that Leonard Lessius justified not only businessmen orinvestors planning to invest their money, but also any people with liquidfunds, including professional money-lenders. For the first time among scho-