During 1500-1700, the Ottoman Empire suffered from severe monetary instability. The silver akce was repeatedly debased, and it consequently depreciated against the gold sultani. Periodically, the authorities attempted to restore the value of the akce by increasing its silver content, or, alternatively, by decreeing a new, lower akce/ sultani exchange ...
(Show more)During 1500-1700, the Ottoman Empire suffered from severe monetary instability. The silver akce was repeatedly debased, and it consequently depreciated against the gold sultani. Periodically, the authorities attempted to restore the value of the akce by increasing its silver content, or, alternatively, by decreeing a new, lower akce/ sultani exchange rate. Such decrees caused major disputes between borrowers and lenders. Suppose that a loan was made in sultani, when the sultani was worth 50 akce. Subsequently, the authorities decreed that the sultani must be valued at no more than 40 akce. The borrower wishes to repay in sultani, or in akce at 40 akce/sultani; the lender demands that he pay in akce at 50 akce/sultani.
For the leading rabbis in Ottoman areas, such cases created both a challenge and an opportunity. By tradition, they were bound by the rulings of the Babylonian Talmud, which is the canonical text of Jewish Law. Although the Talmud prescribes a rule for repayment following reinforcement or debasement, it does not discuss repayment following revaluation or devaluation. The lack of Talmudic precedent meant that the rabbis had to create their own precedents, by significantly reinterpreting the Talmud and the works of medieval rabbis. Some ruled in favor of the borrower, arguing that exchange rate changes should be ignored, as long as the precious metal content remained the same. Others ruled in favor of the lender or urged compromise, on the grounds that Jewish Law must take into account the major economic impact of the exchange rate changes that occurred.
The responsa (Jewish legal opinions) of the period contain much interesting historical data. These include reports of exchange rate developments, as well as observations concerning price adjustment, the valuation of coins by merchants, Ottoman exchange rate policy with respect to tax collections and disbursements, and general socieconomic conditions. We analyze these data in light of the findings of Sevket Pamuk, in his monetary history of the Ottoman Empire.
The responsa are also an invaluable source of information on the development of Jewish monetary doctrine. Some rabbis used economic reasoning to support novel interpretive approaches. This reasoning became increasingly sophisticated over time. By the late 1600’s, rabbis were analyzing questions such as: (a) Is the circulation of coins of varying weights consistent with rationality? (b) Is it possible that prices adjust with a lag? If there is overshooting in the price adjustment process, is this transitory or permanent? (c) When measuring inflation, should rabbinic judges consider the prices of all goods, or only prices of domestic goods? We compare rabbinic economic thought to the economic thought of Islamic thinkers.
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