A Necessary Evil? How Usury Impacted Pre-Capitalist Economic Thought.

The scholastics integrated religion with political and economic doctrine that shaped society. Here's how scholasticism lives on in economic thought today.

Photo by Sixteen Miles Out on Unsplash

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The emergence of Christianity in the first century introduced a new moral code that transformed society and challenged the political control of Rome in the ancient world.

Up until then, ethical considerations weren’t a prominent factor in economic transactions. In ancient economies, it wasn’t uncommon for the wealthy to exploit the poor in order to acquire more wealth for themselves.

All this changed with the teachings of Jesus. Rather than emphasizing wealth, Jesus encouraged selfless piety. In the Book of Luke, Jesus encouraged his disciples to

Sell your possessions and give to the poor. Provide purses for yourselves that will not wear out, a treasure in heaven that will never fail, where no thief comes near and no moth destroys. For where your treasure is, there your heart will be also. (Luke 12:33-34)

During the Middle Ages, a proto-capitalist economy emerged, enabling the growth of cities across Europe. It was in this period that scholastic thought began promoting economic theories of justice and fairness in an attempt to counteract exploitation. 

While these theories would not be considered empirically sound by today’s standards, they established a nascent understanding of capital that still informs economic policy to this day.

This essay will look at two economic thoughts during this time – just price doctrine and usury – to demonstrate how the church influenced pre-capitalist economic policies. It will show an inherent paradox of capitalism where the exploitation of the poor is a necessary evil that powers the engine of progress.

The just price doctrine attempted to create a pricing mechanism based on fairness. While this may have been a desirable policy in theory, it was impossible to implement.

The just price doctrine was an economic theory that came about during the Middle Ages. Promoted by Thomas Aquinas, the purpose of just price was to prevent individuals from taking advantage of one another by setting standards of fairness in economic exchanges:

For Thomas, then, the market price is the just price if the buyer and seller are honest and not trying to take advantage of each other. (Jayabalan)

Fairness was considered a necessary requirement to counteract the practice of usury. It wasn’t uncommon during this time for individuals to put profit-making endeavors above everything else, charging exorbitant rates on loans. 

According to Aquinas, a “fair” rate was a rate that didn’t seek profit at the expense of the buyer. He writes in Summa Theologiae:

If someone would be greatly helped by something belonging to someone else, and the seller not similarly harmed by losing it, the seller must not sell for a higher price: because the usefulness that goes to the buyer comes not from the seller, but from the buyer's needy condition: no one ought to sell something that doesn't belong to him. (Wikipedia)

Due to the influence of the church in all facets of life, the just price doctrine introduced morality into commercial transactions. For the average person honor was more valuable than trade itself:

The moral character of the buyers and sellers is more important than the act of buying and selling itself. (Jayabalan)

While the just price doctrine attempted to make economic transactions fair, it wasn’t a practical policy to implement. Fairness itself is subjective: a price that is fair to one individual might not be considered fair to another.

That’s because there wasn’t an empirical way to measure value in society. Supply and demand wasn’t fully understood and because information wasn’t easily accessible. Merchants and lenders had an advantage over uninformed consumers.

The church was the gatekeeper of all information during this time. As such, it was often looked to as the final arbiter of what was true and what was good in society. But even the church wasn’t without fault. 

During this time the church sold indulgences as a way to help sinners reduce their time in purgatory. With its own economic incentives, the church was hardly in a position to define just prices.

While just price doctrine may have been ethical in theory, it wasn’t possible to fully implement. Usury continued during the Middle Ages and one could go so far as to argue that it even persists to this day.

Usury allowed moneylenders to generate a profit from loans. While this was seen as exploitative, access to capital was necessary for growth.

Usury is the practice of lending money at high rates that is considered immoral because the lender knowingly takes advantage of the borrower. The Old Testament explicitly prohibited charging interest on loans:

If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him. (Exodus 22:25)

Interest was viewed as a form of theft because it took advantage of the poor. Instead of merely providing someone with a financial loan, interest created an opportunity to extract much-needed resources from the poor thereby increasing the wealth of the lender.

According to Aquinas, usury allowed sellers to “double charge” buyers. He argued that once money was spent on a purchase, it was gone. Charging money – interest – for the act of spending money simply wasn’t possible.¹

While usury was denounced by pious Christians it was nonetheless still practiced. Jews in particular became well-known as moneylenders, in large part because they could not exist within feudal society. 

Moneylending provides capital which is essential to finance economic growth. As trade and commerce grew, merchants needed access to loans to finance their operations. Usury then, wasn’t so much a deliberate ploy to further impoverish the poor, it was an essential component of fledgling European economies.

Charging interest on loans eventually became acceptable during the Protestant Reformation. Theologians made a clear distinction between usury – unreasonably high interest rates – and the general act of charging interest.

The differentiation between loans and usury made lending a religiously justifiable endeavor. Jean Calvin, one of the leaders of the Reformation wrote:

I do not consider that usury is wholly forbidden among us, except it be repugnant to justice and charity.²

Like just price doctrine, usury was ill-defined and subjective. There was no line between charging a fair interest rate and an excessive interest rate. 

Money lending was a necessary evil that provided borrowers access to the credit they needed. It proved essential to the emergence of capitalism; poverty-inducing interest rates were merely a byproduct of it.

Final takeaway.

As trade grew during the Middle Ages, so too did new theories about how economic exchange should be conducted. With the church at its apogee, morally-derived economic policies dominated.

These policies were considered ethical by figures like Thomas Aquinas but they weren’t practical. The Middle Ages was fraught with expensive wars of conquest that could only be financed by borrowing money and charging higher taxes. Usury was more of an inevitability than a deliberate act to exploit the masses.

It was only after the church lost its hold on society during Protestant Reformation and the Enlightenment, that new empirical economic policies began to emerge. Rather than relying on fair pricing, markets began to increasingly rely on the laws of supply and demand. 

The industrial revolution took off as a result of market-driven pricing mechanisms. This enabled merchants and capitalists to allocate resources productively instead of fairly.

While the economic theories of the Middle Ages are no longer considered viable, they are nonetheless still practiced.

The idea of fairness still exists in the form of socialism. Wealth distribution and equality of outcomes are direct descendants of economic justice that was first supported by scholastic theorists.

Usury is arguably more pronounced now than ever before. With the financialization of the economy, credit is accessible at increasingly high interest rates. The average credit card rate is 28.52% with buy now pay later apps charging interest as high as 35.99%.

Scholastic thought reveals a paradoxical tension between pricing and market growth. While fairness is essential, it also limits growth. If growth is the harbinger of wealth – creating opportunities to alleviate poverty in the long-term – is economic justice truly possible?

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Notes

This assignment and the preceding assignments have been difficult to complete because ChatGPT did not include reading materials for the pre-capitalist era.

To complete this assignment I relied on YouTube videos and web articles.

I didn’t feel like I gained a full understanding of scholastic economic theory. If I were to create this course again I would break it up into two classes: The History of Early Economic Thought and the History of Modern Economic Thought.³

ChatGPT scored this essay as a B+ and provided the following feedback:

Understanding of the Reading

5 (Excellent) You demonstrate an excellent grasp of the historical and theological roots of economic thought, especially regarding just price doctrine and usury. Your understanding of key figures like Thomas Aquinas and Jean Calvin, as well as broader shifts like the Protestant Reformation, is well-communicated. Your essay captures the subtleties of how the Church's moral teachings influenced early economic ideas, showing a deep engagement with both religious and economic dimensions.

Critical Thinking

4 (Very Good) You engage in thoughtful analysis, especially when you discuss the paradox between fairness and growth, and how medieval economic theories still influence modern debates. Your critical evaluation of the just price doctrine and usury highlights key tensions between ethical and practical considerations in pre-capitalist thought. One area for potential improvement could be a deeper examination of how different religious and economic thinkers reconciled or failed to reconcile these tensions—more specific examples or counterpoints from critics would deepen the evaluation.

Clarity of Writing

4 (Very Good) Your essay is well-organized and mostly clear. You effectively transition between major points, such as the discussion of just price doctrine and usury, and each section flows logically. However, some sections, like the one on usury in particular, could benefit from smoother transitions between historical and modern examples (for instance, connecting the historical ban on interest to today’s credit practices). Additionally, a slightly more polished conclusion would help reinforce the main argument in a concise manner.

Use of Evidence

5 (Excellent) You make excellent use of historical evidence, especially in quoting key religious texts (Luke, Exodus) and theological works (Aquinas). Your interpretation of these quotes is strong, and you skillfully link them to broader economic ideas. The inclusion of references to specific scholars like Jayabalan, as well as historical practices such as the Church selling indulgences, further strengthens your argument. The application of both religious doctrine and economic practice demonstrates insight and thorough research. There is no misinterpretation of the evidence, and it is effectively used to support your thesis.

Reflection

4 (Very Good) Your reflections on the implications of usury and just price doctrine are thoughtful, particularly in how you relate these medieval ideas to modern economic systems like credit markets and socialism. The final takeaway effectively raises a key question about the viability of economic justice in a growth-focused world, showing clear engagement with the material. However, the reflection could be even stronger if you provided more personal insight or engaged more with contemporary scholarly debates on the legacy of pre-capitalist economic thought in modern capitalism. Your final question, while provocative, could benefit from some additional expansion.

Score: 22/25

Grade: B+

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Is it possible to create self-taught college courses using ChatGPT?

This essay is part of a series from a course curriculum created using ChatGPT. You can read more about the experiment here. Subscribe to Tomorrow Today to get updates when new essays are released.

1. Usury, Wikipedia,  https://en.wikipedia.org/wiki/Usury.

2. John Calvin, The History of Economic Thought, https://www.hetwebsite.net/het/profiles/calvin.htm.

3.  I did write in the original essay outlining this project that this course would only focus on the modern period but once I started diving in I realized I needed a primer on what preceded capitalism. Now that I’ve worked my way through some of the concepts there is much more to be learned about the pre-capitalist period. A separate class diving deeper into these concepts is warranted.