Capitalism Didn’t Start With Adam Smith. It Started in a Monastery.

Watch the video above. It's one of my more in-depth analyses.

Capitalism Didn’t Start With Adam Smith. It Started in a Monastery.

The Story Nobody Was Taught

Ask most people where capitalism came from, and Adam Smith’s name comes up almost automatically. The Wealth of Nations, 1776, the invisible hand, the whole story wrapped up in one Scottish philosopher’s ledger.

That story is wrong.

Murray Rothbard spent the final years of his life dismantling that assumption, and the case he built points somewhere nobody expects. Catholic monasteries. Medieval scholastic theologians. Centuries before Smith ever picked up a pen.

Paid subscribers get access to the full archive and early releases.

Rothbard’s Real Argument

In “Economic Thought Before Adam Smith,” the first volume of his massive “Austrian Perspective on the History of Economic Thought,” Rothbard argued that laissez-faire liberalism and economic thought itself began with the Catholic scholastics and early Roman and canon law. Not with Smith at all.

That’s a direct challenge to the version of history taught in most economics departments, where everything meaningful supposedly starts in 1776.

Why does that starting point matter so much? Because the scholastics weren’t dabbling in economics as a side project. According to Rothbard’s research, they established and developed the subjective utility and scarcity theory of value, the foundational idea that something is worth what people are willing to pay for it, not some fixed, objective measure independent of human judgment. They also worked out that prices and the value of money depend on supply and demand centuries before those terms became standard economic vocabulary.

The Friar Who Invented Capital

One figure Rothbard highlights captures just how far back this thinking goes.

Pierre de Jean Olivi, a thirteenth-century Franciscan friar, argued that the value of a good comes down to its scarcity, its usefulness, and its desirability, what modern economists would call marginal utility. Olivi also introduced something even more consequential into economic thought: the concept of capital itself, a fund of money invested specifically in a business venture with the expectation of return.

That’s not a footnote. That’s the conceptual seed of capitalism, growing directly out of a friar’s moral theology rather than a merchant’s ledger.

Isn’t it striking that the person credited with articulating what capital actually is wasn’t a businessman at all, but a Catholic monk wrestling with questions of ethics and value?

Built on Aquinas, Not on Accident

Rothbard traces this tradition specifically to the Spanish Scholastics, thinkers working within the Thomistic framework built on Thomas Aquinas, who had already established that the laws of nature, including human nature, gave reason the tools to discover a rational, coherent ethics.

That framework didn’t just produce theology. It produced an entire intellectual infrastructure capable of analyzing trade, property, and value on its own terms, using logic rather than scripture alone to work through economic questions.

That tradition didn’t emerge from nowhere either. As one review of Rothbard’s work put it, libertarian and economic thought has “an ancestry extending down through the ages to antiquity,” and “those roots are both Western and Christian.” Much of the analysis stayed embedded in moral theology, scattered across commentaries and disputations rather than organized into a single unified text. But the substance was there, developed and refined by clergy debating what a just price actually meant, or when merchants were owed a return for the risks they took on.

Where the Story Gets Provocative

Here’s where Rothbard’s argument stops being safe intellectual history and starts picking a real fight.

He doesn’t treat Adam Smith as simply the next step forward in a straight line of progress. He argues Smith actually represented a step backward for the tradition, a retrograde influence rather than a breakthrough. Smith’s strong Calvinist tendencies toward glorifying labor, toil, and thrift, Rothbard contends, buried a richer scholastic tradition that had emphasized labor in service of consumption rather than labor as a virtue unto itself.

The continental, pre-Austrian tradition built by centuries of Catholic scholars got overshadowed, not built upon, once Smith’s labor cost theories became dominant, especially in Britain.

A Straight Line From Aquinas to Locke

That reframing lines up with a broader pattern historians and economists have pointed to for years. Western institutions, individual dignity, rational inquiry, and eventually market economics, didn’t spring up in a secular vacuum during the Enlightenment. They grew out of centuries of Christian intellectual labor, from Aquinas’s synthesis of faith and reason to the Spanish scholastics working through the ethics of trade and property in the sixteenth century, decades before anything resembling modern capitalism existed as a named system.

Even later natural rights theorists who get credited as purely secular Enlightenment thinkers don’t fully escape this lineage. Rothbard read John Locke’s political theory as what he called “neo-Scholastic Protestantism,” essentially a resurrection of Christian natural law doctrine dressed in a new philosophical vocabulary.

The line from medieval Catholic theology to Enlightenment liberalism to modern free-market economics turns out to be far more continuous than the standard textbook chronology admits.

The Pin Factory Came Later

Capitalism’s popular origin story credits a Scottish moral philosopher standing at the dawn of the Industrial Revolution.

Rothbard’s research suggests the real starting point sits centuries earlier, in the arguments of Catholic friars working out, on Christian moral grounds, what makes a price fair and what gives capital its value in the first place.

The pin factory came later. The theology came first.