A Thomistic Lexicon on the Question of Usury
The greatest contemporary challenge with understanding St. Thomas Aquinas on usury is that we do not often understand the terminology and intellectual context that he is operating from. This is not helped by the fact that authors will often read the question on usury out of the broader internal context of the Summa Theologiae. In this situation, a prima facie reading of St. Thomas makes the question of usury appear fractured, incomplete and confusing. To assist in remedying this problem, I present here a sort of lexicon on the question of usury. Having a better foundation in Aquinas’ terminology, we see the force of his argument and its applicability today.
St. Thomas Aquinas presents his mature argument in three works: the Secunda Secundae of the Summa Theologiae, the Disputed Questions on Evil and Quodlibet III.[1] All of these works were written around the same two-year period during his second stay in Paris in 1270-1272.[2] The premises of the arguments are largely the same, although they are structured slightly differently. While the De Malo presents the richest development of the argument, the Summa Theologiae provides a more comprehensive perspective, with the Quodlibet providing a similar and helpfully brief summary. The main argument can be summarized as follows:
There are things which are consumed in use and those that are not. In those things that are not consumed in use, the use of the thing does not destroy or consume it, as with inhabiting a house or riding a horse. In such things, the use is separate from the thing and thus one can sell the use separately from the ownership, as in a lease. In those things consumed in use, their use is inseparable from their substance and ownership. Thus, when one lends such a thing, the lender grants the full ownership of the thing. When the borrower restores the thing lent, he returns all that the lender granted. To exact more is to sell the same thing twice or to charge for something that does not exist. This is manifestly unjust, as charging for the same thing twice or charging for nothing necessarily involves inequality.
There are a number of terms in this argument that prove to be difficult. One of the most misunderstood is “things consumed in use.” Indeed, the very concept of consumption appears to be challenging. Whereas Aquinas offers examples such as wine and wheat which are literally consumed, money is the principal thing lent and is clearly not consumed like food and drink. A consequence of this distinction of things is the difference between leasing and mutuum lending, where usury can arise. However, the legal and praxeological distinctions are often hidden by this distinction of things.
Consumption
In order to understand Aquinas’ argument we have to determine the meaning of consumption, because this is central to the whole argument. In all three of his arguments, he gives examples of consumption, such eating and drinking wheat and wine. In contrast, he proposes non-consuming uses of things, such as inhabiting a house. The former use destroys the very thing itself, whereas the latter does not, at least per se. While a non-consuming use may eventually result in using up or destroying the thing, this is only per accidens. For example, using a car for driving may lead to it breaking down, yet this is not the end of the use as such, but merely part of the incidental wear and tear of using it. The difficulty with this presentation is that while consumption of food appears fairly obvious, the consumption of money does not, as it persists through being granted in exchange.
In his analysis, Aquinas extends the notion of “consumption” to any sort of alienation whereby the thing is separated from the possessor or user.[3] This happens not only in the case of uses that destroy the substance of the thing, but also in exchange, where spending money or selling a thing separates it from the possessor or owner.[4] When a person eats wheat or drinks wine, the wheat and wine as such are no longer in his possession. They have been physically consumed and he no longer possesses wheat or wine. In contrast, if someone spends money or sells wine or wheat, this is separated from him through the exchange and so it is consumed morally or legally. It is not necessary that the consumption cause the thing to cease to exist or become irretrievably lost to him.[5] It is enough for the act of consumption that the thing be separated from him, and it is merely accidental to the act whether he should be able to retrieve it or not.
Things Consumed in Use
Aquinas also introduces a distinction between things consumed and not consumed in use. However, what is the basis of this distinction? These categories are defined according to the use that we make of things, namely a use that consumes or not. This is an extrinsic denomination or conventional category, as the use we make of them is not determined by the nature of the thing itself, but by our use.[6] For example, the same log of wood may be burnt or sat on or displayed or sold. Some of these uses “consume” the thing while others do not. Hence, the category of “things consumed in use” is not a natural category, but an artificial one.
We see this in Aquinas’ own arguments drawing on an insight from Aristotle’s Politics.[7] Aristotle recognizes that there are at least two sorts of uses of things, one proper and the other improper. The proper use of shoes is to be worn, whereas an improper use of shoes is to be sold. Both of these are uses of the shoes per se, because the shoe is made to be worn and one sells and buys shoes as shoes. In this sense, Aquinas will admit that one can lease shoes to be worn as a non-consuming use, but lending shoes to be sold, a consuming use, introduces the possibility of usury.[8] Hence the possibility of usury is not determined by the kind of thing lent, but rather the sort of use granted in the loan.
If the category of things consumed in use cannot be understood as a natural category, how are we to understand it? It is a category that arises from positive law and thus involves some determination by lawmakers. Defining such categories is necessary for establishing certain legal recourse and remedies. For example, Aquinas notes that since things consumed in use do not admit a usufruct according to law (secundum iura), one who unjustly takes them is not required to restore more than the thing itself.[9] However, in things not consumed in use, such as a house or farm, such a thief would be required to restore the thing as well as the fruits, whether civil fruits as in rent on a house, or natural such as the harvest of the farm.
Underlying this conventional category is the proper use, but this does not prevent an improper use being granted in a loan. Indeed, we see this realization even in Roman Law where the jurist Ulpian acknowledges that things consumed in use cannot be leased, except for ceremony or display, that is, for a non-consuming use.[10] Aquinas will adopt this realization combined with Aristotle’s insight to note that since anything is capable of being sold (a consuming use), it can enter into a loan capable of becoming usurious.[11] However, he also realizes that even though the proper use of money is exchange (a consuming use), it may nevertheless by leased for use as security or display. These are “improper” uses of money, but uses of money as money. Hence, even in the case of money, it may be lent in a mutuum with the possibility of usury or leased for a licit profit from rent.
Lending and Leasing
Now we can turn to the distinction between different sorts of contract. As we saw above, the conception of things consumed in use is a conventional one. However, contracts are often defined according to what sort of thing is granted. In the Institutes of Justinian, the loan or “mutuum” is defined according to the sort of good that is granted, whether wheat, wine, gold, iron or money.[12] However, as we’ve noted, this presupposes a proper use that is determined by the lawmaker. In contrast, Aquinas defines various commutations not according to the thing granted but according to the end, because as such they are properly human acts.[13] Aquinas begins by distinguishing between sales and loans. In a sale, one grants his thing so as to receive something different in return. This is an act of granting this-for-that, where one transfers his right over one thing for a right to a different thing.
In contrast, loans have a distinctively different character. In loans one grants the use of a thing to be returned later. Here loans generically involve the lender granting his thing to be restored to his own.[14] This restoration of one’s right is an act of restitution as opposed to exchange. Aquinas will note three such loans: the usufruct, the commodatum and the mutuum. The first two involve granting a non-consuming use, with the former granting the fruits of a thing as well as its use and the latter only use.[15] For example, if one grants a usufruct over a house with a garden, one can take the fruits of the garden as one’s own. Whereas in the commodatum one would just receive the use of the house for habitation. The mutuum then grants a consuming use, such as wine for drink or money for spending. What this entails is that the restoration in the former loans is of the same thing granted, whereas in the mutuum it need only be returned in kind and quality as the thing may be consumed or alienated.
The difference in the sort of use granted entails different structures of rights and obligations. In the commodatum, since the lender grants a non-consuming use, he grants only a right to the use of the thing while retaining ownership. For example, when you borrow a book from the library, you have contracted a commodatum with the library. While you may use the book in various ways, it can only be in ways that do not consume the book, most obviously reading. Consequently, you do not possess full ownership of the thing, but only a limited right to its use. When the book becomes due, you need to return the same book. If the library loan becomes a textbook rental, this obligation to return the same book does not change. Indeed, what is added is a charge for the use, which is separate from the return of the book. Consequently, in the lease there are two materially distinct acts of justice: restoration of the lessor’s thing, and a charge for the use as distinct from what is restored. Thus, the rent is only justified through the separability of use and ownership.
In contrast, when the lender grants a consuming use, he grants the full ownership of the thing, because in order to consume it he needs to be the owner of it.[16] For example, if your friend lends you sugar for baking a cake, he must grant you full ownership over the sugar, because the sugar will be consumed in the act of baking. When the borrower returns the thing in kind, he completes the act of restitution and satisfies justice by restoring the lender to what is his own. The difference from the lease is that there is no use separate from what is restored, namely the full ownership. Thus, Aquinas will note that the usurer will attempt to sell what does not exists, namely a use separate from what is restored as in a lease, or the same thing twice, namely the ownership which is already restored. Since paying something for nothing and paying for the same thing twice are manifestly unequal commutations, exacting usury on a mutuum is manifestly unjust. It is also in this way that we can speak of usury as the “price of use” in mutuum as an analogy with the lease, but where such a separate use does not exist.
Modern Mutuum
We have now seen how Aquinas’ development of the notion of usury relies on different sorts of uses and the legal implications they involve. From this we can see more clearly the nature of the evil of usury. However, given what we have noted above, we also need to consider how this reveals the mutuum in modern economies. Since a consuming use is granted in the mutuum, this entails that ownership is transferred from lender to borrower. Consequently, the lender has no right or claim to some specific property after the transfer. Rather he has a claim against the borrower himself for the return. Indeed, Roman Law will call this a right in a person (ius in personam)[17] and the mutuum gives rise to this one right.[18] What this means is that the borrower himself is personally liable for the return of the thing, come what may. We see Aquinas acknowledging this in the difference between the mutuum and the societas or partnership wherein the partner retains ownership.[19] In the mutuum, even if the thing is wholly lost, the borrower remains obligated to return it entirely. Moreover, when discussing the sufficiency of the Old Law, he notes how the Jubilee law prepares men to forgive a mutuum debt of an insolvent debtor out of love.[20] That is, the insolvent debtor is still liable for the return in justice, even though the virtuous lender should forgive the debt from charity toward his neighbor. In modern terms, this is called a personally secured loan, where the borrower is ultimately required to repay.[21] We see these where the borrower is ultimately liable for repayment of the principle, such as credit cards, student loans, car loans, and most home loans. These are modern mutuum loans, and when sought for profit, are a case of usury.
This stands in contrast to asset-secured loans. In such loans, the borrower puts up collateral which can be used to guarantee repayment if the borrower fails to repay. Historically, these sorts of fully collateralized debts have been characterized as a conditional sale, whereby a borrower can recover or redeem his collateral through “buying” it back. The structures of such collateralized loans have varied greatly, and the interest can be characterized as a sort of rent on a lease of the collateral.[22] However, what makes them distinct from the mutuum is that there is no ultimate personal liability for repayment. If the borrower fails to repay, the lender takes unencumbered ownership of the thing to recover the principal. Any excess over the satisfaction of the debt may be returned to the borrower, while any deficiency is a loss to the lender.[23] We see this especially in modern corporate bonds, wherein the company’s assets may be liquidated to satisfy the bondholders, but the owners or stockholders generally cannot be personally pursued for any deficiency in the return. Thus while the modern economy involves many sorts of monetary debts, these are not always mutuum loans and thus the profits on such debts are not necessarily usury or unjust.
Conclusion
In this brief essay, I have attempted to clarify the often misunderstood terminology and logic used by Aquinas in his argument against usury. By clarifying these terms, the more superficial readings of his argument can be dispelled. We see no presence of or reliance on the so-called sterility of money, which is often attributed to Aquinas. Indeed, his argument does not rely on the nature of money as such, but on more fundamental principles of ownership and restitution. Reliance on these principles not only makes the argument more resilient to criticism, but also relevant today. While economics and finance have advanced well beyond the state of the 13th century, they remain based on the same principles. Thus, Aquinas’s argument works just as well for a loan of physical coins in the medieval Parisian market as it does in sophisticated credit transaction in Wall Street.
[1] ST II-II, q. 78, a. 1, De Malo q. 13, a. 4, Quodlibet III, q. 7, a. 2.
[2] Torell, Jean-Pierre, Saint Thomas Aquinas: The Person and His Works, vol. I, 3rd ed., trans. Matthew K. Minerd and Robert Royal, 381.
[3] ST II-II, q. 78, a. 1, resp. “...proprius et principalis pecuniae usus est ipsius consumptio sive distractio, secundum quod in commutationes expenditur.”
[4] De Malo, q. 13, a. 4, ad. 15. “Commutatio autem est usus quasi consumens substantiam rei commutatae, in quantum facit eam abesse ab eo qui commutat.”
[5] Johnston, Herbert, “On the Meaning of ‘consumed in use’ in the Problem of Usury,” The Modern Schoolman: A Quarterly Journal of Philosophy, vol 30, n. 2, 95. Johnston provides one of the best understanding of the notion of consumption and different uses. However, he doesn’t fully apply the distinction between receiving the authority or power to consume and the act of consumption, leading him to insist on the irretrievability of the thing consumed.
[6] Noonan, John T., The Scholastic Analysis of Usury, Harvard University Press: Cambridge, MA (1957), 57. While Noonan’s commentary on Aquinas’ theory is deeply flawed, his recognition of fungibility and consumption as conventional is fundamentally sound. However, rather than integrating this insight into his interpretation of Aquinas, he prefers to suggest that the latter's argument is very limited or flawed.
[7] Politics, 1257a5-15.
[8] De Malo, q. 13, a. 4, ad. 15.
[9] ST II-II, q. 78, a. 3, resp.
[10] Digest, 13.6.3.6.
[11] De Malo, q. 13, a. 4, ad. 15.
[12] Institutes, 3.14.intro.
[13] ST II-II, 61, a. 3, resp.
[14] ST II-II, 62, a. 1.
[15] Nicholas, Barry, Introduction to Roman Law, 144.
[16] It is enough that the lender grants the borrower the right to consume the thing rather than that the borrower actually consumes it. The authority of consumption is attached to ownership and so in granting this authority ownership is passed. This remains true even if the borrower ends up not consuming it and returning the very same thing. What is effected through the mutuum is the transfer of ownership with the obligation of a return in kind, which may be satisfied through a return of the same thing if the borrower does not in fact use it up. Hence, the “non-existent” thing sold for Aquinas is not the thing consumed, but the use as separate from the ownership.
[17] Nicholas, 99-101.
[18] Zimmerman, Reinhard, The Law of Obligations: Roman Foundations of the Civilian Tradition, Oxford University Press: Oxford (1996), 154.
[19] ST II-II, q. 78, a. 2, ad. 5. This closely parallels the similar passage in the Institutes 3.14.2.
[20] ST I-II, q. 105, a. 2, ad. 4.
[21] I add “ultimately” here because historically, mutuum loans were often partially secured. The borrower would put up some property against which the lender could recover his principal in default. However, this did not remove the lender’s right against the person of the borrower who remained liable if the security did not cover the debt, but rather gave some assurance to the lender of repayment.
[22] While Aquinas does not discuss them specifically, the medieval census contract is the most prominent case of an asset secured debt from the 13th century. It involved selling a right to the fruits of some property secured by the property itself. See Giles of Lessines, De Usuris in Communi, ch 9.
[23] This seems to have been the practice of the Montes Pietatis, which granted loans to the poor secured by some pawn. If the borrower defaulted, they recovered the principal through selling the pawn. See McCall, Brian M., The Church and the Usurers: Unprofitable Lending for the Modern Economy, 77-78.