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

What led to the fall of the Templars? Though the vast historiographical literature suggests that King Philip IV’s financial situation was the main reason for the downfall of the Templars, we contend that it had little to do with Philip IV per se. Rather the Templars were destroyed mostly due to an institutional shock, which resulted from Pope Clement V’s relocation of the papacy from Italy to France. Prior to the relocation, a conditional toleration 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