How the Fifth Lateran Council unlocked financial theory | Hacker News Reader

How the Fifth Lateran Council unlocked financial theory

sebastiangarren.com

69 pointsmomentmaker15 comments

"Usury" is still a word in use but now, for legal purposes, it means "interest that a lender charges a borrower at a rate above the lawful ceiling on such charges" rather than just any interest at all.

It had a very specific meaning, which we would more properly translate as "personal recourse loan".

traditional usage of usury was the same, any interest charges at a rate above the lawful ceiling, just where the ceiling was 0% for christians and in a like manner for moslems.

That's a strange way to phrase things. It's a bit like saying that the Church recognizes the licitness of murder under a lawful ceiling, but that this ceiling just happens to be 0 per year.

Interest as such is recognized as theft and therefore an injustice.

Well murder is similar in that it means an illegal or immoral killing. There are times (say in self defence) where it has taunt it is moral and should be legal to kill, because that isn't murder. So similar to this, it changed usury to illegal lending rather than lending.

How far would you take this? Let's grant that the difference between murder and a just killing is what someone (maybe the guy in power) says it is, nothing more. Would you say the same about robbery? Is it only robbery to point a gun at someone and take his money if someone says it is? If yes, at what point does the distinction between one thing and another thing become real, and not just based on what some guy says?

Well yes, there are times where it legal to take someones possessions/money such as if they owe a debt or have a legal judgement against them. In that case it could mean for instance sheriff deputies showing up at your house with guns and taking things in a manner that would be legal and not be considered robbery. When it becomes one thing or another is going to depend on your position on other things, there is a legal answer for when it becomes robbery/murder but also moral answers. I am for example a moral realist, so my answer to that would be different than someone who was a moral relativist.

>That's a strange way to phrase things.

no, not really, you have to order it chronologically: charging interest was verboten and in law it was called usury. later, interest was deemed ok... but charging too much interest was to be sanctioned and usury was a handy word to use.

In the Islamic finance model Muslims lending to Muslims, you don't charge interest so much as take a position in an investment with an eye to future value. At least that's how I understand it. There can still be a lein over assets, and a tail of payments and the final state would put both lender and debtor "where they expected to be" under the contract.

Between Christians and Muslims, Christians and Jews, Jews and Muslims different rules may/may-have applied.

Kings (of england, and other places) valued Jews precisely because of the fluidity of their lending to the crown at interest under catholic proscription regarding loans between christians, not the least because at long term consequences in access to jewish loans you could repudiate the debt and (or encourage your citizens to) conduct a pogrom.

Unfortunate for this article to not actually define or explain anything about Catholic usury theory.

Usury in medieval context is profit made on a mutuum loan (a contract for the borrowing a consumable good - as opposed to the commodatum contract, the locatio, etc). It does not apply only to money but all fungible borrowed things. If you borrow a cup of flour from your neighbor, and they ask for 2 cups back, they have (probably) made a usurious contract with you.

The nuance here is the immorality of an "intrinsic title" (as if the loan itself carries a right to earn profit) as opposed to an "extrinsic title" (something external to the loan for which one may validly seek compensation). The two chief extrinsic titles being lucrum cessans (roughly opportunity cost) and damnum emergens (a loss suffered due to the loan).

The case of the Monti from TFA is clearly the right to an extrinsic title of damnum emergens i.e. administrative costs (crucially - not for profit!).

Yes. A full-recourse loan and a non-recourse loan are different: in the way a cat and a dog are different, not in the way a small dog and a big dog are different. It's most unfortunate (and probably deliberate) that they both go by the word 'loan'. Aquinas explains this very clearly in his discussion of usury in the Summa.

Anyone failing to distinguish between the two has no business talking about the ethics of usury, or the history of late-medieval Catholic teaching on the same.

Making a profit on a full-recourse loan, regardless of whether the lender or borrower are Christian or not, is a sin, and a pretty serious one at that. Usury is to fraud what robbery is to larceny. Many people try to claim that the Church has 'changed its teaching' on this, but they can never point to a source that shows this.

It is fascinating to see the differences in philosophy and understanding of economics between Adam Smith, who in 1776 was looking at a pre-industrial economy of taking raw material inputs and doing very little to them before sale, versus Karl Marx who in 1848 was looking at the effects of industrialization and an economy very focused on value-add activities. Different economic structures, different social consequences, and different philosophies that emerged out of that.

I highly recommend David Harvey's guide to Marx's Kapital especially for anyone who has been soaked in anti-communist propaganda (read: grew up in North America) but who has never actually read it. Harvey's guide to it is quite readable and uses modern examples and translates some of the old fashioned language. It's fascinating. After all, Peter Thiel said that he became a better capitalist after reading Marx...

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