Cervantes and Economic Theory

Literature and the Economics of Liberty: Spontaneous Order in Culture - Paul A. Cantor & Stephen Cox 2009

Cervantes and Economic Theory

Darío Fernández - Morera

Critics often subject a great writer to tortured interpretations that reflect their interests, obsessions, insecurities, and career needs. Shakespeare is a well-known example, with theatrical directors fiercely setting loose their creativity upon his texts, and producing a cigar-smoking Iago, a sympathetic Lady Macbeth, a lesbian Midsummer Night's Dream, a feminist Taming of the Shrew, and a pacifist Henry V complete with British soldiers stomping on the flag of St. George.

Cervantes's fate has paralleled Shakespeare's. At one time, Cervantes was read as a supporter of the Counter Reformation and the expulsion of the Moslems still remaining in Spain, the moriscos.1 But after the Spanish Civil War, the exiles who populated foreign language literature departments outside Spain turned him into someone with ideas not unlike those of a Spanish Republic liberal.2 Marxists went further, reading him as a socialist.3 Sharing many of the Marxists' basic premises, academic practitioners of Cultural and Post-Colonial Studies have turned Cervantes into a replica of the professors themselves, occasionally dressing him in a somewhat different vocabulary, though along with Marxist polylogism many venerable Marxist terms linger on, such as “material base,” “ideology,” “ownership of the means of production,” “alienation,” “fetishism,” “overdetermination,” “social discourses,” “distribution of wealth,” “superstructure,” “bourgeois,” “material culture,” “class,” “conditions of production,” “social formations,” and “imperialism.”4 Feminist critics have of course given us a feminist Cervantes.5 A few Catholic critics have read him, naturally, as a Catholic and even a mystic; though the more numerous anti-Catholic professors have seen him as an Erasmian, or even anti-Catholic writer.6 More recently, Cervantes has been interpreted as a homosexual and a Queer Theorist avant la lettre.7

Inspired by such examples, and theoretically authorized by the post-structuralist assertion according to which every text undermines its own presumably fixed meaning, I want to examine Cervantes not so much as a capitalist avant la lettre but as a writer whose works present situations, statements, and ideas that illuminate sympathetically important aspects of the market economy, while providing material for a critique of collectivism, statism, and redistributionism.

This approach seems open to a historical objection. The word “capitalism” was not even in use in Cervantes's day; he was not familiar with many of the practices we associate with capitalism; and he wrote nearly two centuries before Adam Smith, the thinker commonly thought of as the first one to offer a theoretical foundation for capitalism. If Cervantes was ignorant of capitalism in both theory and practice, how could he have anything to teach us on the subject?

The objection to looking at Cervantes in light of free market economics is compounded by the fact that he lived and wrote in Catholic Spain. As a bastion of European mercantilism, Spain is not usually associated with the development of capitalism. Ever since Max Weber's famous book The Protestant Ethic and the Spirit of Capitalism, it has been common to view capitalism as developing in the Protestant countries of Northern Europe, especially Great Britain and the Netherlands. Those who adopt this viewpoint think that capitalism must have been first theorized in Protestant Northern Europe and so they single out the man from Scotland, Adam Smith.8

In fact, Weber's thesis has distorted our understanding of the history of economic theory and practice. Many of the distinctive institutions and practices we associate with capitalism were developed in the Catholic world of Southern Europe. For example, banking in the modern sense and methods of accounting first emerge in the city states of Catholic Italy, such as Venice, Genoa, Florence, and Milan, during the late Middle Ages. And in Cervantes's day, Catholic Spain was one of the greatest economic powers in Europe. This allowed him to observe a good deal of economic activity firsthand. Moreover, contrary to the popular view, economic theory did not begin with Adam Smith, nor was he the first to develop an explanation of the free market. As historians of economic thought like H.M. Robertson, Murray Rothbard, Jesús Huerta de Soto, and Alejandro Chafuén have shown, the traditional view of the development of economic theory needs to be revised to recognize the contributions of a host of thinkers before Adam Smith.9

Of particular importance is the contribution of the so-called School of Salamanca, sixteenth-century Spanish thinkers who anticipated many of the basic ideas of modern, free market economics, including the subjective theory of value, the law of comparative advantage, the theory of supply and demand, the understanding of inflation as a monetary phenomenon, and the productivity problem in the theory and practice of socialism. These Spanish Catholics had a more sophisticated understanding of free markets than Smith did. Therefore, one of my aims is to call attention to these thinkers and show that Cervantes could have been exposed to a whole range of important economic ideas, some of them supportive of economic freedom, some of them critical of government interventionism. Cervantes's historical situation actually makes it quite plausible that in many of his writings he might be commenting, among other things, on important economic questions having to do with socioeconomic freedom and government attempts to restrict it.


During the reign of Charles V, the center of economic gravity in Europe moved from the commercial cities of North Italy to the port city of Seville because of the massive influx of gold from the Americas. During this time, too, the Spanish government began a series of foreign policy adventures that required large amounts of revenue. Government deficits became enormous and more than once the State declared bankruptcy and repudiated its debts.10 First Charles V, and later his successors, used the banking system unscrupulously and taxed their subjects relentlessly to obtain the liquidity necessary to finance uncontrolled government spending.11

The Spanish centrality in economic matters and the spectacle of a profligate and greedy Spanish government sucking the life out of producers—among them shop keepers and other businessmen, artisans, professionals, sheep growers, farmers, and working members of the nobility—and otherwise thwarting the functioning of a market economy partly explain the until then unheard of concentration in Europe of very sharp minds on the subject of economics.12 They included, among others, Domingo de Soto (1495-1560), Domingo de Báñez (1528-1604), Luis de Molina (1535-1600), Juan de Mariana (1535-1624), Martín de Azpilcueta (1493-1596), Francisco de Vitoria (1480-1546), and Tomás de Mercado (1500-1575), and are collectively known variously as the Spanish Scholastics, the Spanish School of Economics, or the Salamanca School of Economics, although some of the more important of these thinkers did not teach at the University of Salamanca.

Such was the case, for example, of Domingo de Soto, who taught at the University Complutense of Alcalá de Henares, a city where Cervantes seems to have been born, which he mentions in Don Quijote, and where he published his pastoral novel La Galatea.13 In his business trips to his native city, Cervantes could have been directly in contact with the legacy of free market ideas that de Soto had published and lectured on a generation before.

Moreover, if, as some scholars have suggested, he attended the Jesuit school in Seville, which he does remember fondly in his Exemplary Novel, The Dialogue of the Dogs, he could have heard of the contributions to free market economics by Scholastic thinkers like the Jesuits Luis de Molina and Juan de Mariana.14 At the time, Jesuit thinkers were pioneers in the defense of expanding free trade, free enterprise, and free speculation. According to H.M. Robertson, the Jesuits, not the Calvinists, pioneered the spirit of capitalism in Europe.15 Mariana boldly linked prosperity to self-interest and business activity: “Is there anything more injudicious than to act against our own interests... in order to serve the interests of another person?” In words reminiscent of Ludwig von Mises and Adam Smith, he wrote that “nothing induces action more than one's utility, be the man a prince or a citizen.”16 For him commerce was necessary for the well-being of all: “If the exchange of goods were abolished, society would be impossible and we would all live in distress and anguish.” He also addressed the economic problem of scarcity and its solution via the market place: “Scarcity can be overcome through the mutual exchange of [goods].” Mariana observed how owning things in common as part of their vows of poverty made Jesuits wasteful: in a classic statement of why government and, in general, publicly owned property is inefficient, he wrote, “We [Jesuits] are too wasteful.... Certainly it is natural for people to spend much more when they are supplied in common than when they have to obtain things on their own.”17

If Cervantes ever attended some classes at the University of Salamanca, as other scholars have thought, he could have been exposed to the free market ideas of the Salamanca School. Economists like Rothbard, Huerta de Soto, and Chafuén have traced the direct connection between these thinkers of Cervantes's Spanish Golden Age and the modern theory of capitalism.18 It is difficult to imagine that Cervantes, so interested in everything around him, including economics, would not have encountered these ideas.19 Cervantes's knowledge of the world of his time and his intellectual curiosity and voracious reading are impressive. Don Quijote alone constitutes a veritable encyclopedia of Renaissance and pre-Renaissance literature and ideas; one of the authorial voices in Quijote alludes to such intellectual curiosity and voracious reading practices when it admits a passion for looking at anything printed, including torn papers found on the street;20 and Don Quijote's fascination with the printed word is evident both in his characteristically obsessive relationship with books and in his vivid interest in the process of book production, most clearly during his visit to the printing business in Barcelona.21

The Spanish School of economics was part of the culture of Cervantes's time and, given the sensitiveness of his “cultural antennae,” he may well have been aware of at least some of their ideas. But even if Cervantes never came across the economics of the Spanish Scholastics, it is likely that his close attention to how and why men act, evident in all of his works, would have facilitated his praxeological insights into some fundamentals of the market economy. Moreover, his years in the commercial beehive of Seville, and his unique experiences inside the belly of the greedy “government beast” as a functionary in charge of supplies for the Invincible Armada and later as a tax collector, could have made him sympathetic to the difficulties faced by producers and aware of the problems created by wrong-headed government policies. And as we shall see, Cervantes's own problems as a producer of wealth may also have contributed to his awareness of economic issues.


Private property and its protection are fundamental to a market economy. The Spanish Scholastics of Cervantes's time grasped this fact clearly and wrote extensively on the subject. Domingo de Soto criticized public ownership of the means of production. He argued that abundance was not possible under common ownership. If land is privately owned while its produce is commonly shared, this injustice will create problems: “The rewards of labor will be unequal. Those who own more land will have to work more, while the fruits of their labor will be distributed to all equally according to need. They will resent receiving less though working more.”22 If there is common ownership of land and private enjoyment of produce, “everyone will expect the other to do the work... the distribution of goods will cause great envy.” If both land and produce are commonly owned, “Each worker will try to appropriate as many goods as possible, and given the way human beings desire riches, everyone will behave in the same fashion. The peace, tranquility and friendship sought by the philosophers will thus inevitably be subverted.” De Soto realized the immorality of the lack of private property: “those who own nothing cannot be liberal,” and therefore generosity will suffer. Without having lived under socialism, de Soto foresaw the problems of socialist economies of the twentieth-century. Reading de Soto one is reminded of Russian mathematician and writer Alexander Zinoviev's powerful anti-socialist novel The Radiant Future, where all the theoretical and, more strikingly, moral consequences of a common ownership of the means of production are shown to permeate everyday life in Soviet Russia.23

Tomás de Mercado also seemed to be talking against modern socialism, but he was simply making theoretical statements derived from his keen observations of concrete life in the Spain of his time. Postulating the modern economic truism of the limited supply of materials, goods, and services in real life (the economic fact of scarcity), Mercado notices how private property reduces scarcity by leading to greater productivity, whereas common property contributes to scarcity by leading to lesser productivity:

We can see that privately owned property flourishes, while city- and council-owned property suffers from inadequate care and worse management.... If universal love will not induce people to take care of things, private interest will. Hence, privately owned goods will multiply. Had they remained in common possession, the opposite would be true.24

Like de Soto, he saw clearly the problems of not only thoroughly socialized economies but even government enterprises. One may contrast his views with, for example, those of Lenin, who, inspired by Marx's “economics,” saw the Post Office as a model of how to run both business and country.25 According to Mercado, common (public) ownership is bad policy

because people love most those things that belong to them. If I love God, it is my God, Creator and Savior that I love. If I love him who engendered me, it is my father whom I love. If a father loves his children, it is because they are his. If a wife loves her husband it is because he belongs to her and vice versa.... And if I love a friend it is my friend or my parent or my neighbor. If I desire the common good, it is for the benefit of my religion or my country or my republic. Love always involves the word mine and the concept of property is basic to love's nature and essence.

Likewise, Francisco de Vitoria thought private property necessary for the universal virtue of generosity and therefore for morality: “Alms should be given from private goods, and not from common ones.”26

As an author, Cervantes had professional reasons for supporting private property, as the publishing history of Don Quijote shows. One of the crucial facts in the writing and structure of Don Quijote (Part I appeared in 1608; Part II in 1615) was the appropriation of its main characters, Don Quijote and Sancho, by another writer using the pseudonym Alonso Fernández de Avellaneda, who in 1614 published in Tordesillas a Segunda parte de las hazañas de don Quijote de la Mancha. Part I of Cervantes's Don Quijote is almost a collage of pre-existing books which not only influence the writing, but also form part of the text in the form of quotations and parodies, and with which the book sustains an ongoing conversation. Part II adds a complication to this already complicated relationship with other texts by introducing a published Part I within the fiction of Part II. So Part II relates not only to the books that Part I related to, but also to itself, in the form of Part I. It happened, however, that during Cervantes's writing of Part II, Avellaneda's book appeared. Cervantes was incensed. He changed the text of Part II in order to make several unfavorable references to Avellaneda and his “false” Don Quijote and Sancho. He purposefully altered the route of Don Quijote, sending him to Barcelona, which was not mentioned in Part I, instead of sending him to Zaragoza, a destination which had been announced in Part I and had been used by Avellaneda. He paid Avellaneda back by appropriating one of the characters in Avellaneda's book, don álvaro Tarfe. He made Tarfe sign a document in which this Avellaneda character asserts, testifies, and swears to the falsity of the Don Quijote and Sancho in Avellaneda's book and the truthfulness of the Don Quijote and Sancho whom Tarfe has just met in Part II of Cervantes's Don Quijote (in chapter lxxii, where Don Quijote calls Avellaneda a “usurper of my name” twice in the same paragraph). And in the process, Cervantes showed what a superior writer he was by making a far more interesting use of Tarfe than Tarfe's author had.

Cervantes culminated his relentless attack on the thief by writing a Prologue to Part II that centers on Avellaneda's stealing of Cervantes's immortal creation (though Cervantes avows that his anger is motivated also by Avellaneda's having called him a cripple and an old man). In this prologue, a masterpiece of subtle and not so subtle literary vituperation, Cervantes destroys Avellaneda.

So Part II's complicated relationship with books is further complicated by its combat with a writer who had stolen the product of Cervantes's mind. Part II interacts with the books included in Part I, with Part I, and with Avellaneda's book. Therefore, the greater complexity of Part II, its very structure, hinges on the question of property rights: the characteristic openness of chivalric books, which Don Quijote takes to an extreme by using the reader as participant in the creation of the work, Cervantes decides to bring to a close, as a result of Avellaneda's robbery.27 This visceral anger against someone who violated the integrity of Cervantes's creation nullifies all of Don Quijote's mad destructions of property as well as his famous Golden Age speech against private property in the novel.

At the end of Don Quijote, the authorial voice of Cide Hamete Benengeli, the most conspicuous narrator in the book, reaffirms Cervantes's intention to protect once and for all his intellectual property:

And said the most prudent Cide Hamete to his pen:

Here you shall rest, hanging from this rack by this copper wire, my quill. Whether you are well cut or badly pointed here you shall live long ages, unless presumptuous and unworthy historians take you down to profane you. But before they touch you, warn them in as strong terms as you are able:

Beware, beware, all petty knaves,

I may be touched by none:

This enterprise, my worthy king,

Is kept for me alone.

For me alone Don Quijote was born, and I for him. He knew how to act, and I knew how to write. We two alone are as one, despite that fictitious and Tordesillescan scribe who has dared, and may dare again with his coarse and ill-trimmed ostrich quill, to write the exploits of my valorous knight. This is no burden for his shoulders, no subject for his frost-bound muse; and should you by chance get to know him, do warn him to let Don Quijote's weary and moldering bones rest in the grave, and not seek, against all canons of death, to carry him off to Old Castile, compelling him to leave the tomb where he really and truly lies stretched out full length, powerless to make a third expedition and new sally. Surely his two, which have met with approval and have delighted all the people who knew about them, both here and abroad, are enough to make a mockery of all the innumerable sallies undertaken by all the countless knights-errant. Thus, you will comply with your Christian profession by offering good advice to one who wishes you ill, and I shall be proud to be the first author who ever enjoyed witnessing the full effect of his writing. For my sole aim has been to arouse men's scorn for the false and absurd stories of knight-errantry, whose prestige has been shaken by this tale of my true Don Quijote, and which will, without any doubt, soon crumble in ruin. Vale.28

In this speech, “Cide Hamete” hangs up his pen much as a knight hangs up his sword, which in chivalric lore could be used, like Cide Hamete's pen, only by the “chosen” or best knight; and this address to the pen, which suddenly metamorphoses into a speech by the pen itself, is almost a conjuration to stop any future Avellaneda-like authors from stealing Don Quijote ever again.

Therefore, the final fate of Cervantes's main character goes back to the problem of property rights. For in order to make it impossible for anyone else to steal Don Quijote again, the writer Cervantes kills his creation. So Don Quijote in effect dies in defense of Cervantes's private property rights.29

Cervantes's authorial consciousness is remarkable even at a time, the Renaissance, when writers and artists were breaking away from the relative anonymity customary among producers in the Middle Ages.30 It is true that in Spain one finds instances of an earlier consciousness of individual authorship. An example is the Infante Don Juan Manuel. Writing in the 1330s, he notoriously includes himself in his works and shows pride in his authorship and concern regarding the fate of his works and the quality of their future reproduction.31 The great Arcipreste de Hita, too, shows an awareness of his uniqueness as an author.32 But nothing can compare to Cervantes's lyrical singing of himself and his creative powers in some of the tercets in chapter IV of his Viaje del Parnaso, which contains some of his most evocative and heart-rending verses, and where the self, the proud Renaissance I, becomes a recurrent motif:

Yo corté con mi ingenio aquel vestido

con que al mundo la hermosa Galatea

salió para librarse del olvido.

(I tailored with my wit that dress

with which the beautiful Galatea

went out into the world to live forever.)

Yo con estilo en parte razonable

he compuesto Comedias que en su tiempo

tuvieron de lo grave y de lo afable.

(I, with a proper style,

have composed plays that in their time

were both grave and light.)

Yo he dado en Don Quijote pasatiempo

al pecho melancólico y mohino

en cualquiera sazón, en todo tiempo.

(I have given in Don Quijote entertainment

to the melancholy and sad

in any time or season.)

Yo he abierto en mis Novelas un camino

por do la lengua castellana puede

mostrar con propiedad un desatino.33

(I have opened with my Novels a path

through which the Castilian language can

show with propriety men's folly.)

The Avellaneda affair shows how Cervantes as “a producer of a good” was “powerfully affected by the existence of competition,” as Menger observed in his classic work on the foundations of economics.34 The entire direction and structure of Cervantes's greatest novel was changed by another writer's book, in an exemplary case of a producer responding to competition. For as the Marxist-feminist-deconstructionist professor in David Lodge's novel Nice Work laments, a professional writer in a market economy is an entrepreneur of the mind. He “invents a product which consumers didn't know they wanted until it was made available.” He manufactures his product “with the assistance of purveyors of risk capital known as publishers.” And he then sells his product “in competition with makers of marginally differentiated products of the same kind,” namely other writers.35

Unfortunately for Cervantes as producer of an intellectual article of consumption, in the seventeenth century there was only limited protection of property rights, especially intellectual property. Moreover, these rights had not become internationally protected. The Spanish School of economics was an exception in its determined defense of property rights, but its influence on public policy was practically nonexistent because of the greed of the Spanish government.

So authors like Cervantes, and the businessmen who printed his books, were exposed to seeing the product of their minds and labors copied almost immediately by another printer, or stolen by another author. The only way to try to prevent this from happening was to get from the State (the King) a permit (the privilegio, or publishing right, but literally a “privilege” granted by the State rather than something inalienable to the producer and owner), so that for a certain number of years and within a certain geographical area, no one else could legally print the work. But the enforcement of this right was not consistent or thorough, and of course beyond the presumably “guaranteed” geographical area books were subject to piracy. Within a few weeks of Don Quijote's publication, three pirated editions appeared in Portugal. Since under the Hapsburgs Spain was still divided into various former kingdoms, privilegios granted, say, in Castile, were not necessarily recognized in, say, Asturias. Moreover, nothing protected an author's character from being used by another writer. The situation is different today, when property rights include preventing the piracy of one's literary characters. Witness, for example, the legal suit filed by English author J.K. Rowling against the author and publishers of a Russian series of books that very loosely imitate her Harry Potter novels and that present a female version of her main character.

Cervantes's impotence in preventing another writer from stealing Don Quijote and Sancho illustrates not only the institutional, but also the philosophical precariousness of property rights in the Spain of his time. A great deal of grazing and agricultural land was “public property” in a number of bewildering forms and uses, such as baldíos, commons, community property, crown lands, municipal property, and the practice of presura.36 Naturally, not everyone received equal treatment. Those with government connections, such as municipal officials and the lord of the place, benefitted the most, receiving a greater share in the use of these “public” lands.37 All sorts of other problems and complications existed, typical of what modern economics calls “the problem of the commons,” which arise from the lack of enforced property rights and clear boundaries of ownership, and which have a bearing on environmental issues.38

The well-known statements in favor of liberty throughout Cervantes's works are connected to his defense of property rights and his thematic critique of Spain's absolute monarchy and government bureaucrats. As Locke proposes, property functions as an instrument against the absolute power of the state (in Locke's and Cervantes's time, against the absolute power of the sovereign) because it limits the state's (the sovereign's) power and frees the subjects from the “obligation to obey edicts which endangered their property.”39 And, as Locke proposed, too, one's property is the extension of one's property over oneself. One cannot help but be reminded of this viewpoint when in Don Quijote40 one reads Maese Pedro's lament over the destruction of his property, the puppets: “cúyos eran sus cuerpos sino míos?” (whose were their bodies, but mine?). Afterwards, the destroyer of the property, Don Quijote, reimburses Pedro for all damages, as he does later in the case of the Enchanted Ship adventure.41

One can say, then, that the strength of property rights at a given time and place is a measure of the strength of political liberty at that time and place. If the product of one's mind or labor (the Quijote in Cervantes's time) can be taken by others (Avellaneda in Cervantes's time) without one's consent, then one's liberty is necessarily curtailed. The connection between property rights and liberty becomes even clearer if one remembers that Locke thought of property not only as property that a subject owns, but also as the subject's own body, which is the subject's property as well. One owns one's body, and since property earned is but an extension of one's body, respect for property rights is therefore essential to one's ownership of one's body and therefore to one's liberty. The State (or the sovereign) can no more take a subject's property without his consent than it can take his body and therefore his liberty without his consent: or, more clearly, the State (the sovereign) cannot take a subject's liberty, tout court, without his consent. Private property is therefore liberty.


Cervantes's understanding of the market place can be better grasped in conjunction with his fictional critique of the State in one of his Exemplary Novels, Rinconete and Cortadillo. Upon arriving in Seville, the two boys, Rinconete and Cortadillo, encounter and are forced to join a carefully constructed organization of thieves, enforcers, and other assorted low-lives run by a grotesque, yet oddly paternal man named Monipodio. Scholars have traditionally seen Monipodio and his group as many things, such as a satire of the Church or organized crime, but, perhaps not surprisingly in view of the statism of many academicians, they have not seen it as a satire and parody of governmental activities and structures. And yet, having been a member of the government's bureaucracy, Cervantes had a unique perspective on the inner workings of the redistributive State, which at best takes from the productive and redistributes to the less productive or unproductive (as taught in Marx's parasitic teaching: “From each according to his ability, to each according to his need”), while in the process feeding a vast machinery of bureaucrats who are essential to the redistribution process and who therefore have a stake not merely in the maintenance of the machinery of redistribution, but also in its continuous expansion.42 Cervantes knew first hand a government's desperate need for revenue, its ingeniousness and ruthlessness in obtaining that revenue, and the damage such greed causes to the productive people in society.

As Charles Adams has pointed out, onerous taxation was probably the single most decisive cause of the decline of Cervantes's Golden Age Spain.43 It was, in turn, largely the consequences of foreign involvements and wars that drained the Spanish treasury and stimulated government greed for revenue. The value-added tax, or alcabala, lamented by Cortadillo in Cervantes's novel, was particularly damaging to the economy, as this sort of tax always is. Cervantes was for a time an alcabalero, a collector of this tax. Though a formidable revenue machine, it reduces the incentive to produce because it lowers profits and, in addition, makes every product more expensive for the citizenry. As each successive producer in the manufacturing and commercial line adds to the price to compensate for the growing expense created by the value-added tax, the cost of production goes up— and the final price of items goes up for the consuming citizens as well, affecting those with lesser means the most.44 In Spain, “The same materials, as they changed hands in the course of commerce and manufacture, paid the 10 per cent tax many times, and thus placed Castilian producers at a hopeless disadvantage as compared with their foreign competitors.”45

The Moslems invented the value-added tax, which they called alcabala and brought along when they invaded the Iberian Peninsula in 711 A.D. In Spain it became known under its Arabic name and was adopted by Christian monarchs, who appreciated its effectiveness as a source of revenue. The government of Charles V relied on it heavily. Realizing its damaging effects on commerce and living standards, however, Queen Isabella in her 1504 will recommended the abolition of the alcabala. Cardinal Ximenez, minister of Charles V, tried to end it. But as in the case of today's U.S. Income Tax, the State had gotten used, like a drug addict, to the large revenue generated by the alcabala. It was “the most lucrative of taxes... hence the tenacity with which many generations of Castilian kings clung to this disastrous import.”46 It was desirable, too, because inescapable for most citizens, including the nobility (which many historians have erroneously said were exempt from every tax).47 The only ones not directly affected were the very poor, who ate bread and wheat imported from abroad and therefore not subject to the alcabala. This tax was therefore expanded to include the chain of production of food, and the rates of taxation were increased.

The alcabala was not enough for the insatiable needs of the State. The Church was enlisted in the search for revenue, and papal indulgences were pushed on the population so that part of the income they generated would go to the royal coffers (this is a neglected factor in the episode of the bulero in the sixteenth-century picaresque novel Lazarillo de Tormes).48 A personal income tax called servicio was imposed on commoners, the clergy and the nobility being exempted. Another tax called millones was imposed on agricultural producers—not only peasants but also those members of the lower nobility who “had to work by the sweat of their brow to keep from starving,” for, contrary to what is commonly believed, not all noblemen in Spain were idle, and contrary to what the Marxist reductionist categories suggest, the nobility was not a homogeneous group.49 There were other taxes, as well as tariffs.50

This weight of taxation, combined with the need for revenue, created all sorts of corrupt practices. For instance,

the councils of many towns, reluctant to impose new direct taxes on an already overburdened population, resorted to the expedient of exploiting the various types of municipal property available to them... they rented common pastures to the highest bidder for plowing, they sold common forests for firewood, and they speculated with the resource of public granaries.51

Anyone familiar with municipalities, state governments, and household utilities receipts in the U.S. will recognize this governmental desperation for obtaining revenue in every possible and surreptitious way—such as state revenue tax, utility fund tax, municipal tax, environmental tax, service tax, regulatory cost recovery tax, universal service fund tax, excise tax, 911 tax, town public parking sticker fees, town dog permit fees, lotteries, selling of public space to advertising, and even local taxes on taxes.52

The alcabala discouraged the creation of industrial and trade businesses, and led therefore to stagnation in the creation of new jobs and therefore to unemployment. Why take up a trade and start a business when onerous taxation made both unprofitable? This, and not just the vaunted “Spanish pride” or mistaken sense of honor, explains why so many Spaniards chose to be idle: “Any no good wretch,” explains the Spanish narrator in Lazarillo de Tormes, “would die of hunger before he would take up a trade [and pay taxes, one might add, that made taking up a trade unprofitable if one looked at the effort and risk involved and the rewards one would get].” A modern scholar observes that “Spanish industry was strangled by the most burdensome and complicated system of taxation that human folly can devise.”53

Foreign goods, which were cheaper because not subject to the alcabala, were smuggled into Spain to violate import limitations and tariffs, and they underpriced Spanish goods in the local markets. So gold and silver flowed out of the country as fast as it arrived from America, and not only because the government used it to pay foreign loans, but also because importers used it to pay for foreign goods, and because Spaniards in general were reluctant to invest in Spain itself in view of the anti-business economic situation.

Since the ancient liberties and customs of the old Spanish kingdoms made it very difficult to tax them for the government's overseas wars, Charles V had to look to Castile for his tax base. In Castile, taxation required the approval of the Cortes, a representative body analogous to the English Parliament or the French Estates General. But in fact, by the sixteenth century, the Castilian Cortes usually granted the King's wishes. Taxpayers, however, would take only so much.

In 1520, before Charles V had consolidated his rule as king, a revolt of taxpayers asking for true representation in and accountability of the Castilian Cortes turned into an ugly social and political uprising, the so-called Comuneros revolt. The acts of violence committed by the angry taxpayers dwarfed anything done by the rebellion of American taxpayers in 1776. In one of them, the rioters killed a member of the Cortes while ignoring his request for an opportunity to get last rites before dying. Charles V defeated the rebels with difficulty and ruthlessness. But the revolt showed the Emperor the limits of what the citizens would accept. So instead of relying exclusively on new taxes, he resorted to a more strict application of existing taxes and to a corrupt use of the banking system in which bankers were willing participants—an early example of collusion between government and influential sectors of the business world that illustrates how such a combination undermines a market economy.54

Most of the taxpayers flying from the government's despoliation went to America. “The galleons left on the 28th of last month,” writes a contemporary French observer, “I am assured that in addition to the persons who sailed for business reasons, more than 6,000 Spaniards have passed over to America for the simple reason that they cannot live in Spain.”55 The decline caused by the exodus was the reason the German chancellor Bismarck did not want colonies for Germany: he used the example of Spain to illustrate how the flight of its most productive people might hurt a nation.56 This most important reason has been glossed over or mentioned only en passant by historians of Spain, most of them statists, who prefer instead to attribute the decline to the expulsion of the Moslems, or the Jews.

The size of the Spanish government grew out of the need to create bureaucracy to handle the extraction, administration, and redistribution of the revenue, as well as the government's foreign adventures, the army, and the navy. Government became the largest employer in Spain. Taxpayers jostled for the available public service jobs, which were tax-free and, as is always the case with the public sector at any time or place, did not produce rev-enue—they could only distribute it.57 Cervantes and other Golden Age writers made a literary theme out of this desperate search for state employment.58 As government as employer grew, the private sector shrank. In the bureaucracy “There are a thousand employees,” writes a contemporary, “where 40 could suffice if they were kept at work; the rest could be set to some useful labor.”59 Anyone familiar with the over-employment and lack of efficiency of government bureaucracies at any time and place will recognize the situation.

It is true that some historians point out a short period of prosperity after the beginning of Charles V's reign and attribute it to the rise in prices, which presumably stimulated the production of goods.60 From the point of view of modern economic theory, however, this could not be true prosperity, but an artificial boom created by the inflationary pressures that originated in the huge deficit spending of the state's budget, the influx of gold from America, the demands of war, and the expenses of the conquest, colonization, and defense of America—an artificial boom which distorted the functioning of the market and which when added to onerous taxation eventually led to what economists of the Austrian School call an “inflationary depression.”61

The Spanish School of economics was aware of these problems. Though Domingo de Soto conceded that some taxation is needed to support the essential needs of government, such as national defense, the justice system, and so forth, he warned that “Great dangers for the republic spring from financial exhaustion, the population suffers privations and is greatly oppressed by daily increases in taxes.”62 Diego de Saavedra Fajardo (1584-1648), who was not a Scholastic, but a lay writer like Cervantes, warned that “power is mad and has to be restrained by economic prudence. Without prudence, empires decline. The Roman Empire declined due to the emperors' excessive spending, which consumed all its treasures.”63 Mariana condemned the bellicosity of tyrants and their penchant for engaging in one war after another and going after “the rich and the good” to get their revenue.64 Pedro Fernández de Navarrete, Chaplain and Secretary to Charles V, wrote that Spain's major problem was emigration prompted by the high taxes people had to pay to finance public spending and, to no avail, urged the Emperor to reduce spending.65 Thinking as a modern economist, Navarrete rejected the idea that abundance of money in a nation is a sign of prosperity, and instead defined wealth as productivity. “The origin of poverty,” he added, “is high taxes. In continual fear of collectors [the farmers] prefer to abandon their land, so they can avoid their vexations. As king Teodorico [a Visigoth king] said, the only agreeable country is one where no man is afraid of the tax collectors.”66 He also understood the modern governmental problem of killing with high tax rates the goose that lays the golden egg: “he who imposes high taxes receives from very few” and since the number of productive people consequently declines, “the backs of those few who are left to bear the burden grow weaker.”67

As a one-time tax-collector, Cervantes was familiar with both sides of the process of taxation. On the one hand the government desperately looks for ways to extract more and more wealth from the productive citizens in order just to keep operating. On the other hand the productive citizens desperately try to keep the results of their productivity. Cervantes would have known of the Spanish taxpayers' revolts and flight and witnessed the taxpayers' ingenious efforts to hide the fruits of their productivity, that is to say, their income—ingenious ways of tax evasion which in turn made the government clamp down with further regulations to stop the evasion, thereby further hampering job creation, and so on in a spiral well described by modern day market economics.68 “The [Spanish] taxpayer,” writes Golden Age scholar Trevor Davies, “overburdened with imposts, was entangled with a network of regulations to prevent evasion.... He was thus crippled at every step by the deadly influence of the anomalous and incongruous accumulation of exactions.”69

Cervantes's critique of the distributive state in Rinconete and Cortadillo begins with a humorous parody of government attempts to control entrepreneurship and of government mooching on producers, as Rinconete and Cortadillo learn to their astonishment that their “work,” stealing, is both regulated and taxed by Monipodio's “government.” Refusal to pay the government for the right to work, that is to say, the refusal to get a “license” to exercise their “trade,” and any attempt to avoid paying taxes on their profits, will be severely punished: “it will cost you dearly” (les costará caro), the two boys are told. In addition, they must pass through the aduana (customs) of Mr. Monipodio.

Cortadillo's response to the government's threat is a classic libertarian statement on the right any producer has to work without having to pay production taxes or buy a “license” in order to work: “Yo pensé que el hurtar era oficio libre, horro de pecho y alcabala, y que si se paga, es por junto, dando por fiadores a la garganta y a las espaldas” (“I thought that stealing was a free enterprise on which neither duty nor alcabala was levied, and that if payment was required, it was in a lump sum, with neck or back as security”). He wonders if thieves in that part of the country have to pay “duty” and is told that at the very least thieves must “register” with the government authority, that is, with Monipodio, who is the thieves' “father, mentor, and protector.” Since the Spanish government did not in fact tax thieves, Cervantes must be mocking a system run amuck, a system that he found it safer to criticize by means of the humorous presentation of a band of thieves who act as a respectable government.

In Cervantes's Rinconete and Cortadillo, government, in effect, is a bunch of thieves. When at one point in the novel money taken out of the citizens of Seville victimized by the thieves cannot be accounted for in Monipodio's society, the government's chief executive (Monipodio) is incensed not about taking money from those who have earned it, but about the violation of the government's rules. Thus, his government's “taxation,” based from the start on immorality (taking by force from the innocent and productive) is doubly immoral because it cannot even keep to its own rules on stealing. Angry about this stolen money that appears to have been further stolen, or stolen to the second degree, Monipodio's anger explodes:

“!Nadie se burle con quebrantar la más mínima cosa de nuestra orden, que le costará la vida! Manifiéstese la cica, y si se encubre por no pagar los derechos, yo le daré enteramente lo que le toca, y pondré lo demás de mi casa, porque en todas maneras ha de ir contento el alguacil” (“Let no one play fast and loose with the slightest regulation of our order, for it will cost him his life. The purse must be handed over, and if it is being concealed to avoid the taxation due, I shall give him [the constable] his full share and make up the balance out of my own pocket, for, come what may, the constable must be satisfied”).

A side detail contributes to the critique of government: the municipal employee, the Sevillian alguacil (constable), is in cahoots with the crooks. Again, anyone familiar with many city and even state governments in the U.S. today will recognize the situation in Seville during the Golden Age.70

Behind Cortadillo's response lies an entire theoretical economic edifice. According to economic theory, government needs revenue for all sorts of redistributive and power-exerting actions, most frequently war.71 Even economist Joseph A. Schumpeter, not a particularly staunch free market advocate, wrote that

the state has been living on a revenue which was being produced in the private sphere for private purposes and had to be deflected from these purposes by political force. The theory which construes taxes on the analogy of club dues or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.72

So the state looks constantly for new sources of revenue, the only caveat being that it must not tax the productive so much that the incentive to produce disappears. In the process of stealing the golden eggs, it must not make the goose that lays the eggs unwilling to continue laying the eggs or even too inclined to lay fewer eggs. So in order to increase expendable revenue, and not being content with direct taxation, sales taxation, or the more subtle means of taxation like money-printing (and therefore gradual currency devaluation and inflation), the government creates a monopoly on the right to produce and proceeds to sell that right. Then a producer must get a permit (“license”) from the government if he wants to produce. On the one hand individuals have the right to work and produce at their chosen trade without government interference or permission. On the other hand government desperately needs revenue. The two sides cannot coexist. But the state, being the stronger on account of its usual monopoly of force, normally wins. The desperate need for revenue normally masks itself as an effort to secure the quality and safety of what is produced. The areas requiring permission are gradually extended, so that eventually even barbers and hair dressers must get permits. Free market theory counters the safety argument by pointing out that the fear of losing customers and going bankrupt along with private seals of quality such as Consumer Reports and UL approvals can do the job as well or better without government interference.

Governmental extensions of the licensing monopoly eventually enter areas of unsavory action not outside the realm of gangsters like Monipodio. Take, for example, gambling. Morally, gambling traditionally falls within a gray area of sinfulness. But it has been turned by government's greed for revenue into an illegal activity. So, for example, in many areas of the U.S. many forms of gambling (betting for money) are legally forbidden. On the other hand, gambling is legally allowed, as long as the gambling is “licensed” by the government in casinos, or government owned, as in state lotteries. Like Monipodio, government turns a presumably undesirable activity, forbidden by government, into an activity that is not only accepted but also enthusiastically promoted and advertised by government as conducive to the people's well being, as happens with state lotteries, where the damages that compulsive gambling may cause to freely acting citizens are ignored as long as the gambling is government-sanctioned and therefore as long as the gambling results in more revenue for the coffers of the State. In some parts of Europe, prostitution is similarly treated. So what used to be activities sponsored and overseen by gangsters become activities sponsored and overseen by government.


As an immensely imaginative novelist, not as a philosopher writing a coherent essay, Cervantes embodied in his characters and narrators the most diverse thoughts and actions. So a given passage may present a particular viewpoint, which Cervantes may or may not have shared at one time or under certain circumstances, while the next passage may present another viewpoint, which, again, he may or may not have shared at one time or under certain circumstances. But what all of Cervantes's pages indubitably prove is that he understood many things; and that he could therefore envisage, even more than his ingenioso Don Quijote, many different ways of thinking and acting. So it is with libertarianism.

Don Quijote's expressions glorifying liberty are well-known. But no one seems to have noticed that his most famous speech in defense of liberty occurs in the context of a condemnation of the comforts and protection granted by others because they result in a loss of one's independence and therefore of one's liberty. This is a classic libertarian position, which argues that in exchange for its protection and help, the state inevitably curtails one's liberty and creates a dependence that makes one lose not only liberty but also the love and the understanding of liberty. Or, as Patrick Henry put it, “Give me liberty, or give me death.”

Liberty, Sancho, my friend, is one of the most precious gifts that Heaven has bestowed on mankind; all the treasures the earth contains in its bosom or the ocean within its depths cannot be compared with it. For liberty, as well as for honor, man ought to risk even his life, and he should reckon captivity the greatest evil life can bring. I say this, Sancho, because you were a witness to the luxury and plenty that we enjoyed in the castle we have just left; yet, in the midst of those seasoned banquets and snow-cooled liquors, I suffered, or so it seemed to me, the extremities of hunger, because I did not enjoy them with the same freedom as if they had been my own. The obligations that spring from benefits and kindnesses received are ties that prevent a noble mind from ranging freely. Happy the man to whom Heaven has given a morsel of bread for which he is obliged to thank Heaven alone.73

Cervantes could well relate to these words, because the defining fact of his life was not the society of his time, or the distribution of wealth, or the material base, or any of the other things that “materialist” (Marxist) analyses of his life and times offer as “explanations” of his works. The defining fact of his life was his capture by the Moslems of North Africa and his slavery at their hands for five and a half years. Only his participation in the battle of Lepanto (1571), which in the Prologue to Part II the narrator boasts as the greatest occasion of his life, comes close to it.

This slavery, the culminating experience of his action-packed youth, had a lasting impact, affecting the later course of his life not only because he lost precious time and the possible government career he had ahead of him as a result of his earlier heroics at Lepanto and the letters of recommendation he carried with him—but also because from then on he would look at life from the point of view of a passionate lover of liberty, who, having lost independence and freedom once under terrible conditions, sees them as the guiding principles of human life.

Don Quijote is a staunch advocate of the freedom of the will. Therefore, not for him are assumptions and premises according to which social and economic “conditions” make one, or Cervantes, or Don Quijote, do or think something or other.74 As Don Quijote puts it, no “sorceries in the world... can affect and force the will, as some simple people imagine. Our will is free and no herb nor charm can compel it.... I maintain that it is impossible to force a man's will.”75 For Don Quijote, then, man is a “volitional” creature.

Unlike Alonso Quijano, who is a common country gentleman easily associated with the social class he is born into, Don Quijote creates himself and becomes a unique, clearly differentiated individual. There were many Alonso Quijano-like gentlemen in Don Quijote's time; but there was only one Don Quijote.

Don Quijote is frequently at odds with the state. He frees people the State has arrested and condemned to serve in the galleys of the state (the king). This episode76 also shows the lack of proportion between crime and punishment and also the increasingly intrusive existing regulations and proposed regulations that libertarians condemn today. One of the galley slaves has been sent to the galleys for merely stealing some clothes. Another has been sent there because he was not strong enough to resist what today we would call the police's “third degree,” which in the Golden Age was serious business, since it involved torture. Another galley slave complains of the corruption of the justice system and argues that he would not be where he is if only he had possessed the money to sway the justice system in his favor. Again, anyone familiar with the government's justice system no matter what the times will recognize the situation. In another part of the novel,77 Don Quijote challenges a lion which belongs to the king (the state), an act doubly subversive because lions have traditionally been symbols of royalty. In yet another episode, Don Quijote is captured by Catalonian bandits led by the nobleman Roque Guinart, depicted admiringly despite his rebellion against the state, and as a figure who in his chivalrous actions is reminiscent of Don Quijote.78 As a Catalonian nobleman at odds with the Castilian crown, Guinart plausibly represents the libertarian desire for local autonomy and political self-determination against the monolithic state.79

Characters like Don Quijote and the “shepherdess” Marcela claim an autonomy and independence from social mores and obligations that run against collectivist premises upheld, among others, by those who believe Marcela should return a young man's love, and by the priest at the Duke's palace, who urges Don Quijote to do the accepted thing, which is to take care of his family and house. Don Quijote's independence from the mores of the collective in which he lives and his uniqueness as an individual are obviously central to the novel. Marcela's similar views are clearly stated in her long speech80 where she rejects the collective's desire that she sacrifice herself to society's interests by loving someone she does not love. In this speech she emphasizes the volitional origin of her life-style and its grounding in the natural or intrinsic quality of human freedom: “I was born free, and to be free I chose the solitude of the fields.” She emphasizes human volition also in her requirement that love must be voluntary and not imposed by the collective's mores.81

Marcela's understanding of the volitional nature of love is echoed by Don Quijote, who vows to protect her at the end of the episode: after the adventure of Altisidora's “death,” Don Quijote defends himself by saying that love cannot be forced.82 And Cervantes's sympathetic treatment in his works, from Don Quijote to the Exemplary Novels, of those who live out of the mainstream of the collective (what some scholars call “the marginalized”), such as prostitutes, rogues, and even bandits like Roque Guinart, is well known.

Other characters echo this libertarianism. As we have seen, Cortadillo in Rinconete and Cortadillo complains against the alcabala and the need to get a permit in order to produce. Sancho is a potential entrepreneur who, at one point in the novel, thinks of the possibility of marketing the seemingly miraculous balm of Fierabrás to sell it at three times its cost of production. Indeed, unlike so many Spaniards of his time, Sancho is even willing to forsake land for a commercial adventure and so he asks Don Quijote for the balm's recipe in exchange for the insula that Don Quijote has promised him.83 This Cervantine awareness of the way the free market functions is reflected also in the narrative voice's observation84 that his interest in the manuscripts he had discovered in the Toledo flea market was so great that he would have been willing to pay far more for them than what their seller eventually asked.

Anarcho-libertarian economist David Friedman has explored the system of justice of Medieval Iceland as an example of the workability of libertarian ideas in real-life situations.85 The views on justice of Don Quijote, a Medieval relic in the era of the Renaissance, are also close to anarcho-libertarian positions. He of course upholds the right to keep and bear arms, which the U.S. Constitution secures in its Second Amendment, and the right, if necessary, to use them to achieve justice. He upholds the idea that the individual offended, not the state, is the one who must take action. He advises Sancho to act on this principle when Sancho's property is at stake: “You, Sancho, must be the one to redress the injury done to your ass.”86 And the great Spanish scholar Martín de Riquer has called attention to the fact that Roque Guinart confesses that what led him to his life of banditry was his trying to avenge a personal offense he once received.87

Moreover, like Cervantes's famous sympathetic portrait of a Salamanca-educated madman in the Exemplary Novel, El licenciado Vidriera, Don Quijote is a magnificent poster boy for the libertarian rejection of many definitions and cases of mental illness.88

True, Don Quijote, Sancho, and the other characters are literary creations, fictional beings. Attributing a writer's views to one or more of his characters or narrators can be a naive form of reading that Don Quijote himself illustrates with his belief that the stories he has read in the chivalric books tell of real events—a naive form of reading that perhaps Cervantes, the sophisticated writer and theoretician of literature, is making fun of precisely by means of his novel Don Quijote. Moreover, Don Quijote is at times delusional, or at least acts as if he were delusional. Finally, Don Quijote's words, the narrations of his actions, and the narrators' comments on his actions and words and the words of other narrators, are not part of an essay or a book, where a writer usually attempts to express what he claims are his true views on something or other. They are, again, a fiction.

Nonetheless, some parts of Don Quijote can be connected to Cervantes himself more plausibly than others. The prologue to Part II is one. The great speech in defense of liberty in Part II, chapter lxviii is another. Yet another one is Don Quijote's speech in defense of pimping.

Spanish literature has an illustrious tradition of using gobetweens as important literary characters. Most famous is perhaps the madam, Celestina, the central figure in Fernando de Rojas's magnificent sixteenth-century novel-play Tragicomedia de Calisto e Melibea. In the Middle Ages, the Arcipreste de Hita made another madam, Trotaconventos, one of his memorable creations in the Libro de Buen Amor. And other Spanish Golden Age writers, like Lope de Vega and Agustín Moreto—whom Baltasar Gracián called “the Spanish Terence”—wrote humorous defenses of pimping. So Cervantes was writing within a long and respectable Spanish literary tradition.

Nowhere, however, do we find in Spanish literature such a well-reasoned defense of pimping as that found in Don Quijote. The speech is inspired by Don Quijote's discovery that one of the galley slaves has been sent to the galleys for being a go-between, a sexual facilitator, in short, a pimp. Speaking of one of his fellow galley slaves, another one tells Don Quijote: “the offense for which they gave him this punishment was for having been an ear broker, and a body broker too. What I mean to say is that this gentleman goes for pimping and for fancying himself as a bit of a wizard.” To this Don Quijote answers:

If it had been merely for pimping, he certainly did not deserve to go rowing in the galleys, but rather to command them and be their captain. For the profession of pimp is no ordinary office, but one requiring wisdom and most necessary in any well-governed state. None but wellborn persons should practice it. In fact, it should have its overseers and inspectors, as there are of other offices, limited to a certain appointed number, like exchange brokers. If this were done, many evils would be prevented, which now take place because this profession is practiced only by foolish and ignorant persons such as silly women, page boys, and mountebanks of few years' standing and less experience, who, in moments of difficulty, when the utmost skill is needed, allow the tidbit to freeze between their fingers and their mouth and scarcely know which is their right hand. I should like to go on and give reasons why it is right to make special choice of those who have to fill such an important office in the state, but this is not the place to do it. Someday I will tell my views to those who may provide a remedy.89

This witty yet mind-stretching speech, written in the early seventeenth-century, is the sort of thing that libertarians like economist Walter Block have written in the late twentieth century. Block in fact dedicates a chapter of his witty yet mind-stretching book Defending the Undefendable to a defense of pimping.90 Like Don Quijote, Block argues that pimping is a necessary, socially useful occupation. He compares pimps to practitioners of other trades, such as bricklayers, physicians, and lawyers, all of whom can be good or bad at their chosen profession and can therefore, be guilty of foul play (cheating the customer, doing a poor job, imperiling the health of the customer, or his future, or his financial situation), just as a pimp can (physically hurting the prostitute). But in neither case is foul play necessarily part of the trade. Bricklayers, physicians and lawyers do not necessarily have to cheat, do a poor job, or imperil the health or future or financial situation of a customer, though they are potentially capable of doing so. It is the same with the pimp. A pimp does not necessarily have to hurt a prostitute because it is not a necessary part of his job. The reason for this is that the pimp's defining function is that of a broker.

Some individuals want sex and are willing to pay for it, and some others are willing to sell it and accept cash for it instead of, say, a big house, designer clothes, mink coats, diamonds, leisure, babies, and the prestige of a well-off spouse.91 Hence, the existence of the pimp as a broker of sex. Or, as Block puts it,

The prostitute is no more exploited by the pimp than is the manufacturer exploited by the salesman who drums up business for him, or the actress who pays an agent a percentage of her earnings to find new roles for her. In these examples, the employer, by means of the employee's services, earns more than the cost of hiring the employee. If this were not so, the employer-employee relationship would not take place. The relationship of the prostitute to the pimp (employer to employee) contains the same mutual advantages.92

Indeed, argues Block, “assignations arranged by the pimp afford the prostitute additional physical security over street walking or bar hopping.” And of course the pimp gives the prostitute protection against undesirable or violent customers, or those who refuse to pay, and even policemen. So the result for the prostitute and also for the customer is that the pimp, as broker, brings her to her customer and the customer to her under conditions that ultimately are of less cost to the prostitute and also to the customer than would exist without the pimp's brokering services. “Each party to a transaction served by a broker gains from the brokerage, otherwise they would not patronize him.” The prostitute can benefit from the pimp and therefore as long as there is an uncoerced exchange of products between the two—money from the prostitute and protection, advertising, and especially facilitation or brokering on the part of the pimp—there is no reason for violence. The pimp gets what he wants, money from the prostitute; and the prostitute gets from him what she wants, namely brokering, protection, advertising, and perhaps other things.

Cervantes saw in the Spanish Golden Age what Block sees today, that pimping is a form of brokerage. Notice, of course, that Don Quijote, unlike libertarians like Block, would enlist the state to supervise the brokerage function of the pimp. Don Quijote suggests that pimping should be regulated or licensed as other trades were at the time. That presumably would stop so many incompetents from trying to enter pimping, which is, after all, a demanding and indeed delicate occupation. In writing this, Cervantes may be satirizing, as a libertarian would, the licensing of all sorts of professions that do not need licensing; he has Don Quijote accept the fact of licensing, so that pimping can be recognized as a profession like any other, but in the process Don Quijote tries to find benefits in licensing that modern libertarians would argue do not justify it. Instead, the market place, a modern libertarian would say, will eliminate the majority of bad or incompetent pimps, whereas the good or competent ones will attract enough customers to succeed.

Like Block's, Cervantes's arguments in Don Quijote's speech are ultimately Smithian. And like Block, by using humorously an extreme example, Cervantes illustrates the workability and morality of the free market when extended into things normally considered outside its parameters. From the libertarian viewpoint, the free market approach to pimping is no different from a free market approach to the administration of justice, police, roads, parks, and other such areas.93

Unlike Block, however, Cervantes may have had more than a mere theoretical or literary investment in such matters as pimping and prostitution, which he touches upon with curious insistence in several fictional and stage works. During his years in Valladolid, he lived in a two-floor house above a tavern. Cervantes occupied one part of the house with his wife, daughter, two sisters, a niece, and a young woman servant. Other parts of the house were occupied by other women, two little girls, a twelve year old boy, and one man. Altogether, at least seventeen women ranging in age from eighteen to fifty lived in the place.94 Several men visited it at various hours. One of them was a dissolute gentleman who was mortally wounded nearby on 27 June 1605. He was taken inside and nursed by one of Cervantes's sisters before he died on 29 June. The authorities suspected that the gentleman's murder could be related to his visits to the women. Cervantes, several of the women, and a male visitor were arrested and jailed for a couple of days. A neighbor made some accusations regarding the activities of Cervantes's daughter. Having no visible means of support, and being about the only man in a house full of women and frequented by men, Cervantes was perhaps suspected of being a facilitator. Nonetheless, everyone was freed for lack of evidence, though Cervantes's daughter was forbidden to see the male visitor. The murder remained unsolved.

This public suspicion over Cervantes's behavior may be alluded to in one contemporary literary work that has come down to us. A Spanish short play (an entremés) written by Gabriel de Barrionuevo includes a minor character who makes only a brief appearance looking for a younger woman to marry so he can prostitute her and make some money. The character's name is Cervantes.95

So, at one point in his life Cervantes had been suspected of being a pimp, and therefore his main character's speech defending pimping has the same personal ring to it as the narrative voice's defense of Cervantes's intellectual property in the prologue to Part II of Cervantes's novel. A high-minded “knight” like Don Quijote, so ardently defending pimps rather than, say, prostitutes, and with so modern-sounding and logical free market arguments, might indicate that our author not only had a personal stake in pimping, but also, more importantly, a good grasp of and a great deal of sympathy towards a market economy.


In his Exemplary Novel, The Dialogue of the Dogs, one of the two speakers, the dog Berganza, shows great admiration for the businessmen of Seville. The master he speaks of most favorably is a merchant. Berganza also notices how frugally his master and the other merchants live, and how much they care about their families, especially their children, whom they pamper and send to the Jesuits' school, the best in Seville. And to his fellow dog's malicious comments against the businessmen's “ambition,” Berganza replies after the manner of Adam Smith: yes, the merchants have ambition, but it is of the best kind, the one that “attempts to better itself without doing harm to others.”96 And could it be, too, that Cervantes remembered that he owed his rescue from slavery under the Moslems in North Africa not only to his family and the Catholic Church (Trinitarian friars went to Algiers to pay his ransom and eventually succeeded in freeing him), but also to the Christian businessmen in Algiers who put up part of the ransom money?

It is not easy trying to distinguish between what are more likely Cervantes's personal views and what are more likely the views of his characters and narrative voices motivated by thematic and stylistic reasons. We do not have from Cervantes family letters, or essays, or other strictly non-fictional or non-poetic writings in which an author takes a position regarding some issue. In Don Quijote the distinction is especially difficult to make because of the subtleties and ironies of the text, the multiplicity of narrative voices that periodically correct each others' versions of events and even the assertions of the characters, and the madness or perhaps feigned madness of Don Quijote. Thus, the sympathetic presentation of wealthy, entrepreneurial commoners like Camacho,97 or the neutral presentation of other wealthy and entrepreneurial commoners like the fathers of Marcela and Dorotea are not completely reliable. And they are balanced by Cervantes's presentation of Andrés's master, who beats the boy because he keeps losing the sheep.98 Cervantes's “prologues” to the novel might do, except that, utilizing fictional techniques later imitated by the likes of Fielding and Stendhal, Cervantes makes his prologues part of the fiction, so they are also unreliable. One exception is the prologue to Part II, where the subject matter, as we have seen, lends itself to a more personal interpretation because of the Avellaneda affair. There autobiographical issues come out through the seams of the prologue's structure. Another exception is his long poem Viaje del Parnaso, where he comments on contemporary literature and authors as well as his own works. Apart from the Viaje and the prologue to Part II of the Quijote, the more plausible illustrations of Cervantes's own views can be found probably in the Exemplary Novels, which lack the multiplicity of narrative voices, the narrative corrections and critiques, and, in general, the misdirection, complexity, and ambiguity of the Quijote. Nonetheless, sooner or later one must come back to Cervantes's most important work.

In the Quijote, the knight's visit to the printing business in Barcelona illustrates Cervantes's grasp of business ethics. He prints books, the printer tells Don Quijote, because “I want profit.”99 So books, which people read and enjoy, and the knowledge and pleasure they communicate, are not the result of an altruistic effort on the part of this businessman, but of his desire to improve his condition in life by making a profit. Here Cervantes anticipates the famous dictum of Adam Smith: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but their self love.”100

It is fitting that Cervantes locates the encounter between the knight-errant and this businessman in Barcelona (a city chosen to spite Avellaneda, the thief of Cervantes's intellectual property), because Catalonia was at the time and still is a more entrepreneurial region than Don Quijote's Castile. Cervantes's printer is not unlike Johann Gutenberg, a great benefactor of the world with his invention of mobile characters for the printing press, who was, however, no selfless benefactor: he was an entrepreneur, the owner of a printing business, someone who made money by being a producer, and who gave value that he created in a free and voluntary exchange for other producers' value (one may say the same of the great entrepreneurs who in the 1970s and 1980s accomplished in the U.S. a cultural revolution—the computer revolution—as momentous as that started by Gutenberg in 1440).101

Cervantes's appreciation for the qualities of businessmen is particularly noticeable in a country like Spain where early capitalism was weak compared to that of England, the Netherlands, or France, and where commerce, finance, and, in general, the desire to make a profit, were looked down upon and associated with the Jews. In Spain the development of a middle class (the so-called “bourgeoisie”) and its accompanying commercial and entrepreneurial spirit had been thwarted. The aristocratic preference for wealth obtained through the sword in heroic and courageous actions rather than through business activities had been developed and cultivated through centuries of war against the Moslem invaders during the long Christian Reconquista of the Iberian Peninsula. It became therefore part of everyone's ethos, from noblemen to peasants. After the Reconquista was completed in 1492, this preference continued and was reinforced by the Conquistadors' bold military feats. And the medieval trust in land rather than commerce as a sign and source of wealth lingered on, reinforced by the territorial expansion of the Reconquista. In addition, the Conquest of America contributed to the idea that wealth was not to be created, but found otherwise, in the earth, in the mines of America (gold, silver), much as today the oil-producing countries of the Middle East are commercially stunted by the idea that wealth is not to be created, but found in the earth (oil). Gold in the case of Spain and oil in the case of the Middle East have been disastrous for the growth of a business mentality. In Castile people with capital also tended to invest in land rather than commerce because land was considered not only more prestigious but also safer, though less potentially profitable; and the change in ownership of land did not result in an increase in productivity because the new owners kept the same methods of production.102 There were still other factors working against capitalism in Spain: the expulsion in 1492 of large numbers of enterprising Jews who refused to convert to Christianity; the continued hostility against those Jews who chose to convert in order to remain in Spain, the so-called conversos or marranos; and the expulsion between 1609 and 1615 of the agriculturally enterprising Moors who had remained in Spain (the moriscos).

Given this widespread anti-business mentality and the policies of the Spanish crown, the ideas of the Spanish School of economics had little chance of success. So it was of no use that thinkers like de Soto, after considering and rejecting arguments in favor of utopian alternatives to money, commerce, and profit, such as barter (a Communist ideal even in the twentieth-century), concluded that “buying and selling are very necessary contracts for the republic,” or that, long before David Ricardo, de Soto established the law of comparative advantage and pointed out how businessmen only in a free market can respond rationally and efficiently to relative scarcity to the benefit of all, a law and a process that even today many politicians do not understand:

Not all the provinces have the goods that they need in abundance. And what we say of different places can be said also of different times.... Without people to respond appropriately to such circumstances the republic could not do without harm.103

Being a many-sided man, Cervantes could understand better than most the hard-nosed business approach to life. He could draw both on his writer's detailed observations and on his personal experience. He was not only a man of fantasy. He was also a producer of an article of consumption and therefore an entrepreneur of the imagination. He had to deal with the business world and other businessmen. He, not some literary agent, had to make arrangements with publishers whom he had to convince of investing in his product. He certainly wrote books in order to try to make a living and improve his situation in life. He was a professional writer. In addition, he had been a commissary in charge of supplies for the navy (the Invincible Armada) and a tax collector. He had therefore dealt with the hard facts of accounting, consumption, supply, demand, and deficits, and he had actually suffered the consequences of failing to take all this into account properly, or making the wrong calculation, or the wrong assessment of things.104 He had also been a soldier. As a soldier he had dealt with reality at its most brutal. In some ways, the occupation of soldier is no different from that of businessman, as the popularity among some businessmen of such classics as Sun Tzu's The Art of War and Miyamoto Musashi's The Book of Five Rings suggests. A soldier has to plan, think ahead, look at means, be aware of facts, and accurately assess the competition. But for a soldier the stakes are much higher. He must know that a dull sword will not cut, that wet powder will not fire, that mere wishing will not make it so, and that one's very life is at risk in all this. The hero of Lepanto, and the seasoned veteran of Navarino, Tunez, and La Goleta knew that there is nothing theoretical or unreal about being a good soldier.105 Wishful thinking and faith alone will not do. A soldier must know the enemy's resources and execute the plan based not on fancy but on facts. Cervantes must have been more than familiar with the need to use one's reason (act rationally) if one wants to be “productive” and win on the battle field. He makes this clear in his great tragedy Numancia, where the ultimately victorious Scipio repeatedly emphasizes rational and methodical control (cordura, reglada, concierto: judgment, prudence, temperate agreement) as a prerequisite for winning.106

Cervantes's understanding of the businessman's no-nonsense view of life is also shown in the scene where the knight meets some merchants and asks them to swear to the supreme beauty of Dulcinea.107 One of the businessmen kindly answers that they will gladly do so if only Don Quijote will show them at least a portrait of his beloved. In other words, they want empirical proof. Don Quijote, however, wants them to swear based merely on faith. What merit would there be, he asks, in affirming her beauty upon seeing her face? The whole point is to affirm her beauty without having ever seen her. Conflict is inevitable between these completely opposed epistemological camps. Don Quijote attacks the businessmen, who are saved from injury only because Don Quijote's horse, Rocinante, trips and both horse and rider end up on the ground. Like so many other scenes in the novel, this encounter is an encapsulation of two very different epistemologies: the empirical approach to knowledge, and the faith-based approach. Cervantes is familiar with each, and his knowledge of the businessman's way of facing the world is evident in the merchant's answer to Don Quijote. Men have the capacity to act one way or the other, and sometimes one finds both manners of behavior in the same person. But the merchant who asks for proof is a particularly good example of the volitional and rational approach to life characteristic of the businessman.

The rational selection of ends and means is characteristic not only of homo economicus, as the enemies of business are fond of proclaiming, but also of anyone, including a writer, who desires to achieve certain ends, material or not. People tend to be productive when they are rational and self-interested. They have to think, plan, and finally produce something that other people may be willing to trade for what they in turn produce. The businessman in particular must act in a self-interested way; otherwise his business will flounder; and this thinking, planning, and self-interested producing must take place according to the requirements of reality. But the businessman must also be imaginative. Without imagination a business cannot be first conceived, and then executed. As a matter of fact, many a businessman has been, like Don Quijote, regarded as crazy by others when they learned of his visionary plans.108 The businessman's imaginative activity, however, must be exerted within a framework of reality. In this sense the businessman is a supreme realist, the opposite of Don Quijote. One may notice some of these characteristics in the businessman who faces Don Quijote: rationality (notice the rational construction of his speech), realism (he wants proof), and calm, peaceful self-interest (he is willing to accommodate Don Quijote and thus avoid conflict).



Don Quijote's great speech on the Golden Age has frequently been cited as an example of Cervantes's reservations against private property and the growing capitalism of his time. Don Quijote, prompted by his being treated by some rustics, the goatherds, to a simple meal of roasted acorns, launches a long tirade that the narrative voice describes as a “larga arenga, que se pudiera muy bien excusar” (“a long harangue that could very well have been omitted”).109

In the more relevant part of the speech, Don Quijote praises a time, the Golden Age, when humanity was in harmony with nature, ignored the idea of mine and yours, and therefore lived peacefully and happily:

Happy times and fortunate ages were those that our ancestors called golden, not because gold (so prized in this our Iron Age) was gotten in that happy era without any labors, but because those who lived then knew not those two words thine and mine. In that holy age all things were in common, and to provide his daily sustenance all a man needed to do was to lift up his hand and pluck his food from the sturdy oaks that generously invited him to gather their sweet, ripe fruit. The clear fountains and running brooks offered him bountifully their refreshing waters. In the clefts of the rocks and in the hollow of trees the busy, provident bees fashioned their republic, offering without interest the fertile harvest of their fragrant toil to every hand. The robust cork trees, inspired by their own courtesy alone, divested themselves of their broad light barks, with which men began to cover their houses built on rough stakes, using them only as a defense against the inclemencies of heaven. All there was peace, all friendship, all concord. The heavy share of the curved plow had not dared to open and expose the compassionate bowels of our first mother, for she without compulsion offered through all the parts of her fertile and spacious bosom whatever could nourish, sustain, and delight the children who possessed her. Then did the innocent and beauteous young maidens trip from dale to dale and hill to hill with braided locks or flowing tresses, wearing just enough clothing to conceal modestly what modesty seeks and has always sought to hide.110

Even if one overlooks that it is Don Quijote, not Cervantes, who speaks here, or that the ideas in the speech on the Golden Age conflict with other passages, such as the second prologue's implicit defense of property rights and Cervantes's decision to kill his creation to protect his property from further theft, or Alonso Quijano's attention to his property in his will at the end of the novel, there are two other problems with the anti-capitalist interpretation of the speech. One is literary, structural, and contextual. The other is economic.

The speech is a set piece where Cervantes displays his knowledge of a theme quite popular during the Renaissance. In this respect it is no different from other set pieces in the novel, such as the great speech on Arms and Letters. In Greek literature, Hesiod gave the Myth of the Golden Age its most memorable formulation. Virgil made it Roman, and through him it was preserved by the Middle Ages until it received new life as part of the renovated interest in the classics during the Renaissance. But it is a myth that transcends Greco-Latin and European civilization because it can be found in somewhat different form in other contexts, such as Judeo-Christian thought, where it takes the name of Eden. Other civilizations have equivalent narratives of a place, no one knows where, and a time long ago when human beings were happier, in harmony with each other and with nature, and enjoyed a life with few material needs. When Europeans arrived in the Americas in the sixteenth century, some of the better educated among them saw in the new land and in the simple natives they met early on in the Caribbean that Golden Age they had read about. And a myth that necessarily accompanies the Golden Age, the Myth of the Noble Savage, was also superimposed by the more literate Europeans upon the seemingly innocent yet noble Amerindians.

The two myths, the Golden Age and the Noble Savage, have continued to live on, cherished by intellectuals tired of or at odds with their own presumably too civilized civilization. Michel de Montaigne used the cannibals of America, his Noble Savages, as weapons to criticize the Europeans of his time. In his educational thought, Rousseau cherished the Noble Savage ideal, which he called l'homme natural. In later centuries, socialist and ecological movements have given life to the twin myths, in a persistent search for a world and a humanity simpler and closer to nature. The two myths still influence our culture, even generating movies about the Inuit, or about “white” people who come to appreciate the superior life of “savages” and end up dancing with wolves.

But the context of Don Quijote's speech provided by its listeners, that is to say, the speech's “reception” within the fiction of Cervantes's book, undermines taking it as anything other than a literary set piece with satirical overtones. The context of the speech subverts its ideological assertions. The listeners are the goatherds and Sancho Panza. The goatherds in particular function as the Cervantine equivalent of the natural men of the Golden Age and it is they and their simple fare that prompt Don Quijote's tirade.

But the inhabitants of the presumably “natural” world of Don Quijote's Golden Age are different from these “natural” men who listen to Don Quijote's speech. In the Golden Age speech they are shepherds, not goatherds. Sheep and shepherds have positive literary and spiritual connotations that goats and goatherds do not have. Goats are anything but cuddly and “nice,” and these goatherds who listen to Don Quijote are real country folk, perhaps preoccupied with where the next rain is coming from, or with too much rain, or the harshness of the winter, or too much heat, or fleas and dung. They are also far from the peaceful, sensitive men of the Golden Age: in other parts of the novel, they are shown as quarrelsome and uncouth folk who fight with Don Quijote and Sancho.111 The recipients of the speech are antithetical to what it portrays.

Their reactions to Don Quijote's tirade also undermine taking seriously the ideological message of the Golden Age speech. These goatherds simply do not understand what Don Quijote is talking about and eat and stare uncomprehending: “They listened to him in wide-eyed astonishment without answering a word.” Sancho, the other “natural” man, acts in a similar way, as he stops his steady eating only to drink, and not the natural water of the Golden Age, but human-manufactured wine: “Sancho, too, was silent, munching acorns and frequently paying visits to the second large wineskin that was hanging from a tree to cool.” Not only do they not understand the speech that presumably talks about men such as they, but they also cannot even recognize themselves in the people depicted in the speech. The dissociation between the real natural men of Don Quijote's world and the “natural” men of the Golden Age is not unlike the dissociation between Don Quijote and the handsome, young, princely, and immensely strong knights of the chivalric books.

This dissociation, so perceptively thematized by Cervantes, continues to accompany more recent incarnations of the Myth of the Golden Age, so that today many of those who actually live off the land, such as hunters, cattlemen, and farmers are frequently at odds over how to relate to nature with modern day versions of the lovers of nature and the simple life, such as today's ecologists, who are by and large educated city folk looking at nature with eyes and expectations different from those of men and women in everyday contact with nature and, most importantly, in everyday contact with it not just for pleasure, or getting away from it all, or theoretical or philosophical musings, but in order to make a living.

There are other literary, structural reasons that undermine the speech's ideological seriousness. Both the speech and the “natural” scene with the goatherds that frames it serve as an introduction or bridge to the next episode, where Cervantes, in the Marcela adventure, treats the reader to a Cervantine mini-version of a pastoral novel, a type of fiction that was set in a “natural” environment and had as protagonists shepherds and shepherdesses in, out of, or, more rarely, indifferent to love. These novels were nearly as popular in the sixteenth and seventeenth centuries as the chivalric novels that Cervantes makes the ostensible target of satire in Don Quijote.

So the speech is part of a series of chapters in which Cervantes, who had already and not terribly successfully tried his hand at a “regular” pastoral novel, the Galatea, does for this literary form what he did for the chivalric novel, placing it under a critical eye, uncovering its mechanisms, and having fun while rewriting it a la Cervantes. Thus, Marcela the shepherdess is not actually a shepherdess, but the daughter of a wealthy farmer. She merely chooses to become a shepherdess by means of a volitional act, much as Don Quijote chooses to become a knight. And while one imitates his chivalric books' readings, the other likely imitates her readings of pastoral novels. Neither Don Quijote “the knight” nor Marcela “the shepherdess” is the real thing. In addition, they have enough wealth to allow them to “find themselves”: Don Quijote has enough land to pawn some of it to buy books and pay a squire, and Marcela's wealthy father has enough sheep for Marcela to play the shepherdess. Finally, neither one must support a family—a lack of responsibility that allows them to go and do what they want to please themselves, the one living by herself in the woods to commune with nature, the other roaming the paths of Spain in search of adventure, without worrying about how to pay for their children's schooling, or fixing the roof, or caring for aging parents. One can even speculate that Marcela may have been prompted to choose her way of life by reading pastoral novels, much as Don Quijote was prompted to choose his by reading chivalric ones. These connections would explain the affinity between Marcela and Don Quijote, who takes her side and bars any love-stricken young man from following her, only to follow her himself; and it would explain, too, the affinity between their two “books,” that is, between Don Quijote's adventures and Marcela's episode. The speech on the Golden Age, then, would be no different from other instances in which Don Quijote thinks and speaks through literary texts.

The other problem of interpreting the speech as an attack against private property is economic. Many economists have long known that only in a world without scarcity can a society exist without private property and a marketplace.112 The Spanish scholastics of Cervantes's time also recognized the fact of scarcity as a validation of the need for private property.113 This necessity has forced socialist theoreticians to assume cheerfully that under perfect communism there would be abundance: “There is in the vast flood of Marxian literature,” writes Mises, “not the slightest allusion to the possibility that a communist society in its ’higher phase’ might have to face a scarcity of natural factors of production.”114 Not surprisingly, in the Golden Age of Don Quijote's speech there is a sufficiency of goods, which nature provides freely, along with an absence of counterproductive natural forces such as droughts, torrential rains, winters, plagues, volcanoes, and earthquakes. Instead, in the utopian world of the Golden Age, there reigns an undisturbed, eternal, and bounteous spring. But this is not the case in the real world, where productive resources are by and large limited: therefore the lack of yours and mine postulated in Don Quijote's speech is irrelevant to the conditions of Cervantes's time no less than ours.

The famous episode of Sancho's governorship may similarly be read as a defense rather than an attack on the market place. Literary scholars have often interpreted positions favored by Sancho that they find undesirable as subtle Cervantine critiques, that is to say, as positions that Cervantes himself finds undesirable. A good example is the Spanish government's expulsion of the moriscos, which Sancho appears to favor after listening to the morisco Ricote's praise of the expulsion.115 To Ricote's invitation to help him get the money the morisco hid from the government's inventory of his possessions, Sancho answers that helping Ricote would mean helping the enemies of Sancho's king, and this he cannot do: “it would be treason to the king to help his enemies [and] I will not go with you even if you offered me twice as much cash down.” Literary scholars almost unanimously deplore the expulsion of the moriscos and are reluctant to accept that Cervantes, so kind, so liberal thinking and sympathetic to the marginalized and the oppressed, might have actually favored the expulsion. Therefore, in spite of Sancho's words, they have seen this entire episode as Cervantes's sly way of criticizing government policy against the moriscos.116 Ricote's sadness and his expressions of love for a land where his kind lived for generations, would indicate Cervantes's sympathy for the plight of the moriscos; and placing this critique within the context of Ricote's praise for government policies, his all too excessive condemnation of his own kind, and Sancho's rejection of his offer, would be simply Cervantes's way of protecting himself against government retaliation. Nevertheless, in the case of Sancho's governorship of his insula Barataria,117 scholars have not followed this hermeneutic procedure, accepting instead Sancho's economic policies as being not in disagreement with, but in consonance with Cervantes's thought, and on a par with Sancho's quasi-Solomonic judgments as governor.

But at least some aspects of Sancho's governorship could be seen as a satire on government's wrong-headed interventions in the market place. The name of Sancho's insula, Barataria, may be a derivation from “barato,” cheap, and it would make Sancho's governorship a “Cheap Island,” in the sense of an “unimportant island”; but it could also make it the “Low-Cost Island,” an island that Sancho got cheaply, and this meaning would charge the episode with obvious economic associations.118

Even more relevant to a market interpretation of the episode is the historical context. During Cervantes's time, government intervention in the marketplace was ubiquitous and harmful. In fact, examining what was happening in the Spanish Golden Age is like taking a short course on anti-market government policy.

Although Sancho seems to understand the market in other episodes, when he becomes governor of Barataria he makes a number of anti-market decisions. But if Cervantes wanted to criticize government practices, he would have felt the need to protect himself, as he may have done in the case of the expulsion of the moriscos. This need would explain why he places Sancho's economic decrees within a context of actions that elicit admiration for Sancho's government, such as Sancho's judgments and his declared intention to defend the privileges of hidalgos and be respectful of both religion and the members of the Church.119 This defensive procedure could parallel Cervantes's placing of Ricote's pathetic words in a context of praise for the government of Philip II.

From the point of view of economic analysis, Sancho's decisions adversely affect the quantity and quality of goods and hamper manufacturing innovation. He orders that wine from outside can be sold in Barataria, a measure that, in market terms, means opening the realm to foreign goods, but then undermines this pro-market decision by reserving for his government the pricing of the wine.120 This contradiction illustrates inconsistent government trade policies that favor the market with one hand while harming it with the other. Sancho also mandates the price of footwear, especially shoes, because it seems to him that the price is too high.121 These decisions are received by Baratarians as indication that the new governor cares about them, or, in modern terms, “feels their pain.” Sancho's decrees, however, echo the demagogic and harmful government controls of Cervantes's time:

[Prices] on the local level were subjected to a type of economic control that could be described as municipal mercantilism. Throughout Castile it was considered normal for municipal governments to enact regulations fixing prices and restricting the movement of goods.... For example, we find that in Cieza (Murcia), the ordinances of 1523 forbade the importation of outside wine as long as the vecinos of the town still had some of their own to sell.... [Outside wine could not be sold] without the permission of the town council, which was to establish a “reasonable” price.... [In cases where selling was allowed], the municipal authorities set such a high price on this outside wine that only the rich could afford to buy it, and most Segovians had to continue to endure the miserable local stock.... The councils of every city, town, and village had the power to fix the price of fruit, vegetables, grain, meat, cheese, oil, or any other merchandise.... They granted monopoly rights to tavern keepers, butchers, and other officially designated victualers for the locality... they established detailed price schedules from which no one could deviate without the special permission of the council. The official prices were in force even on market days, when peasants were permitted to bring in their crops for sale. Such price controls (as always throughout history) caused problems. The legal price was likely to be too low in the eyes of the producer, because the idea behind municipal price fixing was usually to protect the consumer rather than the producer. The 1583 ordinance of Los Santos de Maimona (Badajoz) went so far as to require any vecino who had fish, game, vegetables, or fruit for sale to offer his wares in the market of the town before removing them from the municipal jurisdiction for sale elsewhere. And the council reserved for itself the right to determine how much could be “exported”... the ordinances of Los Santos made it illegal for anyone to offer anything for sale in the town marketplace without notifying the council a day in advance.... Castilian municipalities also undertook to regulate the operation of grain and oil mills, and other processing establishments related to agriculture.... [T]he council of Arjona (Jaén)... tried to regulate everything: milling procedures, working hours, measurements, salaries, and prices. All of this was designed to protect olive growers and olive oil buyers from unscrupulous mill operators... but it also... discouraged innovation and experimentation, and by ossifying existing structures and techniques it made it difficult (in fact, actually illegal) to adjust to changing circumstances.122

These policies were also implemented at the national level, where government regulated the maximum price of many commodities. This brought about consequences familiar to today's economists, from discouraging production to disruptions in the producers' ability to make economic calculations to criminal activity—as people tried to get around the regulations, but in doing so put themselves outside the law, the price they paid for helping ameliorate somewhat the harmful effects of the policies (these last two results are characteristic of “black market” activities in any time or place, the black market being the absolutely free market). The marketplace, as usual, often got around such government interventions, but the market's effectiveness was much diminished in the process.

Although these policies were defended by many contemporaries, their bad effects were obvious to others. In 1539 the chronicler Florián de Ocampo wrote that price controls caused producers to lose money and that this in turn led to shortages.123 The Spanish School of economics was aware of the problems. Martín de Azpilcueta opposed all price controls.124 He declared that, “according to the opinion of all the Doctors, an unjust official price ’does not oblige’.”125 Others, such as the Jesuit Luis de Molina, thought that the authorities certainly had the right to set “just” prices, but that it was not a good idea because of both its practical results and its immorality. On the one hand, this policy hurt the poor, and on the other hand it was unjust to place the burden of the “common good” on the producers alone since in times of scarcity the producer has to undergo larger expenditures, and a “legal” price does not allow him to recover his costs and make a profit for his labor.126 Indeed, modern economics knows that price fixing hurts everyone but especially the poor because it makes products disappear or become scarce, which in turn leads to black market violations, bribing of government officials, delinquency, government brutality enforcing laws that are increasingly disregarded, and, ultimately, general social degradation.127

Henrique de Villalobos (d. 1637), who used many ideas from the Spanish School of economics, also understood with surprising lucidity some of these problems:

I think it would be better not to have an official price (tasa) for wheat, as happens in many places without detrimental effects. Reblo says that everyone in Lisbon would have died of hunger if an official wheat price had been established. The reason for what I say, as we can see, is that in cheap years the maximum price is useless. The same is true of average years, because the value [price] of wheat does not reach the maximum price, and the price is reduced or raised according to the existent abundance. In expensive years, despite the fixed price, the price rises for one reason or another, and you will not find a single grain of wheat at the official price... and if you do find it, it will be with a thousand cheats and frauds. And also because it seems a harmful thing to oblige the farmers to sell at the official price in a scarce year, when they have to pay high production costs and when common estimation grants a higher price to wheat.128

Another of Sancho's decrees puts a ceiling on the wages of servants because he thinks that these wages are rising too fast.129 This echoes the Spanish government's efforts to control labor and wages. Some municipal ordinances “established low wage rates, which had to be observed under pain of severe penalties.”130 Inter-municipal unions also imposed labor regulations: in Tierra Segovia in 1514 the unions specified that the workday for salaried rural laborers should start an hour after sunrise and last until sundown.131

These wage controls were more successfully enforced than price controls, but the normal market pricing of labor was, of course, disrupted, so that at times there were serious shortages of workers.132 Some Spanish ordinances were so specific that they can serve as illustrations of the interventionist extremes to which government bureaucrats can go in drafting their laws. In 1599 the Council of Cifuentes (Guadalajara) mandated a wage ceiling of 34 maravedís for plowmen and pruners in February, 57 in March, 60 in April, and 68 in May and June.133

It is probably fortunate that Sancho's tenure as governor did not last long enough to create serious problems. Otherwise his subjects would have soon begun to suffer from the consequences of his interventionist policies. There would have been shortages of footwear in general and shoes in particular, and their quality would have declined. Shortages and declines in the quality of other goods would eventually have occurred as well because the importation of competing goods would have been priced out, or forbidden, until one day Barataria, now indeed a “cheap island,” might have come to resemble Cervantes's Golden Age Spain.



The market, its mechanisms, and its benefits, do not pertain to a particular time or place. They are not historical, but inherent to the relations between human beings. Thousands of years before Christ there were markets in Mesopotamia, as cuneiform tablets show. And there probably were markets long before, anywhere and anytime, as soon as two or more people got together to have better lives. The market is universal, independent of its theorization in later centuries. So what is central to capitalism, namely the exchange of goods, services, and, ultimately, values between human beings, without coercion and in order to improve their conditions, is not characteristic of a given period. What happens is that, at particular times and places the functioning of the market becomes more widely practiced and eventually universalized and theorized. The theory of capitalism as understood by Mises is a universal explanation of human action. If writing, and therefore producing books, falls within the realm of human activity, then of course the theory of capitalism is applicable to the production of texts and therefore to a seventeenth-century novel.

The relationship between Sancho and Don Quijote is a good example of how praxeology can be generally applied to human relations. Transformed into “Don Quijote,” early in the novel the hidalgo Alonso Quijano reaches a loose verbal agreement with his peasant neighbor, Sancho Panza, whereby Sancho offers his services as squire in exchange for a salary and an insula. This relationship is therefore based on material rewards that combine the medieval preferred form of wealth, land, with the increasingly preferred form of wealth and medium for economic transactions, money, although the more abstract desire for adventure, which later in the novel becomes more important, seems also present in Sancho's mind at this early stage. In any event, the relationship is not based, as in the Middle Ages, on a collectively-sanctioned bond of loyalty between a man of noble family, a knight, and another man of noble family, a squire.

Sancho's choice of joining and staying with Don Quijote is possible only in a market system and illustrates its functioning most distinctly. In a collectivist system, Sancho's decision would be largely determined by the State, or the Party, or the town, or the clan, or the family, not by Sancho. In the Middle Ages, collective norms pushed a nobleman into becoming a squire and eventually a knight. Exceptionally, a young man would rebel against his family's compulsion, and perhaps become a monk, as happened with Thomas Aquinas. It is true that a collectivist system that basically dictates one's direction in life may be more desirable because it lessens people's responsibility for choosing. The many options of a market economy, like its affluence, can make some people unhappy.134 But whether or not one prefers collectivism, at least it is clear that within it Sancho would not have much individual free choice.

At the fictional juncture when Sancho decides to join Don Quijote, however, he operates in a market system and could decline Don Quijote's offer. Therefore, his freely made decision is momentous for the unfolding and cultural significance of Cervantes's novel: by setting it up as Sancho's decision, Cervantes not only triggers much of what follows in terms of the narrative, but also strikes a blow for that freedom which obviously was to him one of the most important things in life.135

Eventually, the purely “commercial” or “material” relationship between Don Quijote and Sancho evolves into a friendship. Could one say that at this point there is no longer a free exchange? No, because the exchange continues in a different form, but with the same purpose of maintaining or improving Sancho's, and Don Quijote's conditions. It has merely been transformed from a purely material exchange into an exchange of values. Sancho has come to appreciate certain values in Don Quijote that Sancho is willing to exchange for what Sancho has to offer; and Sancho has values that Don Quijote appreciates and is willing to exchange for what Don Quijote has to offer. Thus, they establish a friendship. This relationship is not coerced. It is a voluntary exchange. It is not unilateral. It is mutual, dialectical. Don Quijote gives to Sancho and Sancho gives to Don Quijote, though neither “does it for money.” They do it for other things.

Sancho stays with Don Quijote even when it is evident that the insula is not rewarding, that the money is not enough, and that perhaps his master is mad, because Sancho still believes that his life will be better with Don Quijote than without him. But Sancho does not continue to stay for money or the insula. He has found things in Don Quijote that he has come to value more, such as his courage, knowledge, increasing liking of and kindness towards Sancho. And no less important, he has developed a taste for the free, adventuresome, and exciting life that Don Quijote creates for both, a life which at the end of the novel he tries in vain to coax Alonso Quijano to take up again. Though more abstract than the insula or the money, these reasons are to Sancho just as decisive, if not more so. Therefore, he sees all the vicissitudes and the blows and the other sufferings as more than compensated for by what Don Quijote's friendship entails.136

At the end of the novel, when Don Quijote is again Alonso Quijano, Sancho will be rewarded for his loyalty, once more with material things, as it was at the beginning, in a perfect circularity that matches the reverse transformation from Don Quijote back to Alonso Quijano. Thus, as he did early in the novel, when Don Quijote exchanged land property for another form of property, books, Cervantes carefully shows that his most significant creation does exercise his property rights. Alonso Quijano makes sure in his testament that Sancho gets all that he is owed by Don Quijote and more; and the dying Alonso Quijano even admits that, were it in his power, he would leave Sancho a kingdom, since he deserves it for the values that both Don Quijote and Alonso Quijano came to appreciate in Sancho, namely the sencillez de su condición (“simplicity of his constitution”) and his loyalty. Moreover, deeply cognizant of the human condition, Cervantes has one of his narrative voices conclude that, despite the impending death of his friend, Sancho is happy, since “inheriting something erases or moderates a bit the pain that a dear one's death understandably leaves behind.”137 Again, all this is possible only because in Cervantes's fictional world property rights are recognized and an individual can therefore dispose of his property as he sees fit.138