especially in Summa Theologica, II, II.1 Among the topics covered were the division of labor, property rights, the just price, usury, the labor theory of value, trade ...
Thomas Aquinas: A Pioneer in the Field of Law & Economics
Robert W. McGee Barry University
Published in Western State University Law Review, Volume 18, No. 1 (Fall, 1990), 471-483.
ABSTRACT St. Thomas Aquinas addressed a number of economic questions, especially in Summa Theologica, II, II.1 Among the topics covered were the division of labor, property rights, the just price, usury, the labor theory of value, trade and insider trading. Most of his economic ideas have been either improved upon or discarded by modern economic thinkers. Very little of what he says on economics has remained unchanged over the course of time. Unfortunately, some of his ideas that have been (rightly) discarded by most economists are still being used as the basis of policymaking by politicians and government officials. And some of his ideas that were basically correct (such as his view of insider trading) have been discarded by them. This article summarizes and discusses Thomas' views on economics and political economy.
The Division of Labor Basically, the theory of the division of labor states that when people specialize they are more productive than when they do everything for themselves. Adam Smith pointed out this fact in his Wealth of Nations.
The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour.2
To illustrate his point, Smith gives the example of the pinmaker. Working alone, and performing every task himself, the pinmaker can produce perhaps one to twenty pins a day. But by dividing the pinmaking process into a number of tasks, performed by ten different people, 48,000 pins can be made in a single day. One man draws the wire, another straightens it, a third cuts it, a fourth puts a point on it, a fifth grinds it. The head is made in two or three distinct operations. Another person inserts the pins in paper. Each pin goes through a total of 18 operations. By dividing the work and specializing in one or a few operations, ten men can make 48,000 high quality pins in a single day. Without specialization and division of labor, each pinmaker could produce no more than twenty lower quality pins a day.3 Smith advanced this idea in 1776, based on his observations of Scottish industry on the eve of the industrial revolution. But Aquinas anticipated Smith's division of labor theory by 500 years.
One man does not suffice to perform all those acts demanded by society, and therefore it is necessary that different persons be occupied in different 2
pursuits. The diversification of men for diverse tasks is the result, primarily, of divine providence, which details the various compartments of man's life in such a way that nothing necessary to human existence is ever lacking; secondarily, this diversification proceeds from natural causes which bring it about that different men are born with aptitudes and tendencies for the different functions and the various ways of living.4
While Aquinas would attribute this division of labor to divine providence, Smith has another explanation.
This division of labour, from which so many advantages are derived, is not originally the effect of any human wisdom, which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a certain propensity in human nature which has in view no such extensive utility; the propensity to truck, barter, and exchange one thing for another.
Whether this propensity be one of those original principles in human nature, of which no further account can be given; or whether, as seems more probable, it be the necessary consequence of the faculties of reason and speech, it belongs not to our present subject to enquire. It is common to all men, and to be found in no other race of animals, which seem to know neither this nor any other species of contract.5
While this division of labor theory is well established, and easily proven empirically to be valid, a number of political leaders have chosen to ignore it. Mao is 3
perhaps the worst violator. His backyard steel furnaces proved to be both inefficient and of poor quality. Rather than build large, modern steel facilities that could utilize specialization and the division of labor, he forced thousands of Chinese to make small quantities of steel in their own backyards.6 So Aquinas' theory of steady progress, with no loss of knowledge between men or from one generation to the next, is subject to exceptions.7
The Direction of Economic Activity Aquinas' view of what should direct economic activity differs from that of Smith. Aquinas thinks that government is needed to regulate the economic activity of individuals.
For where there are many men together and each one is looking after his own interest, the multitude would be broken up and scattered unless there were also an agency to take care of what appertains to the common weal ... Therefore in every multitude there must be some governing power.8
Yet Aquinas also thinks that government regulation should be the exception rather than the rule.
The optimum in any government is that things should be provided for according to their own measure for in this does the justice of an administration consist. Accordingly it would be against the principle of human government if men were to be prevented by the governor of the commonwealth from carrying out their own functions, unless perchance for a brief time because of some emergency.9 4
Smith views society as being guided by an "invisible hand." While each individual acts in his own self-interest, the result is that society benefits. No government action is needed to insure that the public interest is promoted. Private greed leads to public benefit.
As every individual ... endeavours as much as he can both to employ his capital in the support of domestick industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the publick interest, nor knows how much he is promoting it ... he intends only his own gain, and he is in this, as in many cases, led by an invisible hand to promote an end which was no part of his intention.10
Smith's view could be seen as Deistic -- God made the world like a clock, wound it up, and allows it to run by its own rules. This "clock" that we call earth runs on the basis of a secularized divine providence. There is a natural harmony of interests, not the natural conflict that Marx saw.11
Property Rights While Thomas More, in his Utopia, and Karl Marx in his various writings view property as evil, Aquinas views property as necessary to human life.
... it is lawful for man to possess property. Moreover this is necessary to human life for three reasons. First, because every man is more careful to 5
procure what is for himself alone than that which is common to many or to all; since each one would shirk the labor and leave to another that which concerns the community, as happens where there is a great number of servants. Secondly, because human affairs are conducted in more orderly fashion if each man is charged with taking care of some particular thing himself, whereas there would be confusion if everyone had to look after any one thing indeterminately. Thirdly, because a more peaceful state is insured to man if each one is contented with his own. Hence it is to be observed that quarrels arise more frequently where there is no division of the things possessed ... the ownership of possessions is not contrary to the natural law, but an addition thereto devised by human reason.11
The Thomistic view of property is widely held in the more prosperous countries, whereas the Marxist view that private property should not exist is the prevailing view in communist countries. In fact, the lack of familiarity with the idea of private property is creating a major obstacle in the Eastern European countries, which are attempting to convert their command economies to market economies. Private property is the cornerstone of a market economy, but they do not realize that fact.
Trade The ancient Greeks viewed the city state (polis) as being the perfect arrangement for society. The polis was a self-sufficient unit. Merchants were viewed with suspicion because they bought goods and resold them without changing them or adding any value. The fact that they provided a service was not recognized by the ancient Greeks. Furthermore, a city that engaged in trade became dependent on outsiders, a condition that
6
could prove very detrimental in time of war. A city dependent on food from outsiders could be in serious trouble if the food supply were cut off in time of war. Aquinas adopted a less harsh version of the Greek view in his On Kingship. While trade led to dependence on others, which could be harmful in time of war, and while merchants were avaricious because they sold goods without adding anything to them, they should not be excluded from society altogether because they do provide goods that would otherwise be either in short supply or nonexistent. Government should allow trade, but should not encourage it. "Trade too much entangles the soul in secular cares, and withdraws from spirituality."12 Modern economic theory views trade in a better light. Indeed, trade raises the standard of living for everyone. Specialization and the division of labor can be vastly increased where markets can be expanded through trade. Trade restrictions destroy jobs and raise the price consumers must pay.13 Trade restrictions are now seen by economists (but not always by politicians) as being harmful, and have been blamed as being one of the reasons why the depression of the 1930s lasted as long as it did.14
The Just Price Aquinas accepted the general medieval notion that the just price equals the seller's cost.15 But the seller's cost does not necessarily equal what the seller paid. The seller may suffer some emotional loss by parting with something, and the value of this loss is included in the determination of the just price. There may also be a time preference factor that affects the price. Adding labor was commonly seen as an acceptable reason for raising the price of a good. Taking some risk in keeping or moving the goods was another acceptable reason. If the goods increase in quality, as is the case when new wine is purchased, then aged and sold for a higher price, the seller is justified in charging the higher price because he sells something that is more 7
valuable than what he bought. Cost theory was in its primitive stages during the thirteenth century, and Aquinas helped move it forward a bit. In Summa Theologica, Aquinas discusses whether it is lawful to sell a thing for more than it is worth.16 He concludes that it is sinful to sell something for more than its just price, because doing so deceives and injures one's neighbor. Likewise, to buy something for less than what it is worth is unjust and unlawful. Shortly thereafter, Aquinas states that it is lawful to sell something for more than it is worth "in itself," although the price may not be more than it is worth to the owner. Thus, it appears that he is applying an objective value theory (value "in itself"), and at the same time he is also subscribing to a subjective value theory ("worth to the owner"). Therein lies the weakness of his argument, and the source of much confusion when later commentators have attempted to determine his view on the subject. Value is either objective or subjective. Value cannot be both objective and subjective at the same time. If a good has intrinsic value, the value is objective. If different people are willing to pay different prices for the same good at the same time, then value is subjective. Since, in the real world, different people are willing to pay different prices for the same good at the same time, value is subjective, and there is no such thing as intrinsic value. Also, in the real world, the same person places different value on identical goods at nearly the same time. For example, a hungry man may go into a franchised fast food establishment such as McDonalds to buy a hamburger. The stated price is $1.00, and he decides to buy the hamburger because he would rather have the hamburger than the $1.00. To him, the hamburger has a higher value than the $1.00. Otherwise, he would not buy the hamburger, because he would not give up something of higher value ($1.00) to obtain something of lesser value (the hamburger). After he eats it, he may buy a second hamburger, which means that he values a second hamburger more than he values $1.00. 8
After eating the second hamburger he gets up and leaves because he is no longer hungry. The reason he leaves is because he now values $1.00 more than he values a hamburger. Otherwise, he would have purchased a third hamburger. His value is subjective, even for the same good at nearly the same time. He values the first hamburger more than he values the third hamburger, even though the hamburgers are identical in every respect. The labor theory of value takes a different view of value. If the value of a good is equal to the amount of labor that was expended to produce it (labor theory of value), then selling it for more than the labor cost results in exploitation of the workers, at least according to the Marxists. According to this view, inefficient utilization of labor, which raises the cost of producing the product, will increase its value. Proponents of this view have a difficult time explaining why inefficiently made products cannot be sold for their labor costs when more efficient producers are able to sell identical or similar products at a profit for a price that is less than the inefficient producer's cost of labor.17 For example, Company A and Company B both make an identical product. The market price is $5.00. Because Company A has efficient production methods, it is able to make the product for $3.00 a unit, so it makes a $2.00 profit on each unit it sells. According to the Marxists, Company A exploits its workers to the tune of $2 a unit. Company B is less efficient, and its unit production cost is $6.00, so it takes a $1 loss on each unit it sells. In the long run, Company B will go out of business because it cannot afford to take losses indefinitely. If value is determined by the costs expended to produce a product (production theory of value), then a price set above production cost is an unjust price. This theory may allow room for some owner profit, since the owner may be seen as adding something to the product. Proponents of the production theory of value have a difficult time explaining why some products cannot be sold for a price at least equal to production 9
costs, and why inefficiently produced goods cannot be sold for a higher price than more efficiently produced goods. For example, if it costs Company B $6 to produce one unit of product, why can it not sell the product for $6? The obvious answer is that consumers are not willing to pay $6 for it. What a product costs to produce and what consumers are willing to pay are not directly related. This answer, which is obvious today, was not at all obvious when Aquinas wrote about the just price. It was not until the marginalist revolution of the 1870s that Carl Menger, Leon Walras and Stanley Jevons clarified the relationship between cost and price.18 If the price is set based on what a willing buyer is willing to pay (subjective value theory), then any price is just. If no buyer is willing to pay a price at least equal to production cost, then the value of the product must be less than production cost. If the seller wants to sell at the buyer's price, the seller will lose money if production cost is higher than the selling price. If the seller is unwilling to sell at that price, the good will go unsold. When Aquinas states that "... it will be lawful to sell a thing for more than it is worth by itself, though the price paid be not more than it is worth to the owner,"19 he makes two mistakes. First, things have no intrinsic value, so a thing cannot be sold for more than it is worth in itself. Value is subjective. Something is worth whatever someone is willing to pay for it. Second, if the owner may not sell a thing for more than it is worth to him, then nothing would ever be sold. All exchange is based on the fact that both parties to the exchange are improving their lot. If a seller would rather have $5 than the product he is trying to sell, then he values $5 more than he values the product, and he will, in his subjective opinion, improve his lot in life if he can exchange the product for $5. But the buyer would rather have the product than $5. The buyer values the product more than he values $5. Otherwise, he would not be willing to pay $5 to obtain it. So for 10
one party to the exchange (the seller), the $5 is worth more than the product. The other party (the buyer) values the product more than the $5. Each party to the transaction gains as a result of the exchange. However, Aquinas should not be faulted too heavily for taking an incorrect view. Other thinkers of his day took a similar view of the just price. It was not until the last half of the nineteenth century that the subjective theory of value was first clearly stated, although the Italian economist, Galiani, came close to expounding it in the late 1700s.20 And some medieval theorists apparently thought that the just price could be equated with the market price.21 Cajetan, in his commentary on Aquinas' Summa, infers that the just price can be the market price when he defines the just price as
... that which can be found among merchants, presupposing common knowledge and removed from all fraud and compulsion.22
Aquinas did recognize that price can be affected by market forces, and he concluded that charging the market price is not unjust.
The just price of things, however, is not determined to a precise point but consists in a certain estimate ... The price of an article is changed according to difference in location, time, or risk to which one is exposed in carrying it from one place to another or in causing it to be carried. Neither purchase nor sale according to this principle is unjust.
Usury Usury is a variation of the just price theory. Although it was necessary to charge interest for the lending of money (otherwise, money would not be lent), theorists were 11
unable to come up with an acceptable theory to justify the practice. Both Aristotle24 and the Bible25 condemned it. So did Aquinas.
To take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice.26
... just as it is a sin against justice to take money, by tacit or express agreement, in return for lending money or anything else that is consumed by being used, so also is it a like sin by tacit or express agreement to receive anything whose price can be measured by money. Yet there would be no sin in receiving something of the kind, not as exacting it, nor yet as though it were due on account of some agreement tacit or expressed, but as a gratuity; since, even before lending the money, one could accept a gratuity, nor is one in a worse condition through lending.27
He that suffers injury does not sin, ... wherefore justice is not a mean between two vices ... Now a usurer sins by doing an injury to the person who borrows from him under a condition of usury. Therefore he that accepts a loan under a condition of usury does not sin.28
Aquinas' analysis of usury leaves much to be desired. For one thing, the borrower does not suffer by taking out a loan. If someone can borrow money at 10% and invest it in property, plant and equipment or something else that yields 15%, that person gains by 5%. The lender is doing the borrower a favor by granting the loan, and the borrower is
12
doing the lender a favor by borrowing. Both parties benefit by the transaction and no one is harmed.29 The investment in property, plant and equipment creates jobs and goods that were previously unavailable. So workers also benefit because jobs are created, which gives them more options and chances for employment. And consumers also benefit by the loan because the investment creates previously nonexistent consumer goods. If the loan proceeds are used to create capital goods instead of consumer goods, the capital goods created will eventually be used to produce consumer goods. The end of all production is consumption,
30
so the consumer benefits somewhere down the line because consumer
goods are created. While this explanation seems elementary toady, medieval thinkers had not yet realized how this aspect of the economic process works. In fact, the Islamic world still forbids charging interest. They still believe in the medieval view that charging interest is a form of exploitation rather than a beneficial act that benefits both parties to the transaction as well as a number of unidentifiable third parties such as workers and consumers. The time preference theory was developed by Böhm-Bawerk in the late nineteenth century to explain why the practice of charging interest exists.31 The time preference theory recognizes that people prefer receiving something today to some time in the future. A million dollars today is more valuable than a million dollars next year. A person who has a million dollars today can invest it and earn money, so having the money now instead of at some time in the future has some value. While Aquinas did not see this point, he did recognize a crude form of time preference theory as applied to the just price. A merchant who buys new wine, lets it age and then sells it for more than what he paid for it recognizes time preference even though
13
he may not be able to explain it. Money is a commodity, as is wine. Aquinas saw time preference theory applied to wine but not to money.
The Labor Theory of Value A cursory reading of St. Thomas might lead to the conclusion that he subscribed to the labor theory of value. In fact, a number of writers have asserted that Aquinas was a labor value theorist. R.H. Tawney states that "the true descendant of the doctrines of Aquinas is the labour theory of value; the last of the Schoolmen was Karl Marx."32 However, other writers have gone so far as to say that Aquinas not only did not subscribe to the labor theory of value, but was actually an early subjective value theorist.33
The distinction he [Aquinas] seems to make between price and value is not a distinction between price and some value that is not a price, but a distinction between the price paid in an individual transaction and the price that consists in the public's evaluation of the commodity ... which can only mean normal competitive price or value in the sense of normal competitive price ... 34
If Aquinas was a subjective value theorist, he anticipated Menger, Jevons and Walras by 600 years, since they were the first to expound the full theory in the 1870s. A closer reading of Aquinas shows that he did recognize the fact that market forces affect the value that is placed on commodities.35 Although this insight does not make him a subjective value theorist in the modern sense of the term, it does show that he did not subscribe to the theory that all value is objective or intrinsic. A more accurate description of his views would be to say that he believed in a crude production theory of value, that
14
included costs of production (consisting mostly, but not exclusively, of labor), but allowed room for market forces as well.
Insider Trading His view of insider trading is especially pertinent today. Aquinas said that fraud can be perpetrated in one of three ways, either by selling one thing for another or by giving the wrong quality or quantity.36 Webster's definition of fraud is "intentional deception to cause a person to give up property or some lawful right."37 A more general definition is that fraud is perpetrated when a person knowingly or intentionally makes a false representation of fact to another with the intent that the other party rely on the representation, and that the other party actually did rely upon the false statements to his loss, detriment or damage.38 Some courts have extended liability to include negligent or inadvertent misrepresentation.39 According to this theory, there is no fraud if there is no loss. And because much so-called insider trading does not involve any identifiable loss, the practice is not fraudulent. Even in cases where there is a loss, it still has to be proved that all the elements of fraud are present before an inside trader can be found guilty of the offense. Typically, a case of insider trading occurs when a buyer with inside information calls his stock broker and tells him to buy, knowing that the stock price is likely to rise as soon as the inside information becomes public. In this case, the buyer does not deceive the seller into giving up property. Indeed, the buyer does not even know who the seller is, and the seller would have sold anyway, anonymously. The seller's action would have been the same whether or not an inside trader was the other party to the transaction. If the inside trader had not purchased the stock, someone else would have. Yet this "someone else" would not be accused of reaping unjust profits even if the identical stock was
15
purchased for the same price the insider would have paid. Consequently, insider trading does not seem to fit the definition of fraud. According to Aquinas, there is no moral duty to inform a potential buyer that the price of the good one is trying to sell is likely to change in the near future.40 Aquinas discusses a wheat merchant who:
carr[ies] wheat to a place where wheat fetches a high price, knowing that many will come after him carrying wheat; ... if the buyers knew this they would give a lower price. But ... the seller need not give the buyer this information .... [T]he seller, since he sells his goods at the price actually offered him, does not seem to act contrary to justice through not stating what is going to happen. If however he were to do so, or if he lowered his price, it would be exceedingly virtuous on his part: although he does not seem to be bound to do this as a debt of justice.41
In other words, an insider who knows the stock price is likely to change in the near future has no moral duty to inform potential buyers of this fact. And where there is no moral duty, certainly there should be no legal duty either.
Summary Aquinas recognized the need for, and the benefits of, the division of labor, a fact some modern political leaders (especially China's Mao) have not always accepted in practice. His view of government is that it should regulate economic activity only in emergencies. Otherwise, people should generally be left alone to conduct their business as they think best, an idea that is still advanced by classical liberals and some conservatives. 16
Unlike the classical liberals, who believe that economic activity is guided by an invisible hand, Aquinas thinks that government direction is needed to prevent chaos, a view that seemingly conflicts with his otherwise laissez faire attitude. Thomas thinks that private property is necessary to human life and is an extension of the natural law, a view that is prevalent in Western democracies, but denied in varying degrees in socialist countries. Unlike Aristotle and Augustine, who viewed trade negatively, Aquinas viewed it as neither inherently good nor bad, but potentially good. His view of the just price is less clear. Proponents of the labor theory of value, the cost of production theory and the subjective value theory have all pointed to Aquinas as their forerunner. His view of usury, although prevalent at the time he advocated it, has since been replaced by a better theory (the time preference theory) that is accepted everywhere except in the Islamic world, although governments in other parts of the world often place restrictions on the amount of interest that can be charged.
Footnotes 1.
Summa Theologica has been published in a number of languages. All references in this paper will be to the Fathers of the English Dominican Province trans. 1947. This classic is so large that it was published in two parts. But Part II was so large that it was also published in two parts. Thus, the reference to Summa Theologica, II-II refers to Part 2 of the second Part.
2.
Adam Smith, An Inquiry Into the Nature and Causes of the Wealth of Nations, Book I, Chapter 1, p. 7. All references are to the 1953 Henry Regnery edition. The book was originally published in 1776. 17
3.
Id., Book I, Chapter I, pp. 8-9.
4.
St. Thomas Aquinas, Quaestiones quodlibetales vii. 17; cf. Summa Contra Gentiles iii 132; Contra Impugnantes Dei Cultum et Religionem v. 27, as quoted in Dino Bigongiari, The Political Ideas of St. Thomas Aquinas ix (1953).
5.
Smith, The Wealth of Nations, supra note 2 at 23, Book I, Chapter 2.
6.
This "steel mill in every back yard" policy was part of Mao's "Great Leap Forward" of the late 1950s. Martin C. Schnitzer and James W. Nordyke, Comparative Economic Systems 519-20 (1971). The popular press covered this aspect of Mao's policy extensively.
7.
Aquinas, Summa Theologica, supra note 1 at I-II, Q. 97, A.1. The idea of progress has been discussed in numerous places. For example, see J.B. Bury, The Idea of Progress (1920); Charles Van Doren, The Idea of Progress (1967); Madsen Pirie, Trial & Error & the Idea of Progress (1978); Sidney Pollard, The Idea of Progress (1968); Radoslav A. Tsanoff, Civilization & Progress (1971).
8.
Aquinas, On Kingship, ¶¶ 8 & 9.
9.
Aquinas, Summa contra Gentiles Book III, c. 71, as quoted in Bernard W. Dempsey, Just Price in a Functional Economy Am. Econ. Rev. 480 (September, 1935).
18
10.
Smith, Wealth of Nations, supra note 2 at 456.
11.
Aquinas, Summa Theologica, supra note 1 at II-II, Q.66, Art. 2. For other examples of the view that there can be order without central direction, see Richard Dawkins, The Blind Watchmaker (1987); F.A. Hayek, Studies in Philosophy, Politics and Economics (1967); F.A. Hayek, New Studies in Philosophy, Politics, Economics and the History of Ideas (1978); Bernard Mandeville, The Fable of the Bees: or Private Vices, Publick Benefits (1732). Marx' theory of class conflict permeates his work. For example, see The Communist Manifesto (1848), Das Kapital, various editions.
12.
Summa Theologica, supra note 1 at II-II, Q.77, Art. 4.
13.
According to one estimate, trade protection in 1988 cost American consumers $80 billion. See Paul Blustein, Unfair Traders: Does the U.S. Have Room To Talk? Washington Post, May 24, 1989 at F1. Trade restrictions raise the cost of imported goods 20% on average and boost prices of comparable U.S. goods by 10 to 14%. See Alan Murray, As Free-Trade Bastion, U.S. Isn't Half as Pure as Many People Think Wall Street J., November 1, 1985 at 1. For a detailed analysis of free trade arguments and counterarguments and the cost of protectionism, see Robert W. McGee, The Trade Policy of a Free Society, Cap. U.L. Rev. (1990), forthcoming.
14.
Murray N. Rothbard, America's Great Depression, second edition 213-15 (1972).
15.
Summa Theologica, supra note 1 at II-II, Q. 77. 19
16.
Id. at Q. 77, Art. 1.
17.
Marx' exploitation theory suffers from a number of weaknesses. One of the earliest and best refutations of the exploitation theory can be found in Eugen von Böhm-Bawerk, Capital and Interest, Vol. I, Chapter 12 (1959). Originally published in 1884 under the title Kapital und Kapitalzins.
18.
See Carl Menger, Principles of Economics (1871), Stanley Jevons, The Theory of Political Economy (1871) and Leon Walras, Elements of Pure Economics (1874) for their exposition of the marginal utility theory.
19.
Summa Theologica, supra note 1 at II-II, Q. 77, Art. 1.
20.
Murray N. Rothbard, New Light on the Prehistory of the Austrian School, in Edwin G. Dolan (ed.), The Foundations of Modern Austrian Economics 67 (1976).
21.
David D. Friedman, In Defense of Thomas Aquinas and the Just Price, 12 Hist. Pol. Econ. 235 (Summer, 1980); Murray N. Rothbard, supra note 20 at 58.
22.
Catejan, Comm. in S.T., II-II, 77, 1, as quoted in Frederick E. Flynn, Wealth and Money in the Economic Philosophy of St. Thomas, PhD dissertation, University of Notre Dame (1942) at 45.
23.
Summa Theologica, supra note 1 at II-II, Q. 77. 20
24.
Aristotle, The Politics, Book I, Chapter 1.
25.
God warned Moses against it in Exodus 22: 25; Leviticus 25: 36; and Deuteronomy 23: 20. Nehemiah rebuked those who exacted usury in Nehemiah 5:7. It was thought that a religious man never lent money for usury. Psalms 14:45, Proverbs 28:8, Jeremiah 15:10, Ezekiel 18:8. Indulging in the practice was an indication that an individual was evil or that he had forgotten God. Ezekiel 18:13, 22:12.
26.
Summa Theologica, supra note 1 at II-II, Q. 78, Art. 1.
27.
Id. at II-II, Q. 78, Art. 2.
28.
Id. at II-II, Q. 78, Art. 4.
29.
Aquinas justifies obtaining a return on investment, however. When money that is lent is invested at a profit, the lender "... may lawfully demand, as something belonging to him, part of the profits derived from his money." Summa Theologica, supra note 1 at II-II, Q. 78, Art. 2, Reply Obj. 5. Aquinas does not address the other possibility ... What is the lender entitled to receive if the money invested results in a loss? If a lender were allowed to receive interest regardless of what the borrower does with the money, this question would be answered.
30.
The idea that all production is ultimately for consumption is labeled Say's Law after Jean-Baptiste Say, who elaborated on the theory in his Treatise on Political 21
Economy (1803). James Mill interpreted it to mean that supply creates its own demand in his Commerce Defended (1808). Keynes claimed to have refuted the theory in his The General Theory of Employment, Interest and Money (1936) but others have made convincing arguments that Say's Law is valid. For some of these critiques, see Henry Hazlitt, The Failure of the New Economics (1959); Ludwig von Mises, Lord Keynes and Say's Law, in Henry Hazlitt (ed.), The Critics of Keynesian Economics 315-21 (1960); Thomas Sowell, Say's Law (1972).
31.
Eugen von Böhm-Bawerk, Capital and Interest, Volumes I and II (1959); Value and Price, 2nd ed. (1973); The Ultimate Standard of Value, in Shorter Classics of Böhm-Bawerk (1962).
32.
R.H. Tawney, Religion and the Rise of Capitalism 36 (1926), as quoted in Alfred O'Rahilly, Aquinas versus Marx 15 (1948). Also see Ernest Bartell, Value, Price, and St. Thomas, 25 The Thomist 330 (July, 1962).
33.
Desire Barath, The Just Price and the Costs of Production According to St. Thomas Aquinas 34 New Scholasticism 430 (1960).
34.
Joseph Alois Schumpeter, History of Economic Analysis 93 (1954). Also in Bartell, supra note 32 at 330.
35.
Summa Theologica, supra note 1 at II-II, Q. 77, Art. 4.
22
36.
G. Dalcourt, The Philosophy and Writings of St. Thomas Aquinas 105 (1965); Aquinas, Summa Theologica, supra note 1 at Pf. II-II, Q.77 Art. 3, obj. 4.
37.
Webster's New World Dictionary of the American Language (college ed. 1964).
38.
Kaufman Inv. Corp. v. Johnson, 623 F.2d 598 (9th Cir. 1980), cert. denied, 450 U.S. 914 (1981); Meader v. Francis Ford, Inc. 286 Or. 451, 595 P.2d 480 (1979); Metal Tech. Corp. v. Metal Techniques Co., Inc., 74 Or. App. 297, 703 P.2d 237 (1985); 2 Restatement (Second) of Torts § 525ff, cited in Foley, "Insider Trading": The Moral Issue, 37 The Freeman 409 n.7 (1987).
39.
Weiss v. Gumbert, 191 Or. 119, 227 P.2d 812, reh'g denied, 191 Or. 139, 228 P.2d 800 (1951); 3 Restatement (Second) of Torts §§ 552-552C, cited in Foley, "Insider Trading": The Moral Issue, 37 The Freeman 409 n.8 (1987).
40.
Summa Theologica, supra note 1; Barath, The Just Price and the Costs of Production According to St. Thomas Aquinas, 34 New Scholasticism 420 (1960); Bartell, Value, Price, and St. Thomas 25 The Thomist, 359-60 (1962).
41.
Summa Theologica, supra note 1 at Pf. II-II, Q.77 Art. 3, obj. 4, reply obj. 4.
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