In the early 1600s, the officials running Durham Cathedral, in England, had serious financial problems. Soaring prices had raised expenses. Most cathedral income came from renting land to tenant farmers, who had long leases so officials could not easily raise the rent. Instead, church leaders started charging periodic fees, but these often made tenants furious. And the 1600s, a time of religious schism, was not the moment to alienate church members.
But in 1626, Durham officials found a formula for fees that tenants would accept. If tenant farmers paid a fee equal to one year’s net value of the land, it earned them a seven-year lease. A fee equal to 7.75 years of net value earned a 21-year lease.
This was a form of discounting, the now-common technique for evaluating the present and future value of money by assuming a certain rate of return on that money. The Durham officials likely got their numbers from new books of discounting tables. Volumes like this had never existed before, but suddenly local church officials were applying the technique up and down England.
Really interesting avenue of research; who’d have thought that discounting future value, as a concept, would come from clergy in a tenuous political and financial position with the Reformation and the start of inflation.
I’m not an economic history expert by any stretch, but isn’t the 1600s the early start of the industrial revolution? Was the industrial revolution the cause of inflation? That would make sense, since it would be a major break in the value of capital in the short term to increase profits in the long term.
It’s almost like every human has a built-in allergy to excessive profiteering…
