6. The Worldly Ascetic, San Bernardino of Siena
The great mind and the great systematizer of scholastic economics was a paradox among
paradoxes, a strict and ascetic Franciscan saint living and writing in the midst of
the sophisticated capitalist world of early 15th century Tuscany. While St. Thomas Aquinas
Mises was the systematizer of the entire range of intellectual endeavor.
His economic insights were scattered in fragments throughout his theological writings.
San Bernardino of Siena, 1380-1444, was the first theologian after Olivier to write an
entire work systematically devoted to scholastic economics.
Much of this advanced thought was contributed by San Bernardino himself, and the highly
advanced subjective utility theory was cribbed word for word from the Franciscan heretic
of two centuries earlier, Pierre de Jean-Olivier.
San Bernardino's book, written as a set of Latin sermons, was entitled On Contracts and
and Usury, and was composed during the years 1431 to 1433.
The treatise began, quite logically, with the institution and justification of the system
of private property, proceeded to the system and the ethics of trade, and continued to
discuss the determination of value and price on the market.
It ended with a lengthy discussion of the tangled usury question.
San Bernardino's chapter on private property was nothing remarkable.
Property was considered artificial rather than natural, but still vital for an efficient
economic order.
One of Bernardino's great contributions, however, was the fullest and most cogent discussion
and yet pinned on the functions of the business entrepreneur.
In the first place, the merchant was given an even cleaner bill of health than had been
given by Aquinas.
Sensibly, and in contrast to early doctrines, San Bernardino pointed out that trade, like
all other occupations, could be practiced either licitly or unlawfully.
All callings, including that of a bishop, provide occasions for sin. These are scarcely
limited to trade. More specifically, merchants can perform several kinds of useful service,
transporting commodities from surplus to scarce regions and countries, preserving and storing
goods to be available when the consumers want them, and as craftsmen or industrial entrepreneurs
transforming raw materials into finished products. In short, the businessman can perform the
useful social function of transporting, distributing or manufacturing goods.
In his justification of trade, San Bernardino finally managed to rehabilitate the lowly
retailer who had been scorned ever since ancient Greece. Importers and wholesalers, Bernardino
pointed out, buy in large quantities, and then break bulk by selling by the bail or
load to retailers, who in turn sell in minute quantities to consumers.
Realistically, Bernardino did not condemn profits.
On the contrary, profits were a legitimate return to the entrepreneur for his labor,
expenses and the risks that he undertakes.
San Bernardino then goes into his trenchant analysis of the functions of the entrepreneur.
Managerial ability, he realized, is a rare combination of competence and efficiency and
therefore commands a large return.
San Bernardino lists four necessary qualifications for the successful entrepreneur.
Efficiency or diligence, industria, responsibility, solicitudo, labor, labores, and assumption
of risks, pericula.
Efficiency for Bernardino meant being well informed about prices, costs and qualities
of the product, and being subtle in assessing risks and profit opportunities, which Bernardino
Now shrewdly observed, indeed very few are capable of doing.
Responsibility meant being attentive to detail and also keeping good accounts a necessary
item in business.
Trouble, toil and even personal hardships are also often essential.
For all these reasons and for the risk incurred, the businessman properly earns enough on successful
On determination of value, San Bernardino continued in the mainstream scholastic tradition,
with value and the just price being determined by the common estimation of the market.
Price will fluctuate in accordance with supply, rising if supply is scarce and falling if
Abundant.
Bernardino also has a penetrating discussion of the influence of cost.
Cost of labor, skill and risk do not affect price directly, but will affect the supply
of a commodity, and, Ceteris Paribus, other things being equal, a phrase used by San Bernardino,
Things requiring greater effort or ingenuity to produce will be more expensive and command
a higher price.
This insight prefigures the Jevons-Austrian analysis of supply and cost over five centuries
later.
As in the case of other scholastics, the common estimation of the market was held to be the
As we have seen, San Bernardino took over, word-for-word, the remarkable subjective utility
Theory of Value, published and previously neglected by the Franciscan Pierre de Jean
Olivier.
Bernardino's significant contribution to the theory of the just-as-market price was to
apply it to the just wage.
Wages are the price of labor services, Bernardino pointed out, and therefore the just or market
wage will be determined by the demand for labor and the available supply of labor on
the market.
Wage inequality is a function of differences of skill, ability and training.
An architect is paid more than a ditch-digger, Bernardino explained, because the former's
job requires more intelligence, ability and training, so that fewer men will qualify for
the task.
Gold workers are scarcer than unskilled, so that the former will command a higher wage.
In a sophisticated discussion of foreign exchange, Bernardino put his imprimatur on transactions
that were the dominant way in which hidden interest was charged for a credit transaction.
Here Bernardino followed the latitudinarian view of his master, Alexander Lombard.
Generally exchange transactions were conversions of currencies and not loans. Furthermore,
usury was only a certain and riskless interest on a loan. Foreign exchange rates fluctuated
and were therefore unpredictable. This was technically true, but generally lenders received
interest on exchange transactions, since the money market was structured to favor the lender
in this way.
Bernardino also pointed out that conversion of currencies was necessary because of the
great diversity of currencies, and because the coinage of one country was not acceptable
elsewhere.
The money exchangers therefore performed a useful function by enabling foreign trade,
which is essential to the support of human life, and by transferring funds from one country
San Bernardino of Siena was a fascinating and paradoxical combination of brilliant, knowledgeable
and appreciative analyst of the capitalist market of his day, and an emaciated ascetic
saint fulminating against worldly evils and business practices.
Bernardino was born in 1380 to a high official of Siena.
His father, Albertolo Degli Albatzechi, was governor of the town of Massa for the Republic
of Siena.
Bernardino's mother also belonged to a prominent local family.
Joining the strictly ascetic order of the observant Franciscans, Bernardino soon became
Boehm noted as a persuasive and highly popular traveling orator, preaching throughout northern
and central Italy.
In the 1430s, Bernardino was appointed vicar general of the observant Franciscans.
Three times in his lifetime, San Bernardino was offered bishoprics in Siena, Urbino and
and each time he refused this honor since he would have had to give up his preaching.
Some of Bernardino's anti-worldly preaching dwelt on problems of personal morality, thus
he deplored the practice of traveling merchants staying away from home for long periods and
then defiling themselves by living in carnal sin or even sodomy, which the saint habitually
Bernardino was often referred to as filth. Indeed, in his youth, Bernardino punched a man who had made homosexual overtures.
But Bernardino's main contradiction between sophisticated analyst of business and denouncer of business practice lay in his fulmination against usury.
Surrounded by the home of usury in Tuscany, San Bernardino, in common with so many scholastics,
found that realism stopped short at the usury door. On the usury question, the saint's brilliant
analysis and benign view of the free market failed him, and he fulminated almost in a frenzy.
." Usury was a vile infection permeating business and social life. Whereas other scholastics
had taken seriously the objection that church and society depended upon usury, Bernardino
did not care. No, it could not be. All those holding that usury was economically necessary
were committing the sin of blasphemy, since they would therefore be saying that God had
would bound them to an impossible course of action.
Abolish the charge of interest, Bernardino opined, and people would then lend freely
and gratuitously.
And besides, far too much is being borrowed now for frivolous and vicious purposes.
Usury, the saint thundered, destroys charity.
It is a contagious disease.
It stains the souls of all in society.
It concentrates all the money of the city into a few hands or drives it out of the country,
and what is more, it justly brings the wrath of God upon the city and invites the four
horsemen of the apocalypse.
One can only stand in awe at the fury of unreason in which this truly great thinker indulged
Bernardino himself on the usury issue.
Ranting about the usurer daring to sell time, Bernardino went further than his predecessors
in insisting that only Jesus Christ knows the time and the hour.
If therefore it is not ours to know the time, much less is it ours to sell it.
Is keeping watches and clocks therefore a mortal sin?
So winds up in a fit of almost hysterical frenzy at the hapless usurer.
Accordingly, all the saints and all the angels of paradise cry then against him, the usurer,
saying, To hell, to hell, to hell!
Also the heavens with their stars cry out, saying, To the fire, to the fire, to the fire!
The planets also clamor, to the depths, to the depths, to the depths.
And yet, despite all this, San Bernardino added his great weight to the concept that
would eventually scuttle the usury prohibition, lucrum cessans.
Following Hostiensis and a minority of 14th century scholastics, Bernardino admits lucrum
cessans.
It was all right to charge interest on a loan which would be the return sacrificed, the
opportunity foregone, for a legitimate investment.
It is true that Bernardino, like his predecessors, limited lucrum cessans strictly to a charitable
loan and refused to apply it to professional moneylenders.
He made an important analytic advance by explaining that lucrum cessans is legitimate, because
in that situation money is not simply barren money, but capital.
As Bernardino put it, when a businessman lends from balances which would have gone into commercial
Capital Investment, he gives not money in its simple character, but he also gives his
capital.
More fully, he writes that money, then, has not only the character of mere money or a
mere thing, but also, beyond this, a certain seminal character of something profitable,
which we commonly call capital.
Therefore, not only must its simple value be returned, but a super-added value as well.
In short, when money functions as capital, it is no longer barren or sterile.
As capital, it deserves to command a profit.
There is something more.
In the course of lengthy arguing against hidden usury in various forms of contracts, the brilliant
The modern mind of San Bernardino stumbles, for one of the first times in history, upon
what later would be called time preference, that people prefer present goods to future
goods, that is, the present prospect of goods in the future.
But he failed to recognize its importance and dismiss the point.
It was left to the late 18th century Frenchman Turgot and then to the great Austrian economist
Eugen von Boehm-Bawerk to discover the principle in the 1880s and hence finally solve the age-old
problem of explaining and justifying the existence and height of the rate of interest.
7.
The Disciple, St. Antonino of Florence
San Bernardino's major disciple was the highly influential and slightly younger St. Antonino
of Florence, 1389-1459.
Much of Antonino's influence came from his prolific writings, especially his enormous
Thomas Thomistic Summa Moralis Theologiae, 1449, The First Treatise in the New Science
of Moral Theology.
In Moral Theology or Casuistry, the theologian takes the abstract principles of theology
and ethics and applies them to the detailed empirical data of daily life.
In short, theology and morality were brought from the abstractions of the study and applied
to the details of everyday life.
Sant'Antonino's pioneering summa of moral theology proved to be extraordinarily influential.
It was frequently consulted for the next 150 years and went through 24 printings in that
period.
His shorter Confessionals, 1440, a guidebook for confessors, was reprinted thirty times
in the same century and a half.
There are striking parallels in the lives and personalities of Antonino and his master
Bernardino.
Saint Antonino was born the son of a minor official, the notary of Florence, Serniccolo
de Pierozzo de Forsiglione
The son's first name was Antonio, but he was universally called by the diminutive Antonino
because of his short stature, and the nickname is listed in the official church calendar
of saints.
Although in frail health, Antonino early joined the strict observant branch of the Dominican
order.
His administrative talents were unusual and spotted quickly, and he soon became prior
of the Dominican Friary of Cortona, and was then transferred to similar posts in Naples
and Rome.
After that, Antonino was appointed Vicar General of the Dominican Friaries of Lombardy in 1433,
and four years later, also of all central and southern Italy.
In addition to his vicarate, Antonino continued as prior of San Marco in Florence.
In 1445, Pope Eugene IV appointed Saint Antonino to the Archbishopric of Florence, possibly
on the advice of the great Renaissance painter Fra Angelico.
A humble man, Antonino followed Bernardino in stubbornly refusing to accept the post.
The Pope issued stern commands for Antonino to accept, and the story of a contemporary
asserts that he only took the office under penalty of excommunication.
In any event, St. Antonino refused for the rest of his life to wear Episcopal robes and
continued to wear the white habit and black cloak of a simple Dominican friar.
Ironically, upon his death in 1459, Antonino was buried in full pomp and ceremony.
Despite his reluctance, Antonino became a distinguished administrator and judge, daily
making countless economic decisions.
In Florence, he became steeped in knowledge of the financial and economic practices of
the most advanced capitalist center of his day.
But Antonino is habitually bracketed with Bernardino as two great scholastic thinkers
and economists.
But Antonino was merely a popularizer and casualist.
In his analysis, he simply repeated the views of the truly great and creative thinker, San
Bernardino.
Both men were thoroughly familiar with the economic practices of their day, and Antonino
Antonino came from Florence, the great banking center of Europe.
Yet both men were humble ascetics, and the same tension and contradiction of worldly
asceticism appeared in their works and lives.
Generally, Antonino simply repeated Bernardino's analysis.
In his discussion of value theory, however, Antonino further stressed Aquinas's crucial
point that any exchange on the market is for the mutual benefit of both parties, since
each is better off than he was before. A voluntary sale is a just one. And yet, Antonino seems
more sympathetic than his mentor to government price regulation, which, where it exists,
must be morally binding. Any black market price over a legal maximum is a sin.
On the just wage, Antonino echoes Bernardino and adds material based on his extensive knowledge
of the great Florentine woollen industry. The wage of a laborer is properly determined
by common market estimation, and any attempt to form a union of workers would be harmful
and Social Interference.
This view implicitly endorsed the Florentine practice of outlawing wool worker unions as
unlawful conspiracies.
The monopolistic wool guild of clothiers, however, was legal.
Not surprisingly, since it controlled the government of Florence.
The word guild does not appear in Antonino's work on labor conditions.
Perhaps he felt it more prudent to ignore this controversial issue.
Despite the discipleship, there were definite, though subtle, differences between the two
worldly saints.
Even though Antonino was more knowledgeable of the business world, he was, paradoxically,
considerably more moralistic.
Thus one of Antonino's numerous works was a pamphlet on women's fashions, De Ornate Mulierem, in which he fulminated at great length against women's use of rouge, false hair, fancy hairdos and other fripperies.
His talent for moralism was, of course, reinforced by his pioneering work in casuistry.
Likewise, he sounded off on artists, condemning all except religious art, especially exempting
the work of his friend, Fra Angelico.
Antonino was particularly upset because paintings of non-religious subjects gave artists the
opportunity to depict nude women, not for the sake of beauty, but to arouse libidinous
feelings.
Antonino did make the intelligent observation, however, that the price of paintings is determined
by the artist's skill rather than by the amount of labor involved.
Antonino's censorious views also reached into music, where he called for going back
to the austere Gregorian chant and eliminating the sinful introduction of counterpoint and
popular and even lewd ballads.
In more strictly economic concerns, Antonino's heightened moralism was also evident.
In contrast to his master, Antonino largely fulminated against foreign exchange transactions
as implicit usury.
As Raymond de Rouvet wonderingly remarks, this advice, if followed, would have abolished
banking altogether.
A rather strange attitude on the part of the Archbishop of the leading banking center in
Western Europe.
Most of the theologians were more lenient, although less consistent.
Antonino's ranting against usury was fully as exuberant as Bernardino's, and was heightened
by the fact that he served as the apostolic commissary for the repression of usury in
Tuscany.
Antonino is the all-out denouncer of usury, drawing together all possible arguments with
their most severe interpretation.
As Professor Noonan states, by being more systematic, Antonino is more severe than many
of his predecessors.
Antonino draws together all the strict rules of the early usury teaching into a tight set
of rules.
No later writer of note will be as severe, as uncompromising, as true to the logic of
the earlier conceptions as he.
Furthermore, Antonino took no back seat to Bernardino in his hysterical ranting against
usury.
Usury is diabolic.
It is the great harlot of Apocalypse 17, who sitteth upon many waters, with whom the kings
Users of the earth have committed fornication.
Not only direct userers, but all who cooperate in usury are worthy of eternal death.
Usury to Antonino is a worse sin than adultery or murder, because it continues on and on,
whereas the former sins are only intermittent.
The userer is in a state of perpetual sin.
Not only that, usury damns the heirs of the sinner, since the sin is not wiped out until
the usurer or his estate makes restitution by giving back the interest charge.
Usury, to Antonino, is everywhere, all pervasive.
And yet, Antonino, too, admits lucrum cessans as a legitimate source of an interest charge.
He is so worried about hint of usury, however, that he declares that, in practice, lucrum
cessans must never be advised.
Tragically, the subjective theory of utility developed by Pierre de Jean-Olivier in the
13th century, rediscovered by San Bernardino two centuries later and spread far and wide
by his disciple, St. Antonino, died with the worldly Florentine saint. With minor exceptions,
even the late Spanish scholastics of the 16th century, so much in the Thomist and utility
tradition, did not regain these heights. It was left to the Austrian school of the late
19th century to independently replicate and go beyond the subjective theory of value of
of Olivier, and it was left to the 1950s for this line of scholastic thought to be rediscovered.
8. The Swabian Liberals and the Assault on the Prohibition of Usury
At about the same time that San Bernardino was developing his great work, a relatively
The obscure German-Dominican was independently setting forth a similar analysis.
Johannes Nieder, 1380-1438, was a Swabian who taught theology at the University of Vienna
and led a reform of the Dominican order in southern Germany.
Nieder's brief treatise on the contracts of merchants, De contractibus mercantorum, was
was written about 1430 and published posthumously in Cologne about 1468. It was reprinted frequently
for the rest of the 15th century.
Needer begins by justifying the profits of merchants. Recognizing the entrepreneurial
role of the merchant, Needer stressed that trade requires market knowledge, and securing
Using that knowledge requires industry, diligence and luck.
Business incomes are justified by expenses, care and risks.
In analyzing market price, Nieder emphasizes subjective utility as the determinant.
Nieder, like Olivier and Bernardino, distinguished between the objective utility inherent in
in a Good and Subjective Utility, the Status of that Good in the Estimation of Men.
Kneader was clear that only the latter decisively determined the just market price. Anticipating
Jevons four centuries later, Kneader suggests that a change in supply will alter price by
by changing the utility assigned to it. That common market price determines the just price
is clear in Nieder. The proper value of a thing depends upon the ways buyers or sellers
may think about prices. Yet, where there is no common market, Nieder joins previous scholastics
points in stating that sellers may adopt a cost plus approach to find out the just price
that they may ask for.
While only subjective utility is treated in determination of price, there are disquieting
signs in neither of Langensteinian status arguments in justifying business income.
For businessmen's incomes, in addition to being determined by the economic factors mentioned
above, must also be decided in proportion to the nobility of the effort, a prelude to
neater's making clear that the work of the soldier is nobler than that of the merchant
and therefore deserves a higher reward.
This is a throwback not just to Langenstein but to ancient Greek veneration of the marshal
In discussing money, Nieder is firm in justifying the activities of money changers.
There is no nonsense about usury here.
Nieder points out that the exchange of currency is a kind of selling and buying, and demonstrates
even more cogently that the value of money, like the value of other commodities, also
also varies in the common estimation of the market.
While following Aquinas, the value of money usually changes less radically than the value
of a particular good, change it does nevertheless, merchants incurring legitimate profits or
losses from such variation.
Nieder writes trenchantly of the conversion or exchange of money, or of other things,
which is, as it were, a kind of selling and buying of one currency for another, and presents,
so to speak, the same moral problems as does commerce in goods.
Far more significant than neither was the great 15th century scholastic and fellow Swabian
Gabriel Biel, 1430-1495, Professor of Theology at the new University of Tübingen in southwest Germany.
Biel was a distinguished nominalist and Akamite. In fact, the German Akamites of the 15th century were known as Gabrieliste.
And yet, recent research has discovered that Biel was essentially atomist
in his belief in a rational and objective natural law ethic.
Indeed, he echoed the belief of his fellow Akamite of the previous century, Gregory of Remini,
in the highly rationalistic belief that the natural law was eternal and would exist even if God did not.
Furthermore, man, by his unaided reason, can discern this natural law
and Reach the Right Conclusions on His Proper Conduct.
One of Beale's contributions was to deliver a crystal clear statement of the scholastic
insight that each party to an exchange engaged in the action for mutual subjective benefit.
Following Jean Bouradin, his fellow-nominalist of the previous century, Beale's analysis
was cogent and concise.
For the buyer who desires a good would not buy unless he hoped for greater satisfaction
from the good than from the money he paid over, nor would the seller sell unless he
hoped for a profit from the price.
There had been no clearer demonstration before Beale that every exchange involves an expected
mutual benefit by each party to that transaction, and that the satisfaction of the buyer, at
least, is purely subjective, though the sellers may be translated into a monetary profit.
There would be no real improvement upon Biel until the advent of the Austrian School in
the late 19th century.
A follower of his fellow Akhamites, Jean Bourdain and Nicole Orem, Biel, in his Treatise on
the Power and Utility of Monies, repeated their metalist insights about the value of
money and their attack on governmental debasement.
Biel also insists with Bourdain that a sound money must be composed of material with a
The use independent of its service as money.
Beale regards debasement by a king as equivalent to theft.
If a prince should reject valid money in order that he may buy it up more cheaply and melt
it and then issue another coinage of less value, attaching the value of the former currency
to it, he would be guilty of stealing money and is required to make restitution.
Furthermore, Beale provided a more sophisticated explanation and justification than previously
available of the workings of the foreign exchange market.
In his Commentary on the Sentences, 1484, Beale noted that a bank that accepts a bill
of exchange permits the drawer of the bill to obtain cash in another city, and thereby
Bill by provides the important service of virtual transportation of the money.
The drawer of the bill is relieved of the cost and the risk of moving the money himself.
It is therefore licit for the banker, as lender, to profit on purchasing a foreign bill of
exchange.
In this way, Beale greatly widened the legitimacy of exchange transactions for lender as well
as well as borrower, thus strengthening the theoretical insight that the value of money
varies, as do particular goods.
But the great significance of Gabriel Biel in the history of economic thought was that
he began the smashing of the usury prohibition that had held economic thought in thrall since
the early centuries of the Christian era.
In addition to completing the liberation of the foreign exchange market from the taint
of usury, Beale launched the justification of insurance contracts.
For if it was sinful and usurious to own property or a right without bearing risk, such as the
grantor of a pure loan, then what of a man who had purchased an insurance contract and
and therefore was able to transfer risk to the insurer.
The defense of insurance Beale takes over from Angelus Carlatus de Clavassio, Vicar
General of the Observant Franciscans, who had defended riskless insurance contracts
in his Summa Angelica at the same time that Beale was writing his treatise.
Israel's main contribution in weakening the usury prohibition was his justification of
the census contract, the purchase of an annuity, and justifying it in its widest possible form.
Thus, purchase of an annuity was considered licit as a right to fruitful money, as was
an insured or guaranteed annuity.
Also, the buyer was allowed to redeem the annuity, a concession very close to permitting a lender to reclaim the principal of his loan after he has received a return in installments.
Thus, Beale came very close to justifying credit transactions charging interest, explaining
the fact that the seller of an annuity will often be willing to pay a high annual charge
in order to get ready cash, that is, pay interest on a loan. Beale points out with great cogency
that both parties to this, as any other transaction, expect to benefit.
For a buyer desiring merchandise, unless he hoped for more advantage from the merchandise
than from the money he gave, would not buy.
Nor would a seller sell, unless he hoped for profit from the price.
But the most comprehensive and systematic assault on the usury prohibition came from
From Gabrielle Beale's most distinguished student and his successor in the theology
chair at the University of Tübingen, Conrad Zummenhart, 1465-1511, who had also been a
student at the University of Paris.
The critique came in Zummenhart's massive Treatise on Contracts, Tractatus De Contractibus, 1499.
Zumanhart's contribution was two-fold. First, in enormously widening all the possible exceptions
to the usury prohibition, for example the census and lucrum cessans, and second, in
launching a blistering direct assault on all the time-honored arguments against whatever
usury contracts remained. On the first, Zumanhart developed the argument for insured or guaranteed
Heed Partnerships, far more subtly and extensively than before.
He also widened the lucrum cessans exception far more than anyone had ever done.
Money is fruitful, Zummenhard declared boldly.
It is the merchant's tool, which he can make fruitful by the use of his labor.
Consequently, the merchant should be compensated for loss of the use of his money, just as a farmer should be recompensed for the loss of his fields.
Unfortunately, however, Zumanhart's widening of lucrum cessans was still limited, as among the earlier scholastics, to loans made out of charity.
The boldest loosening of the usury bonds by Zungenhardt was in his radical defense of the widest possible interpretation of census contracts.
Here, Zungenhardt justified many of the credit transactions then used in Germany.
Coupled with his development of the idea of the changeable value of money, this meant the emptying of the usury prohibition of all practical significance.
Money, declared Zumenhard, may illicitly be trafficked in for profit.
Furthermore, he asserted that a census is not a sinful loan, because the right to money is a good of another kind than the money exchanged.
But in that case, Zumenhard asks himself, couldn't a usurer say the same thing, and
simply state that the right to money he was demanding in exchange was a good of a different
kind than the money loaned?
Astonishingly, Zumenhard replied, this was all right, provided that the lender did not
intend this to be usury, and was himself really convinced that he was buying the right to
to Money, which was a different good than the money itself.
But if usury was only subjective intention and not the objective fact of a loan-charging
interest, then there was no objective way of identifying or enforcing the prohibition
against usury.
In this way alone, Zumenhardt effectively destroyed the prohibition against usury.
But this was not all, for Zumanhart explicitly declared that the purchase by someone of a
discounted debt is not a usurious loan because it is only the purchase of a right to money.
The purchase of a debt was licit in the same way as a census.
Furthermore, the purchase of a debt could be that of a newly constituted debt and not
not simply the purchase of a previous debt. This, too, effectively ended the usury prohibition.
Moreover, in approving debt-purchase contracts, Zumanhart came close to understanding the
primordial fact of time preference, the preference of present over future money. When someone
When one pays $100 for the right to $110 at a future date, both parties estimate present
money more highly than money payable at a future date.
The buyer, lender, furthermore, doesn't really profit usuriously from the loan because he
He values the future $110 as worth $100 at the present time, so that the price and the
merchandise are equal in fact and in the estimation of the buyer.
Then, tackling the arguments for usury directly, Zungenhart presents 23 standard natural law
Professor Noonan concludes Zumanhart's examination ends in a rejection of the past. Usury is
is left assailed in name alone. The early scholastic theory of usury is abandoned.
Zumanhart's argument for usury is comprehensive. Contrary to St. Thomas, the usurer is charging
not for the borrower's use of his money, but for his own lack of use. If it is replied
Indeed that the borrower's restoring of the principle restores to the lender the power
of use, Zummenhard cogently replies, again sensing time preference.
But he does not restore to him, the lender, the use of the intervening time, so that he
will be able to use it, the money, for that intervening time.
Thus, interest on a loan becomes a legitimate charge for the foregone use of money during the time period of a loan.
It is clear, at least implicitly, that Conrad Zumenhard has magnificently demonstrated the justice of usury, of interest on a loan.
On the fixed value of money as an argument against usury, Zumenhart repeats and develops the argument of earlier critics that the value of money varies over time.
Furthermore, on the charge of risklessness of a money loan, Zumenhart originates an argument potentially fatal to the usury ban.
He points out correctly that the lender is never without risk.
He always bears the risk of the borrower going bankrupt.
The borrower also has the opportunity of earning more profits from the loan
than the interest he has to pay the lender.
Furthermore, Zumanhart neatly smashed the Aristotelian argument that money by its nature
Nature was meant to be used only as a medium of exchange and not to command interest.
Zumenhard boldly declares that the argument is simply absurd.
Does one then commit sin by using wine to put out a fire, or by storing money in a shoe?
There is nothing in the natural law that demonstrates that a material good must always be used for
for one particular purpose rather than for another.
We are left, after Zumenhardt, with only two very weak arguments against usury.
The mere fact that Aristotle said it was unnatural, an argument which Zumenhardt could only have
meant sardonically, and the divine prohibition.
But since usury is really natural, Zumenhardt, as we have seen, is willing to construe the
The Divine Prohibition so narrowly that it virtually disappears. After Zungenhardt, the usury ban is finished.
Unfortunately for the credibility of scholastic economics, however, the 16th century scholastics, superb as they were in many areas of economics,
did not accept the bold challenge of Konrad Zungenhardt to scrap the usury ban completely.
In some cases, particularly in his justification of the Guaranteed Partnership contract, Zumanhart
held back from full approval, counseling prudentially against contracts, though licit, which might
scandalize the community.
It was left to Zumanhart's eminent student, Johann Eck, to carry the Zumanhartian Revolution
through to its completion.
Eck, professor of theology at the University of Ingolstadt near the financial center of Augsburg in Bavaria,
was soon to find his greatest fame in arguing the Catholic case against Martin Luther.
Augsburg was then the leading financial center of Germany and the home of the great bankers, the Fugers,
who had captured the lucrative papal banking business from the city of Florence.
In 1514, the 28-year-old Eck, a friend of the Fugers, criticized his cautious fellow theologians for concealing the truth that the guaranteed partnership contract was fully licit, scandal or no scandal.
Arguing his case before a favorable audience of canonists at the University of Bologna,
Eck pointed out that merchants generally solicit the guaranteed investment contract and therefore profit by it.
Furthermore, this contract had been in general use for 40 years,
so that it should be assumed that the guaranteed contract is licit unless proven otherwise.
Also, Eck added the modern, sophisticated note that, after all, most capitalist investors in this contract are widows and orphans.
It should be noted that the eminent Scottish nominalist theologian John Major, 1478-1548,
Dean of the Faculty of Theology at the University of Paris,
Paris, clearly assented to the controversial Eck-Zummenhardt Defense of the Guaranteed
Investment Contract.
9.
NOMINALISTS AND ACTIVE NATURAL RIGHTS
The Dominicans, as we have seen, triumphed over the Franciscans on the property rights
This Question with Pope John XXII's Great Bull, Quia Vir Reprobus, 1329.
Individual property rights were now officially established as natural, stemming from God's
granting man dominion over the earth.
Despite William of Ockham's attempt to refute John XXII, his nominalist followers took the
The lead in developing this active natural property rights theory. Pierre Delis, 1350-1420,
and particularly his student and successor as Chancellor of the University of Paris,
Jean Garrison, 1363-1429, developed the theory. Thus, as Garrison put it trenchantly in his
De Vita Spirituali Animae, 1402
for a Natural Integrity.
In this way, Adam had dominion over the fowls of the air and the fish in the sea.
To this dominion, the dominion of liberty can also be assimilated, which is an unrestrained
faculty given by God.
It is odd that this nominalist and mystic, after setting forth the view of human rights
as a Dominion should also hold among a minority of scholastics that any mercantile profit
over and above costs and risk is immoral, and that the government should fix all prices
to assure a just price.
The Active Rights Theory was championed by the Garrisonian Konrad Zumenhardt and then
advanced further by the nominalist John Major.
In his commentary on the sentences of Peter Lombard, 1509, Major, a century after Garrison,
drew the logical conclusion that not only man's right and dominion were natural, but
so too was private property.
Major's student Jacques Almin put it clearly, Aurea Aposcula, circa 1525.
Natural dominion is thus the dispositional power or faculty of using things which people
can employ in their use of external objects, following the precepts of the law of nature,
by which everyone can look after their own bodies and preserve themselves.
Throughout the 15th century and into the 16th, the active theory of natural rights seemed
Terrain Unchallenged.