Money, Banks and Finance in Economic Thought

Practical and impractical money matters in the 13th century: the usury doctrine and money-lending practices

Rajapakse Nadeera, Université Pantheon-Sorbonne, Paris 1

In the 13th century the three main Abrahamic religions converged in their criticism of usury, which was imparted in various forms of discourse to the lay people. In the medieval European scholastic tradition, Thomas Aquinas’ work on usury - described as a synthesis of the biblical scriptures, Aristotelian thought and natural law -, reconciled reason and faith. The scholastic doctrine forbid usury on the grounds of violating justice in exchange, which was meant to prevail over all pecuniary transactions between people. While the doctrine appeared to be reinforced by Aquinas’ exercise of giving it a rational twist, the reality in the steadily expanding market places and trading houses painted a conflicting picture. Money-lenders were busy, there was increasing demand for credit, and ingenious attempts were made to circumvent the prohibitions. Canon law was unrelenting, whereas natural law provided exceptional titles to interest, which gave traders recourse to various extenuating circumstances. In the inevitable battle between ideology and practice, the role attributed to money: the role of maintaining justice in exchange is seen in medieval eyes as destroyed by the money borne by moneylending. This in turn damages the entire foundation upon which hierarchical medieval society is structured. If money was perceived as an agent of justice, the growing demand for credit following the development of trade from the 13th century onwards acted as a catalyst of change in the doctrine. The concern for justice did not disappear, nonetheless; its agent shifted, from money to the marketplace.

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Keywords: Aquinas, money-lending, scholastic doctrine, usury

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