Thomas Aquinas’s classical argument

Thomas Aquinas’s argument against usury gave a rigorous basis to the prohibition of usury, in the sense of the payment of an income in reason of the loan itself. It might be considered as a development of three topics, coming from Roman law, from Canon law, and from the Aristotelian tradition, respectively.

The contractual framework of the money loan: the mutuum Even before Thomas Aquinas, the legal framework for money loans was a free contract for fungible goods, the mutuum (see Digesta, 44, 7, f.1, n.2, 4). When the underlying contract for a transaction is a mutuum, the nature of this contract itself precludes any interest being paid. Robert of Courςon, for example, at the very beginning of the thirteenth century, explained the mechanism by writing:

[T]he name of the mutuum comes, indeed, from that which was mine [meum] becomes yours [tuum] or inversely. As soon as the five shillings that you lent me become mine, property passes from you to me. It would then be an injustice if, for a good which is mine, you were to receive something; for you are not entitled to any return from that which is my possession. (De Usura: 15)

In the mutuum, the prohibition of interest is linked to the fact that the money lent and the money paid back is not, physically, the same object, so that the ownership of the lender has to be interrupted at the beginning of the loan. Conversely, if they had been the same object, interest could have been charged on it because the lender would have kept his ownership throughout the duration of the loan while selling the use of it.

Such a position was challenged throughout the Middle Ages, and even condemned by Pope Nicholas III in a decretal incorporated in Canon law (Decretales, Liber Sextus, V, tit.11, c.3, Exiit qui seminat), thus supporting nonThomistic interpretations of usury. This clearly contradicts our current way of representing economic categories. We would accept that the money lent and the money paid back are not the same in the case of the mutuum, but because they are money at different dates, not because they are physically different objects. Thus, the case of the mutuum would be equivalent to that of the mutuum ad pompam. But we would also admit that the ownership of money is not interrupted by the loan since, apart from the time dimension, the money lent and the money paid back are perfect substitutes in both the mutuum and the mutuum ad pompam (Lapidus 1987, 1992). This disagreement is not easy to settle, because it is an ontological (and not an analytical) disagreement concerning the conception of economic categories. Nonetheless, the argument based on the mutuum is consistent, and leaves no room for a payment to the lender.

However, Roman law also acknowledged other contractual arrangements which would allow such a payment: the locatio, for instance, in which only the use of a thing is transferred from the lender to the borrower, its possession remaining unchanged; or the foenus, in which possession is transferred, but where such transfer is not free. This was far from entirely new at the time of Thomas Aquinas. But the effect of his contribution was to remove the possible arbitrariness of the choice of the mutuum as the contractual framework for money loans.

The nature of money This was made possible by reversing an argument concerning the reasons why a stock can be a source of income. This argument was presented in a well- known palea called Ejiciens, wrongly attributed to John Chrysostom, and integrated by Gratian in Canon law. The author of Ejiciens asked whether “the one who rents a field to receive its fruits or a house to receive an income is not similar to the one who lends money at usury” (Decretum, dist.88, can.11). The negative answer favoured three reasons:

First, because the only function of money is the payment of a purchase price. Then, because the farmer makes the earth fructify, the tenant takes advantage of inhabiting the house: in both cases, the owner seems to give use of his thing to receive money and, in a certain way, he exchanges gain for gain, whilst from money which is stored up, you make no use. At last, its use gradually exhausts the earth, deteriorates the house, whilst the money lent suffers neither diminishing nor ageing. (Ibid.)

The first reason recalls the Aristotelian argument about the sterility of money. The second argues that the income should arise from a pre-existing surplus, like that which comes from production. The third reason is decisive: it asserts that a stock is a source of income from the moment the stock begins to depreciate. This income is then defined as the counterpart of this depreciation. Now, the great skilfulness of Thomas Aquinas was to reverse Ejiciens^, third reason (see Noonan 1957: 54-5). His argument was expounded in De Malo (q.13, a.4c) or in the Summa Theologica:

One must know that the use of certain things is identical with their consumption... In such [exchanges], one must not count the use of the thing apart from the thing itself but, as a result of conceding the use, the thing itself is conceded. And this is why, for such things, the loan transfers property. Thus, if someone wanted to sell wine on the one hand and the use of wine on the other hand, he would sell twice the same thing or sell what is not...

As a result, interest as an income no longer proceeded from the depreciation of a stock but from the possibility of separating property and use - the sale of the latter producing the income. Therefore, a house or a field could - as in Ejiciens, but for another reason - be the source of an income, while bread, wine and, of course, money could not.

The material and the formal causes of exchange Far from being a consequence of a possibly arbitrary decision of a moralist or a lawyer, the choice of the mutuum for a money loan now came from the nature of the object of the transaction: this means that the nature of money itself, as a thing whose possession cannot be separated from its use, determined the nature of the contract. This conception of money was explained by Thomas Aquinas chiefly in his commentaries on Aristotle, from whom he claimed he had borrowed it.

It was when commenting on Aristotle’s Politics that Thomas Aquinas stressed the conventional nature of money (Politicorum, I, 7). For Thomas, this meant that it was a product of human reason, as the most complete form of exchange. In this respect, he pointed out two functions of money, which he discussed at length when comment­ing on Peter Lombard’s Sentences, on the Politics or on the Ethics and, of course, in the Summa. The first function of money stood in the Aristotelian tradition - it is a medium of exchange: “But money, according to the Philosopher [Aristotle] in the Ethics (V, 5) and in the Politics (I, 3), was principally invented to facilitate exchanges: and so, the proper and principal use of money is to be consumed without diversion, because it is spent in exchanges” (Summa Theologica, II^a-II^ae, q.78, a.1, resp.). In this regard, usurious activity is considered as distorting the nature of money (Politicorum, I, 8).

Thomas Aquinas was not so faithful to Aristotle when introducing the second func­tion of money - the unit of account:

All other things have from themselves some utility: however, this is not the same for money. But it is the measure of the utility of other things, as it is clear from the Philosopher in the Ethics (V, 9). And therefore the use of money does not hold the measure of its utility from this money itself but from the things which are measured by money according to the various people who exchange money for goods. Hence, receiving more money for less seems nothing else than dif­ferentiating the measure in giving and receiving, which obviously brings inequity. (In IV Libros Sententiarum, l.III, dist.37, a.1, q.16)

This contrasts with Aristotle’s original position, according to which “money itself is submitted to depreciations, for it has not always the same purchasing power” (Ethics, V, 5:14). However, this emphasis on money as a unit of account, therefore free from either appreciations or depreciations, meant that it could not give rise to any supplementary income.

In spite of their discrepancies, the various sources of Scholastic thought continued along the same lines as Thomas Aquinas’s construction: the nature of money and the contractual framework thereby induced rendered impossible the charging of interest on a money loan. This impossibility is, first of all, a positive one: interest, as generated by the money loan itself, can simply not exist. So that, if interest happens to be associated with a money loan, its amount must be explained on another basis than the money loan itself.