Analysis risk and commercial risk: the first treatment of usury in Thomas Aquinas’s Commentary on the Sentences

Abstract

Whereas literature on Thomas Aquinas’s doctrine of usury has tended to focus on the Summa Theologiae, this paper highlights the contribution of his early work the Commentary on the Sentences. In this work, Aquinas distances himself from the Roman law mutuum and the assumption of a borrower’s state of necessity, and he introduces preliminary monetary elements. He thereby paves the way for a future understanding of surplus in intertemporal exchange. The monetary loan is presented as a commercial exchange involving not only commercial risk but also the risk of analytical errors in understanding the nature of the operation.

Keywords:

• Risk
• interest loan
• usury
• just price
• mutuum
• scholastic
• Thomas Aquinas

JEL CLASSIFICATION:

• B11

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Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 Economic issues are also discussed, albeit much more briefly, in In IV Sent., d. 16, q. 4, a. 2, qc. 3, which deals with the lawfulness of trade.

2 For the years 1268–1272, the introduction to each treatise contained in the Leonine edition, where it is available, as well as the Brief Catalogue established by Émery (1993), give a glimpse of a vast body of works dealing with economic questions after the Commentary on the Sentences and then the De emptione et venditione ad Tempus of 1262 (published in Opuscula III of the Leonine edition, 391–394). These works too have sometimes been eclipsed by the Secunda pars of the Summa Theologiae, of which q. 77 and 78 are a part, which was written in 1271–1272 in Paris. We must also note the Quodlibetal Questions (II, q. 5, a. 2 and III, q. 7, a. 2), dated 1268–1272, the Disputed Questions De malo (q. 13, a. 4) written around 1270, the Commentaries on Aristotle’s Politics (Politicorum, I, 6–9) and Nichomachean Ethics (Ethicorum, V, 9), dated 1269–1272 and 1271–1272 respectively, and the Letter to the Duchess of Brabant (Ad ducissam Brabantiae), dated 1271 (published in Opuscula III of the Leonine edition, 375–378). The Collationes in Decem Praeceptis on the Ten Commandments, a late finalised writing of his preachings in Italy in his mother tongue, could be the last or, on the contrary, one of the first of Aquinas’s contributions. Torrell (1985) and Émery (1993) hesitate between the traditional dating of a Lenten preaching in 1273 and a dating corresponding to Aquinas’s previous Italian sojourn in 1261–1268.

3 The Commentary on the Sentences is articulated in books, distinctions, questions and articles. The Summa Theologiae simplifies the outline by removing the distinctions and tightening up the articles for pedagogical purposes. Each article focuses on answering a question. It is made up of a series of objections, which are generally not false, but which serve as points of support to be surpassed or clarified. Next comes the sed contra (on the contrary), which gives the key to Aquinas’s position, usually drawing from a biblical, patristic, or philosophical quotation, and then the respondeo (answer, or main part of the article), which presents the author’s thesis, often by a process of distinction which allows the question to be approached from different angles in a nuanced manner. Finally, there are the replies to the objections, which are term-by-term responses. Starting by reading the sed contra and then the respondeo allows us to get to the heart of Aquinas’s thinking by first perceiving his orientation, and then the path of his reasoning. The objections and replies are important in the second stage as a means to clarify Aquinas’s arguments.

4 Since the attribution of the treatise, at the beginning of the twentieth century, to Giles of Lessines and not to Thomas Aquinas, this is classical dating given by du Passage (1946, col. 2345), based on the work of Hocédez (1926) and Grabmann (1936), and taken up by Langholm (1984, 23).

5 The first text of the Catholic magisterium prohibiting usury, Nec hoc quoque, which belongs to the letter Ut nobis gratulationem (443) of Pope Leo the Great, is combative but contains only two paragraphs and does not define usury except as “dishonest gain [lucri turpis]” sought by “greed [cupiditate]” (Enchiridion, n°280).

6 For a historical overview of the condemnation of usury, see du Passage (1946, col. 2316–2390), Noonan (1957, 15–17), Lapidus (1991), Langholm (2003, 16).

7 The condemnation of usury in Gratian’s works can be found in Decree, I, d. 46, c. 9–10; d. 47, 1–8; II, causa 14, q. 1, c. 2; q. 3, c. 1–4; q. 4. c. 1–12. It is in this context that the condemnation of commercial turpe lucrum comes into play: “Let us deal with turpe lucrum, which consists in buying cheaper and selling more [turpe lucrum sequitur, qui minus emit, ut plus vendat]. It is compared to the time of the harvest or the grape harvest [the price] of the harvest or the wine: not out of necessity but out of greed, two denarii make four, or six, or more. It is said to be turpe lucrum [non necessitate, sed propter cupiditatem comparat annonam, vel vinum, verbi gratia de duobus denariis quatuor, aut sex, aut amplius, hoc turpe lucrum dicimus]” (Decree, causa 14, q. 4 c. 9).

8 The condemnation of usury in Gregory IX can be found in Decretals, l. 5, t. 19. The exclusion of usurers is firm: “Manifest usurers cannot be admitted to communion or to an ecclesiastical burial” (c. 3). It is in Title 19 that the sale on credit is dealt with and the Decretal Naviganti (chapter 19) is to be found. Commercial activities are dealt with in Decretals, l. 3, t. 17: “De emptione et venditione”, which deals in particular with fraud in measures and weights (c. 2) and just price (c. 3 and 6). It is in this section that we find the conditions for the seizure and restitution of a pledge (pignus) in kind (house and olive trees, domos et olivas) for a loan (chapter 5).

9 Lapidus (1987, 1097), whose study focuses on the monetary surplus, recalls this pre-Thomasian conception of interest as exchange surplus and traces its biblical and patristic origin, and Lapidus (1991) analyses interest from this angle of exchange surplus, which makes it possible to understand the asymmetric view of usury.

10 “Ordinary usurers are prohibited [usurarii ordinari prohibentur], hence as they exercise usury, they prove that they devote themselves to greed [inde est, quod usuram exercentes, cupiditati deservire probantur]” (Gratian, Decree, I, d. 47, introduction).

11 “If you lent your money [mutuam pecuniam tuam dederis], what did you expect more than what you gave [a quo aliquid plus, quam dedisti, expectes accipere], not only money [non pecuniam solam] but something more like wheat, wine, oil or something else, if you hope to receive more than you have given [si plus, quam dedisti expectas accipere], you are a lender of interest [foenerator es], and in this you are to be reproved, not praised [and in hoc improbandus, non laudandus]” (Gratian, Decree, II, causa 14, q. 3, c. 1).

12 Georges Lefèvre gives the date of 1202 to De usura, which he edited and translated into French in 1902. The treatise is now dated slightly later (1208 for Langholm 1992, 40).

13 For Plautus (d. 184 BC), one of the first great Latin authors, the loans were made to family or friends and carried no interest, as indicated by all the occurrences noted by Feuvrier-Prévotat (1993). However, we see the emergence of the profession of usurers (danista) and bankers (argentarii), which were not mentioned in the Greek comedies we know of (Feuvrier-Prévotat 1993, 143). Pre-Ciceronian authors usually reserve mutuum for an interest-free loan and call fenus interest (Nadjo 1989, 233–307).

14 In Cicero (d. 43 BC), for example, there is a mutuum in kind without mention of interest (or free of charge): “wheat is lent to two cities in Sicily (mutuum frumentum dedit)” (Cicero, On the Agrarian Law, II, XXX, 83).

15 The two forms, fenus and fenum, the product of the meadow, retain different meanings, although the Romans understood the relationship between the two terms (Ernout and Meillet 2001, 225). The Romans, like Festus and Varro, also associated fenus with fetus, progeny, because money breeds money (du Passage 1946, col. 2321).

16 In Cicero’s view, fenus can refer to income in a sense close to interest, for which the term used can be usura, but without any pejorative connotation, and on the contrary of generosity: “Indeed, the farmers have an open account with the land, which never pushes back their domination and never makes without interest (sine usura reddit) what it has received, but gives an income sometimes small, most often considerable (plerumque majorum cum fenore)” (Cicero, Cato the Elder, XV, 51). The term fenus is used to denounce an interest-bearing loan that is usurious: “He received an interest of two per cent per month (binis centesimis feneratus); then, there are very many cities where he paid absolutely nothing for the wheat” (Cicero, Second Pleading against Verres, III, LXX, 165).

17 On the rediscovery of Roman law in the Middle Ages, see in particular Lapidus (1987, 1098–1099).

18 Since the loan was initially a consumer loan, this explains the difference in bargaining power between borrower and lender (Chaplygina and Lapidus 2016, 32, 2021).

19 On the common practice of attaching to the mutuum, which normally carries no interest, a stipulation which envisages some interest, see Giliberti (1999, 169), Cimma (1984). Andreau, by noting on the one hand the practice of attaching a stipulation of interest to the mutuum (2000, 152), and by presenting mutuum and fenus as two alternatives depending on whether there is interest or not (1987, 433), echoes the lexical diversity of Latin authors, although fenus is usually designated as a mutuum with stipulatio (du Passage 1946, col. 2321).

20 Lapidus (1991) and Chaplygina and Lapidus (2016, 39), in breaking down the fenus nauticum into two stages, bring it closer to the societas and see in it a loan only in name. After the maritime risk there remains a risk of loss during the sale, which was not taken into account in the contract. The lender continues to bear the risk, since it is his money that has been invested in the transaction. He therefore becomes a shareholder of the commercial transaction, as it were.

21 Sometimes, on the contrary, the clause explicitly stipulates repayment of the loan in the same currency, to avoid the exchange rate risk (Dupuy 1992, 51–52).

22 In the twelfth and thirteenth centuries European cities regularly needed to resort to borrowing, sometimes forced, sometimes free, as Munro (2003) shows for Genoa and Venice (514–515), and for Northern Europe through rente contracts (518).

23 We find here, in a first formulation, what Lapidus (2020) identifies in later Thomasian writings as legal considerations (continuity of ownership), which here refer to the nature of the mutuum, ontological considerations (condition of an income), which echo both the mutuum and money, and epistemological considerations, which concern the proper use of money.

24 Thus the debate on Aquinas’s reception in q. 78, a.2, ad. 5 of Gregory IX’s Decretal Naviganti of 1234 does not concern the inclusion of Aquinas within a general framework of condemnation of usury but rather the articulation of the mutuum and the model of the societas (Noonan 1957, 136–145; Baldwin 1959, 52). Aquinas’s desire to describe positively the mechanism he observes in In III Sent., d. 37, a. 6 and in other economic writings remains intertwined with the moral purpose of determining sinful situations (Lapidus 1987, 1096, 2020, Sivéry 2004, 705). This is part of the primacy that the scholastics give to justice (Hamouda and Price 1997, 192, Monsalve 2014a, 5).

25 Man is first of all thought of as a moral being (De-Juan and Monsalve 2006, 100–101). He is still homo justus, before becoming homo oeconomicus (Monsalve 2014a, 16). It should be noted that Santori (2019, 2020, 278) has recently highlighted an earlier stage, with Thomas Aquinas considering the human being to be first and foremost a friend (naturaliter homo homini amicus), who gives himself over to the gift (donum), before being considered homo justus. Le Goff (2010) stresses the importance of an anthropology of giving through the development of caritas (charity). As a Dominican, it is in the charity of Christ that Aquinas’s own charity and poverty is rooted (Franks 2009, 105–181). Thus Turgot points out in his Mémoire of 1770 that the confusion in medieval times between usury and interest, which justifies the prohibition of interest-bearing loans, is not the result of an intellectual incapacity for analysis but of a different centre of interest, focused on theological and moral concerns (Ege 2014, 412–413). For a normative approach to the modern economy based on Aquinas, see e.g. Franks (2009) and Hirschfeld (2018).

26 Compared to predecessors such as William of Auxerre, or the late scholastics (Monsalve 2014b, 219), Aquinas was less concerned with the sinful intention of the usurer and concentrated more on the usurious fact itself.

27 The Thomasian approach to usury through money is emphasised by Lapidus (1997, 26) and Chaplygina and Lapidus (2016, 28). See also Hirschfeld (2018, 139–152).

28 The limitation which Aquinas perceives concerning the argument presented in In III Sent., d. 37, a. 6 and its subsequent reversal to keep the consumption of money in the exchange, allows him to make a significant shift from degradation to consumption. Interest is no longer, as in the third argument of the Decree Ejiciens, the counterpart of the depreciation of the stock, as rent is the counterpart of the degradation of the house: “Thirdly, the field or house ages with use [utendo veterascit]. But money, being lent [mutata], neither diminishes nor ages [nec minuitur nec veterascit]” (Gratian, Decree, I, d. 88, c. 11). For Ejiciens, since there is no degradation, the rental of money cannot give interest in return (Monsalve 2014b, 220). For Aquinas, on the contrary, interest derives from the possibility of separating the property from the use, which is not the case for money. Aquinas can therefore give a new monetary specification to the condemnation of usury. Whereas rent is possible for a house, which is not consumed (even if it is degraded), this is not possible for money (q. 78, a. 1, resp.; De malo, q. 13, a. 4). See Chaplygina and Lapidus (2016, 33–34).

29 “Money is the principle and term of exchange” (Aristotle, Politics, I, 1257b); “Money was made only for the purpose of exchange; interest, on the contrary, multiplies that very money” (ibid., 1258a). In Nicomachean Ethics, IV, 1, 39, 1121a the criticism of usury is centred on the greed of the usurer.

30 The commentators, with the notable exception of Mélitz (1971) and Lapidus (1987) and (1991), have not studied the question of the mutuum from a purely economic point of view, but they do recall its normative framework, as Baldwin (1959, 52–53) does by referring to the Decretal Naviganti.

31 Satis can mean that something tends to be good and satisfying, but also rather mediocre, and can suggest near-completeness or imply a lack. Probabilis can indicate what is clear and conclusive, but also what is probable, plausible, estimable, or must be proved by others. See Blaise (1954, 665 and 1975, 735 and 820) and Ernout and Meillet (2001, 537 and 596).

32 Authorities are often torn between banning interest-bearing loans, protecting borrowers by controlling the interest rate, or seeing usury as a source of revenue for the treasury (Shatzmiller 1990, 73–84).

33 This requirement of restitution of interest to borrowers and their heirs is further developed by Robert of Courçon (De usura, 44–45).

34 On Aquinas’s approach in Ia, q. 2, a.3, see Lafont (1961, 40–41) and Gilson (1965, 61 and 90). Moreover, in the first article of the Summa Theologiae, Aquinas himself gives a key to understanding that takes us away from immediate proof: “even as regards those truths about God which human reason could have discovered, it was necessary that man should be taught by divine revelation; because the truth about God such as reason could discover, would only be known by a few, and that after a long time, and with the admixture of many errors” (Ia, q. 1, a. 1, resp.).

35 The proposal of a lawful alternative, the societas, made immediately after having notified the impossibility of an interest-bearing loan, testifies to Aquinas’s openness to production and trade and to the need for its financing (Monsalve 2014b, 227–228). This could tend to support Aquinas’s favourable view of international trade (Santori 2019).

36 On the functions of money, see Lapidus (1987, 1997, 25–26). From Franks’s point of view, money is what enables the transition from a nonmarket to a market society and favours exchange value over use value (Franks 2009, 47). In this way, the difficulty in determining a single Thomasian approach to value may lie in the fact that Aquinas was writing in what was still, for Franks (2009, 69) and Hirschfeld (2018, 28), a nonmarket society, or at least a society in transition to a more developed market economy; yet it is the development of the market that will eventually lead to the triumph of exchange value (Franks 2009, 36 and 51).

37 For a price-based approach to usury, see Langholm (1984, 16), Lapidus (1991) and Sivéry (2004, 697). Berthoud (2005, 66), on the contrary, emphasizes the moral specificity of the loan, which is irreducible to exchange, and sees in the interest what he calls a “false price”.

38 In this way, the demarcation would not so much be between trade and usury as between an approach to exchange which is still based on the virtue of justice and an approach based on bargaining power, which appears with the development of the market (Franks 2009, 96–97).

39 On the difference in treatment between brothers and foreigners, see Ege (2014, 395) and Monsalve (2014b, 216).

40 This leads to price fluctuation over time when payment is deferred and the possibility of a surplus due to time if it remains below the just price (De emptione, II); to the possibility of a rent for goods not destroyed by use (q. 78, a. 1, resp.); to the billing of the loan ad ostentationem (q. 78, a. 1, a. 6); to the possibility of a free and gracious gift to the lender; and to the demand for a compensation that is not assessed at a monetary price, such as benevolence, friendship or gratitude (q. 78, a. 2, resp.). Piron (2005) insists, however, on the distinction made by Aquinas between contract and friendship and on his distancing of the notion of antidora, which at the beginning of the thirteenth century places gratitude within the very framework of the loan.

41 Surplus would then fit in with the Aristotelian idea that, in a context of risk and vulnerability, wealth provides protection against risk. Aristotle, Ethics, I. 5, 1095b26-27; Franks (2009, 161).

42 Since the borrower assumes the risk, he has no surplus (interest) to pay, whereas entrusting the merchant with an amount that continues to belong to you and for which you bear the risk of loss justifies a surplus, which is a share of profit (q. 78, a. 2, ad 5). The risk, particularly the risk of transport, therefore justifies that the price of the intertemporal exchange should no longer be the sum itself, but an increased sum.

43 In q. 78, a. 1, ad 1, compensation for prejudice (damnum emergens) is allowed, but such compensation may not be based on a deprivation of earnings from the money lent (lucrum cessans). In De malo, q. 13, a. 4, ad 14 Aquinas explicitly considers compensation for late payment, although he does not use the expression poena conventionalis and does not specify whether this surcharge is agreed and formalised in advance.

44 Aquinas’s evolution could be seen as part of the longer movement of the progressive opening of the scholastics to extrinsic titles, as part of their ongoing adaptation to economic realities (Munro 2003, 510–111; De-Juan and Monsalve 2006, 105–106; Monsalve 2014b, 218). Franks, however, criticises the modern tendency to see Aquinas’s development as an adaptation to the market, since exchange value, for the latter, is still an abstract notion (Franks 2009, 71). Lenoble and Toneatto (2019, 27–31), for their part, criticise the employment as an analytical grid of a Christianity seen as by nature foreign to profit and as playing a moralising role. According to this grid, the scholastic authors were rooted in a theology hostile to wealth, but were gradually adapting their moral framework to the economic reality.

45 Here wisdom and stupidity act as causes of the agent’s behaviour. The study of the articulation between causality and freedom in the Thomasian anthropology tends to show that human behaviour as an economic agent is largely predictable (Conrad and Hunter 2020).