Concluding Remarks
In the two questions from Thomas Aquinas’s Summa Theologica respectively devoted to them, both price and the interest loan were taken up as special applications of a theory of justice.
An outstanding and obvious consequence is that understanding these two economic categories rests on the coexistence of a norm which satisfied the requirements of justice, and of a departure from this norm which explains actual behaviour, usually from a moral point of view. Their respective futures were nevertheless quite different.The construction of a theory of price drawing on a comparative approach between hierarchized concepts of valuation clearly survived the initial concerns expressed by theologians and lawyers from the Middle Ages. Their legacy can be followed (see Lapidus 1986), from the revival of Thomism within the School of Salamanca during the sixteenth century, to the foundation of what was later called “modern” theories of natural law in the works of Grotius and Pufendorf, one century later, and, at last, to the dissemination of their ideas in Great Britain, at the very origin of the School of Glasgow, by Gershon Carmichael and Francis Hutcheson - Adam Smith’s most admired predecessor. So when Smith explained to his students (Lectures on Jurisprudence, LJB: 494; see also LJA: 353) that “[o]f every commodity there are two different prices, which tho’ apparently independent will be found to have a necessary connection, viz. the natural price and the market price”, he made use of the same comparative approach as his predecessors did, but now free from its submission to moral ends. Though the market price is interpreted, in the Lectures and, later, in the Wealth of Nations, in relation to the natural price, as the current price was interpreted in relation to the just price, the possible differences are no longer considered in terms of the morality of the partners to the transaction.
Economic matters had become worthy of being studied in themselves. However, the way price was understood by most classical economists, from Smith to Marx, retained the hallmark of the intellectual device originated by schoolmen several centuries earlier.The difficulties facing the understanding of interest at the turn of the thirteenth century were different. From Augustine, for instance, the authors of this period already knew what was later forgotten by Bernard of Mandeville: that trade is not, by nature, dishonest. However, the proliferation of substitutes for money interest loans and of the institutional possibilities for a lender to manipulate the information about the harm he suffers as a result of a loan, increased both the suspicion of trade in general, and the obsolescence of the various mechanisms used to avoid usury loans: the reinforcement of the prohibition of usury came along with a lessening of its efficiency.
The reason for this dead end was the lack of information, on the part of the theologians or the lawyers, concerning the precise conditions under which such a loan would be non-usurious. Whereas for price the problem concerned the moral assessment of a possible departure from the norm of the just price, this very norm was only imperfectly known in the case of a money loan. The intellectual conditions for a renewal of economic ideas about interest therefore came from a transformation of the norm and of its role, making its identification easier, and progressively superfluous.
The first actual deviation from the Thomistic representation was a consequence of the growing awareness of the unexpected effects of a strict attitude toward interest loans - an attitude which prohibited most of them on the basis of the slightest suspicion of a usurious intention. John of Gerson, Chancellor of the University of Paris, noticed in the 1420s that such an attitude might result in increased poverty and crime. From a moral point of view, this amounted to the provocative claim that, in some cases, a good might result in an evil.
Gerson’s provocative solution was that a good might arise from a moderate evil. In other words, that light usuries help the indigent and prevent him from sliding into crime. Obviously, this did not completely dismiss the Thomistic representation of the money loan: it only led to considering that the lender’s appropriation of the exchange surplus above the non-usurious part might constitute a referential norm, evidently more distant from an evangelical ideal, but more in accordance with usual economic practices.Much later, at the beginning of the seventeenth century, the Jesuit Leonardus Lessius proposed the introduction of a new extrinsic title, named carentia pecuniae, according to which the harm suffered by the lender would depend not on what he was prevented from doing with his money but, more generally, on the fact that this money was missing (see Van Houdt 1998). The carentiapecuniae had a far-from-favourable reception: suspicion of potential lenders was too high to exempt them from giving detailed information about the harm associated with a loan. However, this was also a way to increase the gap with the classical argument on usury: it could be admitted that a money loan did not bring any income to the lender by reason of the loan itself, but only because of the harm that it generated. Now, what remains of the classical argument when the nature of the harm was only that the money lent was missing? One step more and the same analyses could be extended to the case where money is desirable in itself and where the rate of interest is its price. Through their diversity, the mercantilist and classical analyses showed that the giving up of the moral imperatives inherited from the Middle Ages allowed a recomposition of the medieval ingredients of the theory of interest. John of Gerson and Leonardus Lessius had paved the way. The resulting theoretical elaborations were, of course, different, but the constitutive elements needed no substantial change.
Irina Chaplygina and Andre Lapidus
See also:
Economics and philosophy (iii); Money and banking (iii); Value and price (Ill).