An Economic Theory of Economic Analysis: The Case of the School of Salamanca

Abstract

The School of Salamanca is often identified as the first economic tradition in the history of the “dismal science.” Its members anticipated principles later developed by the likes of Adam Smith and Carl Menger. This paper provides an economic theory of the development of economic analysis by the Doctors of Salamanca. Producers of economic analysis respond to incentives the same way producers of meat, beer, or bread do. Historically, demand has come from two sources: governments and interest groups. I argue that the changes in international trade caused by the emergence of new transatlantic markets in the 16th century led to an increase in the demand for economic analysis by Spanish merchants, and that the contribution of the School of Salamanca was the predictable supply response to these new incentives.