Posted by: mattcolvin | February 1, 2010

Aquinas and Zero-Interest Loans

Summa Theologica, Q78a2 reply to objection 7:

If a man wish to sell his goods at a higher price than that which is just, so that he may wait for the buyer to pay, it is manifestly a case of usury: because this waiting for the payment of the price has the character of a loan, so that whatever he demands beyond the just price in consideration of this delay, is like a price for a loan, which pertains to usury. On like manner if a buyer wishes to buy goods at a lower price than what is just, for the reason that he pays for the goods before they can be delivered, it is a sin of usury; because again this anticipated payment of money has the character of a loan, the price of which is the rebate on the just price of the goods sold. On the other hand if a man wishes to allow a rebate on the just price in order that he may have his money sooner, he is not guilty of the sin of usury.

So is “90 days same as cash” usury on this principle? Or is it just the mirror image of Thomas’ last example, a merchant “allowing a rebate on the just price in order that he may have his money sooner”?

On the one hand, it appears that unless usury were common, offering a zero-interest loan would have no advantageous effect for the seller. It is in effect a discount to undersell competitors who cannot afford to offer such a loan.

On the other hand, there is no immediate disadvantage to the buyer, as is usual in cases of usury.

Of course, the probably expectation of the seller is that some of the buyers will not pay before the end of the zero-interest grace period, and will therefore be charged interest after all. The zero-interest loan thus falls afoul of Aquinas’ other reasonings eventually.



  1. Whether or not it qualifies as usury, I think that Aquinas is wrong about the last case. If the seller sells at anything other than the just price, then someone has been taken advantage of; in this case, the seller who sells for less than the just price, and the competitors who lose business to the seller. The buyer benefits unfairly.

  2. That was what I was asking, Rick.

    It seems to me that Aquinas does not think of underselling as unfair pricing. And I think he’s right. We are conceptualizing these things in “the market.”

    But there are many other reasons for selling something below market value besides greed. I might love someone; I might wish to help them obtain their goods sooner; I might not know the true market price of my item (as happens sometimes on eBay).

    Besides, doesn’t the market set prices using precisely this mechanism? Underselling drives down the price of the product from all sellers.

    And what, after all, is a “just price”? Anything the market will bear? So it is never unjust to charge market value? That seems like quite a claim, and one I’d need to ponder before I believe it.

  3. Matt,

    As I understand it, a just price is a price that is established by some authority, e.g. a guild, as being fair compensation for what the maker invested in making an item. The idea is to rule out market pricing, which allows buyers and sellers to take unfair advantage of one another in various circumstance.

    If the cobblers’ guild determines that its members can make a decent living when the price of a pair of boots is thirty dollars, then that is what everyone sells a pair of boots for. If you are an expert cobbler who can make boots quicker and cheaper than your fellow members (not competitors!), then you can take the time and money you save and spend it on yourself—but not on lowering your price in order to corner the market, at the expense of your fellow members.

    As for treating your customers lovingly and generously, there are better ways to do that besides lowering your prices or extending credit.

  4. How is the “cobblers’ guild” different from a labor union or a price-fixing cartel? And why should they be trusted to fix a fair price?

  5. The guild has the knowledge to determine what would be a fair price for its products, and I think at least ideally it is motivated to balance the concerns of those who make the products and those who buy them, i.e. to minimize unfairness on both sides.

    As to why a guild should be trusted, why should any established authority be trusted? And why should either be any more or less trusted to be fair than the mechanism that sets prices in the free market?

  6. Unlike a guild, the lone seller really does have authority over the price of his product, for the simple reason that he owns it. He can, after all, give it away completely free, as a gift.

    Surely we don’t want to say that giving gifts is unjust.

  7. I think we need to distinguish between righteousness and enforcing righteousness. Some gifts are just, and some are not—bribes, for example. A written rule is a pretty blunt instrument for distinguishing between the two. A village elder might be more discerning, but still far from perfect.

    That’s no excuse for not trying to enforce just dealings in a community, but we also need to recognize that it’s not the verdict of the written rule or the elder that makes an action just or unjust.

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