f Money nd Morals
the just way to distribute wealth and how one could ensure economic exchanges were fair. In Summa Theologica (1265-74), for example, Aquinas argued that money’s “natural end” or purpose was exchange. Using money to make money, rather than to facilitate the exchange of goods and services, therefore violated natural law. It was akin to selling wine or wheat separately from the right to consume these products – that is, like selling the same thing twice. “To take usury for the lending of money is in itself unjust, because it is a case of selling what is non-existent; and that is manifestly the setting up of an inequality contrary to justice,” wrote Aquinas. The thinking of the Scholastics and other religious leaders was not all admirable. Some clergy refused to budge from the literal words of the Bible, and others appealed to anti-Semitism to denounce usury. But their conversation represented an informed and influential debate – at the highest levels of academia and religion – about the entanglement of ethics, debt, inflation, high finance and monopolies. Where is that sort of thing today?
price was the market price. In one treatise, the prominent Italian Scholastic cardinal Thomas Cajetan analyzed the ethics of how bankers hid interest payments in inflated exchange rates. It was equivalent to a cardinal in 2006 writing knowledgeably about credit-default swaps. The Scholastics also recognized the value of taking business risks. Many of them sanctioned commercial loans to be repaid with a portion of profits. As long as the return was not guaranteed, because the venture could fail or collateral was unavailable, lenders deserved to keep the interest, they said. Some clergymen also realized that people who lent money were unable to use it on other profitable ventures. This is a very modern justification for permitting interest: opportunity cost. The price of borrowing money reflects the missed opportunity to
invest it profitably elsewhere. The Scholastics took finance seriously, but they always viewed it as connected to the domains of justice and natural law. Aquinas was not interested in narrow questions of maximizing utility or channeling individual self-interest, as a modern economist might be; he and his peers wanted to know
The Scholastics never resolved their disputes. Instead, they were replaced by new authorities on ethics and finance. It wasn’t until the rise of neoclassical economics in the 20th century that economics became the supposedly scientific study of self-interest and individual incentives – a domain in which economists do not pass judgment on actors in the market, any more than biologists
Scholastics understood the power of supply and demand, and argued that the just price was the market price.
68 | November 2017
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