Productive Money

In his contribution to Christian Theology and Market Economics , Stephen Grabill reviews the “pre-Enlightenment” history of economic theory. That is to say, scholastic economics. For many economic historians, the notion of a scholastic economic theory is fallacious, and Exhibit #1 is always the scholastic prohibition of usury, grounded in Aristotle’s notion that money is sterile.

Grabill notes that there was at least some recognition among later scholastics that money in certain forms had a “seminal” quality. He cites Antonine of Florence (1389-1459), who distinguished between “simple” money and “capital,” the latter defined as money retained for commercial purposes. Antonine also write, “What, in the firm purpose of its owner, is ordained to some probably profit, has not only the character of mere money or a mere thing, but also beyond this a certain seminal character of something profitable, which we commonly call capital.” When capital is used, “not only must its simple value be returned, but a super-added value as well” (28-29). It is just to return money for money if the money is simple money; but when capital is invested, it is like planting see and it is therefore unjust simply to return what was invested. Returning equitably means returning a profit.

Antonine’s rationale for interest return on capital sounds familiar: “Anyone can claim compensation, not merely for the harm done him, but also the gain he might otherwise have obtained, if he be a merchant accustomed to engage his money in business. The same holds good even if he be not a merchant but have only the intention of investing the funds in a lawful trade; but not if he be a man who hoards his wealth in his coffers” (29).

Later in the essay, Grabill gives a summary of the work of the theologians of Salamanca, making the intriguing intellectual-historical point that this Spanish “school” was the first place where the philosophy of Aristotle was wed to Justinian’s Corpus juris civilis . Justinian’s code had been rediscovered in the eleventh century, and Aristotle’s works reintroduced to the Latin West in the thirteenth, but the two bodies of thought had existed in “relative isolation” until they met in early sixteenth-century Spain (40).