The King’s Gambit: Rationalizing the fall of the Templars

What can the fall of the Knights Templars teach us about medieval institutions? We highlight that the Templar’s annihilation results from the institutional shock of Pope Clement V’s decision to relocate the papacy from Italy to France. Prior to the relocation, an equilibrium persisted for more than a century where the Templars made loans to more powerful kings, with the reassurance that they were protected by the Church. The decision of Pope Clement V to relocate the papacy to France altered the Church’s relationship with the French Crown and imposed substantial constraints on the Church’s ability to safeguard one of its most important monastic orders, the Knights Templar. In a dynamic game scenario, we model Clement V and Philip IV’s decision making, emphasizing important choices that led to the Knights Templar’s demise. This historical episode illustrates the relationship between credible commitments and religious legitimacy, and the precarious and personal nature of pre-modern political institutions.