St. Thomas Economicus

Many libertarians and classical liberals regard St. Thomas Aquinas as one of the enemies of liberty, of economic liberty in particular.  According to these critics (and to some self-described Thomists, Thomas is supposed to have devised an abstract and systematic theory of an ideal state, which would have the power to regulate the marketplace by establishing a quasi-Marxian “just price” for all goods and by prohibiting all interest on investments.  This opinion of Thomas’s economic views is substantially wrong, both in the details and in its overall point of view.  Although Thomas was far from being a classical liberal, his moral and political philosophy, once properly understood, gives no support to statism in any form.

It is important to note that St. Thomas was not writing as an economist, but as a theologian and moral philosopher.  His primary objective, in the parts of the Summa Theologiae dealing with economic matters (II.ii.77-78), was to provide a coherent framework for making personal moral decisions.  Far from aiming at originality, he wanted to reconcile Aristotelian theory with the traditional teachings of the church and to apply that synthesis to the sorts of social questions posed by his own age.  Unlike Plato, he was no utopian, and unlike both liberals and Marxists he did not pretend to have all the answers.  In this sense, it is certainly true that Thomas was no Thomist.

In his discussion of the just price, Thomas was hardly original: he was, in fact, drawing upon the traditions of both canon law and of his predecessors (e.g., Albertus Magnus).  Because Thomas, in one or two places, seems to include “labor plus expenses” as a component in determining price, the socialist R.H. Tawney declared that “The true descendant of the doctrines of Aquinas is the labor theory of value” and pronounced Karl Marx “the last of the schoolmen.”  This is nonsense, of course.  As my late friend Murray Rothbard makes plain, in his Economic Thought Before Adam Smith [Edward Elgar 1995, pp. 36-58), the just price was primarily conceived of as the market price, and the formula “labor plus expenses” was used “to justify the profits of merchants rather than as a means of determining economic value.”   

If Thomas’ arguments are applied to the economic circumstances of the the new Millennium, they would not so much justify the imposition of moral constraints on market transactions as they would condemn the “rigging” of markets through monopolies, insider trading, and other forms of corruption.  In a famous passage, Thomas even parts company with Cicero, who had argued that a merchant bringing grain to a city suffering famine should tell the local citizens that other merchants were also bringing grain.  No, said Thomas.  The merchant could not know that the grain would arrive.  The foreign merchant, after all, was not responsible for the high market price of grain, and there is no sin in taking advantage of market fluctuations.

As an Aristotelian, Thomas acknowledged the importance of trade in providing necessities with which no individual could possibly supply himself through his own unaided efforts.  As a medieval Christian he was much more severe on the question of interest collected on loans, and he followed the philosophical and legal traditions that condemned all interest (more or less) as usura.  Thomas declares unequivocally: “To take usury for money lent is unjust in itself, because this is to sell what does not exist,” that is, the future interest on the money.   It is just, he says, to rent out the use of some tool or building, but money is not like a house, which was made as a dwelling place and whose space can be rented out.  Since money was made strictly for exchange, there is nothing to rent, and the collection of interest is the sale of nothing--which is unjust.

Thomas does go on to qualify his stricture, by saying that one may take payment for those aspects of a loan which cannot be measured in monetary terms, such as benevolence, affection, etc.   The lender may also receive compensation for losses incurred but not for profits that he has foregone, because they are future and therefore nonexistent.

In condemning usury, Thomas was thinking only in terms of simple lending transactions.  He did not have the faintest conception of modern banks that invest their depositors’ money into land and businesses.  He was not even considering private business loans that a venture capitalist might make to a struggling business.  Thomas did, in fact, (as Rothbard notes) strengthen the argument for the business societas (a group of merchants in a joint-venture), arguing that the profits realized by such investments were not usurious.

Even usurious loans were not necessarily illegal.  Thomas acknowledges as much: "In human affairs justice is determined by civil laws.  But according to them, it is permitted to receive usury."  Thomas rejects the premise that what is permitted cannot be sinful, but throughout his work he puts emphasis on the Christian understanding of the commonwealth as a social  institution that permits, even encourages virtue without compelling it.  In condemning usury as sinful and immoral, Thomas is not legislating--even in theory--for mankind.

This raises a larger issue of Thomas and his times.  Although translators typically translate Thomas’s civitas with some form of the word “state,” the state did not yet exist.  The Italian and French monarchies with which Thomas was familiar were decentralized to the point of impotence.  The king or emperor’s authority was limited by the rival authoritative of the church and of his vassals, and even within Paris, the King of France was limited by custom and law: He could not even deal, as he saw fit, with the refractory scholars at the University of Paris.  

Kings did intervene in the economies, but not out of some theory (like mercantilism) but only as a means of raising revenues.  More serious interventions were made privately and semi-privately, by the guilds that naturally wished to restrict competition.  This is the world in which Thomas’s political and social views took shape, a world far closer to the ancient polis than to the modern state.  

Murray Rothbard criticizes St. Thomas for failing to anticipate the Austrian School’s subjective theory of value.  But the philosopher, who was interested in making people happy, as opposed to wealthy, would have responded that individual subjectivity, while it does provide an effective means of analyzing prices, can only undermine the foundations of objective morality on which our happiness depends.  Thomas was not an individualist; indeed, he would have rejected the entire concept of the human being as an “individual” isolated from the community and from God.  Like Aristotle before him and Althusius after him, Thomas saw human social life as a network of interlocking loyalties and authorities.  He understood that these smaller communities of family and church and corporation served as bulwarks against the tyrannical usurpation of power.  After more than 200 years of individualist theories whose primary effect has been to strengthen the state at the expense of human beings, those who love real (as opposed to theoretical) liberty might do well to study this much-misunderstood philosopher.