Supply Side Elements Taxing Wealth

The conditions necessary for the medieval church to enjoy continual success in maintaining its market dominance were the following: First, there had to be a large reserve of wealth to tap, which was the case in those societies where feudal institutions maintained a prosperous landed class, or other societal arrangements supported the concentration of wealth. Second, the prevailing wealth distribution had to be relatively stable in order to repay the Church's investment in information and to keep transaction costs associated with its pricing strategy relatively low. It was, for example, costly to establish, maintain, and change the price lists that provided the backbone of the Church's pricing strategy (which is elaborated on in table 5.1). Hence, the Church was interested in minimizing these costs as much as possible.

These two conditions were most easily met in tradition-bound, authoritarian societies in which the landed aristocracy typically engaged in rentseeking rather than profit-seeking activities. In other words, the medieval church was most likely to preserve its incumbent monopoly status in semi-feudal societies that had a lot of low-income people (peasants) who were, at best, minor targets of the Church's discriminatory policies, and a strong landed class (nobility) which typically cut their own deals with the Church and routinely engaged in rent-seeking activity. By contrast, the medieval church found it difficult to continue its practice of price discrimination in societies that encouraged profit seeking by offering opportunities for increased market participation among less-favored economic classes. Where the power of the monarch was relatively weak and the ownership of property was widely dispersed, an ever-growing middle class was able to take advantage of new profit opportunities. The distribution of wealth in such societies was constantly changing, making it more difficult for the Church to engage in effective price discrimination. Societies in which political and economic power were decentralized rather than centralized therefore presented impediments to the ongoing profitability of the medieval church.

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