should be animated by some good motive, such as the relief of his own
or another's need. The whole question was settled once and for all by
Aquinas: 'It is by no means lawful to induce a man to sin, yet it is
lawful to make use of another's sin for a good end, since even God
uses all sin for some good, since He draws some good from every
evil.... Accordingly it is by no means lawful to induce a man to lend
under a condition of usury; yet it is lawful to borrow for usury from
a man who is ready to do so, and is a usurer by profession, provided
that the borrower have a good end in view, such as the relief of his
own or another's need.... He who borrows for usury does not consent
to the usurer's sin, but makes use of it. Nor is it the usurer's
acceptance of usury that pleases him, but his lending, which is
good.'[1]

[Footnote 1: II. ii. 78, 4.]

We should mention here the _montes pietatis_, which occupied a
prominent place among the credit-giving agencies of the later Middle
Ages, although it is difficult to say whether their methods were
examples of or exceptions to the doctrines forbidding usury. These
institutions were formed on the model of the _montes profani_, the
system of public debt resorted to by many Italian States. Starting in
the middle of the twelfth century,[1] the Italian States had
recourse to forced loans in order to raise reserves for extraordinary
necessities, and, in order to prevent the growth of disaffection among
the citizens, an annual percentage on such loans was paid. A fund
raised by such means was generally called a _mons_ or heap. The
propriety of the payment of this percentage was warmly contested
during the fourteenth and fifteenth centuries--the Dominicans and
Franciscans defending it, and the Augustinians attacking it. But its
justification was not difficult. In the first place, the loans were
generally, if not universally, forced, and therefore the payment of
interest on them was purely voluntary. As we have seen, Aquinas was
quite clear as to the lawfulness of such a voluntary payment. In
the second place, the lenders were almost invariably members of
the trading community, who were the very people in whose favour a
recompense for _lucrum cessans_ would be allowed.[2] Laurentius de
Rodulphis argued in favour of the justice of these State loans, and
contended that the bondholders were entitled to sell their rights, but
advised good Christians to abstain from the practice of a right about
the justice of which theologians were in such disagreement[3]; and
Antoninus of Florence, who was in general so strict on the subject of
usury, took the same view.[4]

[Footnote 1: Endemann, _Studien_, vol. i. p. 433.]

[Footnote 2: Ashley, _op. cit._, vol. i. pt. i. p. 448.]

[Footnote 3: _De Usuris_.]

[Footnote 4: Ashley, _op. cit._, p. 449.]

It was probably the example of these State loans, or _montes profani_,
that suggested to the Franciscans the possibility of creating an
organisation to provide credit facilities for poor borrowers, which
was in many ways analogous to the modern co-operative credit banks.
Prior to the middle of the fifteenth century, when this experiment
was initiated, there had been various attempts by the State to provide
credit facilities for the poor, but these need not detain us here, as
they did not come to anything.[1] The first of the _montes pietatis_
was founded at Orvieto by the Franciscans in 1462, and after that
year they spread rapidly.[2] The _montes_, although their aim was
exclusively philanthropic, found themselves obliged to make a small
charge to defray their working expenses, and, although one would think
that this could be amply justified by the title of _damnum emergens_,
it provoked a violent attack by the Dominicans. The principal
antagonist of the _montes pietatis_ was Thomas da Vio, who wrote a
special treatise on the subject, in which he made the point that the
_montes_ charged interest from the very beginning of the loan, which
was a contradiction of all the previous teaching on interest.[3]

[Footnote 1: Cleary, _op. cit._, p. 108; Brants, _op. cit._, p. 159.]

[Footnote 2: Perugia, 1467; Viterbo, 1472; Sevona, 1472; Assisi,
1485; Mantua, 1486; Cesana and Parma, 1488; Interamna and Lucca,
1489; Verona, 1490; Padua, 1491, etc. (Endemann, _Studien_, vol. i. p.
463).]

[Footnote 3: _De Monte Pietatis_.]

The general feeling of the Church, however, was in favour of the
_montes_. It was felt that, if the poor must borrow, it was better
that they should borrow at a low rate of interest from philanthropic
institutions than at an extortionate rate from usurers; several
_montes_ were established under the direct protection of the Popes;[1]
and finally, in 1515, the Lateran Council gave an authoritative
judgment in favour of the _montes_. This decree contains an excellent
definition of usury as it had come to be accepted at that date: 'Usury
is when gain is sought to be acquired from the use of a thing, not
fruitful in itself, without labour, expense, or risk on the part of
the lender.'[2]

[Footnote 1: Cleary, _op. cit._, p. 111.]

[Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. p. 451.]

It was generally admitted by the theologians that the taking of usury
might be permitted by the civil authorities, although it was insisted
that acting in accordance with this permission did not absolve the
conscience of the usurer. Albertus Magnus conceded that 'although
usury is contrary to the perfection of Christian laws, it is at least
not contrary to civil interests';[1] and Aquinas also justified the
toleration of usury by the State: 'Human laws leave certain things
unpunished, on account of the condition of those who are imperfect,
and who would be deprived of many advantages if all sins were strictly
forbidden and punishments appointed for them. Wherefore human law
has permitted usury, not that it looks upon usury as harmonising
with justice, but lest the advantage of many should be hindered.'[2]
Although this opinion was controverted by AEgidius Romanus,[3] it was
generally accepted by later writers. Thus Gerson says that 'the civil
law, when it tolerates usury in some cases, must not be said to be
always contrary to the law of God or the Church. The civil legislator,
acting in the manner of a wise doctor, tolerates lesser evils that
greater ones may be avoided. It is obviously less of an evil that
slight usury should be permitted for the relief of want, than that men
should be driven by their want to rob or steal, or to sell their goods
at an unfairly low price.'[4] Buridan explains that the attitude of
the State towards usury must never be more than one of toleration;
it must not actively approve of usury, but it may tacitly refuse to
punish it.[5]

[Footnote 1: Rambaud, _op. cit._, p. 65; Espinas, _op. cit._, p. 103.]

[Footnote 2: II. ii. 78, 1, ad. 3.]

[Footnote 3: _De Reg. Prin._, ii. 3, 11.]

[Footnote 4: _De Cont._, ii. 17.]

[Footnote 5: _Quaest. super. Lib. Eth._, iv. 6.]


Sec. 7. _The Justice of Unearned Income_.

Many modern socialists--'Christian' and otherwise--have asserted that
the teaching of the Church on usury was a pronouncement in favour of
the unproductivity of capital.[1] Thus Rudolf Meyer, one of the
most distinguished of 'Christian socialists,' has argued that if one
recognises the productivity of land or stock, one must also recognise
the productivity of money, and that therefore the Church, in denying
the productivity of the latter, would be logically driven to deny
the productivity of the former.[2] Anton Menger expresses the same
opinion: 'There is not the least reason for attacking from the moral
and religious standpoints loans at interest and usury more than any
other form of unearned income. If one questions the legitimacy of
loans at interest, one must equally condemn as inadmissible the other
forms of profit from capital and lands, and particularly the feudal
institutions of the Middle Ages.... It would have been but a logical
consequence for the Church to have condemned all forms of unearned
revenue.'[3]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 427.]

[Footnote 2: _Der Kapitalismus fin de siecle_, p. 29.]

[Footnote 3: _Das Recht auf den Arbeiterstrag_. See the Abbe Hohoff in
_Democratie Chretienne_, Sept. 1898, p. 284.]

No such conclusion, however, can be properly drawn from the mediaeval
teaching. The whole discussion on usury turned on the distinction
which was drawn between things of which the use could be transferred
without the ownership, and things of which the use could not be so
transferred. In the former category were placed all things which
could be used, either by way of enjoyment or employment for productive
purposes, without being destroyed in the process; and in the latter
all things of which the use or employment involved the destruction.

With regard to income derived from the former, no difficulty was ever
felt; a farm or a house might be let at a rent without any question,
the return received being universally regarded as one of the
legitimate fruits of the ownership of the thing. With regard to the
latter, however, a difficulty did arise, because it was felt that a
so-called loan of such goods was, when analysed, in reality a sale,
and that therefore any increase which the goods produced was in
reality the property, not of the lender, but of the borrower. That
money was in all cases sterile was never suggested; on the contrary,
it was admitted that it might produce a profit if wisely and prudently
employed in industry or commerce; but it was felt that such an
increase, when it took place, was the rightful property of the owner
of the money. But when money was lent, the owner of this money was
the borrower, and therefore, when money which was lent was employed
in such a way as to produce a profit, that profit belonged to the
borrower, not the lender. In this way the schoolmen were strictly
logical; they fully admitted that wealth could produce wealth; but
they insisted that that additional wealth should accrue to the owner
of the wealth that produced it.

The fact is, as Boehm-Bawerk has pointed out, that the question of the
productivity of capital was never discussed by the mediaeval schoolmen,
for the simple reason that it was so obvious. The justice of receiving
an income from an infungible thing which was temporarily lent by its
owner, was discussed and supported; but the justice of the owner of
such a thing receiving an income from the thing so long as it remained
in his own possession was never discussed, because it was universally
admitted.[1] It is perfectly correct to say that the problems which
have perplexed modern writers as to the justice of receiving an
unearned income from one's property never occurred to the scholastics;
such problems can only arise when the institution of private property
comes to be questioned; and private property was the keystone of the
whole scholastic economic conception. In other words, the justice of a
reward for capital was admitted because it was unquestioned.

[Footnote 1: _Capital and Interest_, p. 39.]

The question that caused difficulty was whether money could
be considered a form of capital. At the present day, when the
opportunities of industrial investment are wider than they ever were
before, the principal use to which money is put is the financing of
industrial enterprises; but in the Middle Ages this was not the case,
precisely because the opportunities of profitable investment were
so few. This is the reason why the mediaeval writers did not find it
necessary to discuss in detail the rights of the owner of money who
used it for productive purposes. But of the justice of a profit being
reaped when money was actually so employed there was no doubt at all.
As we have seen, the borrower of a sum of money might reap a profit
from its wise employment; there was no question about the justice of
taking such a profit; and the only matter in dispute was whether that
profit should belong to the borrower or the lender of the money. This
dispute was decided in favour of the borrower on the ground that,
according to the true nature of the contract of _mutuum_, the money
was his property. It was, therefore, never doubted that even money
might produce a profit for its owner. The only difference between
infungible goods and money was that, in the case of the former, the
use might be transferred apart from the property, whereas, in the case
of the latter, it could not be so transferred.

The recognition of the title _lucrum cessans_ as a ground for
remuneration clearly implies the recognition of the legitimacy of the
owner of money deriving a profit from its use; and the slowness of the
scholastics to admit this title was precisely because of the rarity of
opportunities for so employing money in the earlier Middle Ages. The
nature of capital was clearly understood; but the possibility of money
constituting capital arose only with the extension of commerce and
the growth of profitable investments. Those scholastics who strove to
abolish or to limit the recognition of _lucrum cessans_ as a ground
for remuneration did not deny the productivity of capital, but simply
thought the money had not at that time acquired the characteristics of
capital.[1]

[Footnote 1: See Ashley, _op. cit._, vol. i. pt. ii. pp. 434-9.]

If there were any doubt about the fact that the scholastics recognised
the legitimacy of unearned income, it would be dispelled by an
understanding of their teaching on rents and partnership, in the
former of which they distinctly acknowledged the right to draw an
unearned income from one's land, and in the latter of which they
acknowledged the same right in regard to one's money.[1]

[Footnote 1: On this discussion see Ashley, _Economic History_, vol.
i. pt. ii. pp. 427 _et seq._; Rambaud, _Histoire_, pp. 57 _et seq._;
Funk, _Zins und Wucher_; Arnold, _Zur Geschichte des Eigenthums_, pp.
92 _et seq._; Boehm-Bawerk, _Capital and Interest_ (Eng. trans.), pp.
1-39.]


Sec. 8. _Rent Charges_.

There was never any difficulty about admitting the justice of
receiving a rent from a tenant in occupation of one's lands, because
land was understood to be essentially a thing of which the use could
be sold apart from the ownership; and it was also recognised that the
recipient of such a rent might sell his right to a third party, who
could then demand the rent from the tenant. When this was admitted it
was but a small step to admit the right of the owner of land to create
a rent in favour of another person in consideration for some
payment. The distinctions between a _census reservativus_, or a rent
established when the possession of land was actually transferred to a
tenant, and a _census constitutivus_, or a rent created upon property
remaining in the possession of the payer, did not become the subject
of discussion or difficulty until the sixteenth century.[1] The
legitimacy of rent charges does not seem to have been questioned
by the theologians; the best proof of this being the absence of
controversy about them in a period when they were undoubtedly very
common, especially in Germany.[2] Langenstein, whose opinion on
the subject was followed by many later writers,[3] thought that the
receipt of income from rent charges was perfectly justifiable, when
the object was to secure a provision for old age, or to provide an
income for persons engaged in the services of Church or State, but
that it was unjustifiable if it was intended to enable nobles to
live in luxurious idleness, or plebeians to desert honest toil. It is
obvious that Langenstein did not regard rent charges as wrongful in
themselves, but simply as being the possible occasions of wrong.[4]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 409.]

[Footnote 2: Endemann, _Studien_, vol. ii. p. 104.]

[Footnote 3: Endemann, _Studien_, vol. ii. p. 109.]

[Footnote 4: Roscher, _Geschichte_, p. 20.]

In the fifteenth century definite pronouncements on rent charges
were made by the Popes. A large part of the revenue of ecclesiastical
bodies consisted of rent charges, and in 1425 several persons in the
diocese of Breslau refused to pay the rents they owed to their clergy
on the ground that they were usurious. The question was referred to
Pope Martin V., whose bull deciding the matter was generally followed
by all subsequent authorities. The bull decides in favour of the
lawfulness of rent charges, provided certain conditions were observed.
They must be charged on fixed property ('super bonis suis, dominiis,
oppidis, terris, agris, praediis, domibus et hereditatibus') and
determined beforehand; they must be moderate, not exceeding seven or
ten per cent.; and they must be capable of being repurchased at any
moment in whole or in part, by the repayment of the same sum for which
they were originally created. On the other hand, the payer of the rent
must never be forced to repay the purchase money, even if the goods on
which the rent was charged had perished--in other words, the contract
creating the rent charge was one of sale, and not of loan. The bull
recites that such conditions had been observed in contracts of this
nature from time immemorial.[1] A precisely similar decree was issued
by Calixtus III. in 1455.[2]

[Footnote 1: _Extrav. Commun._, iii. 5, i.]

[Footnote 2: _Ibid._, c. 2.]

These decisions were universally followed in the fifteenth century.[1]
It was always insisted that a rent could only be charged upon
something of which the use could be separated from the ownership,
as otherwise it would savour of usury.[2] In the sixteenth century
interesting discussions arose about the possibility of creating a
personal rent charge, not secured on any specific property, but such
discussions did not trouble the writers of the period which we are
treating. The only instance of such a contract being considered is
found in a bull of Nicholas V. in 1452, permitting such personal rent
charges in the kingdoms of Aragon and Sicily, but this permission was
purely local, and, as the bull itself shows, was designed to meet the
exigencies of a special situation.[3]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 410.]

[Footnote 2: Biel, _op. cit._, Sent. IV. xv. 12.]

[Footnote 3: Cleary, _op. cit._, p. 124.]



Sec. 9. _Partnership_.

The teaching on partnership contains such a complete disproof of
the contention that the mediaeval teaching on usury was based on the
unproductivity of capital, that certain writers have endeavoured
to prove that the permission of partnership was but a subterfuge,
consciously designed to justify evasions of the usury law. Further
historical knowledge, however, has dispelled this misconception;
and it is now certain that the contract of partnership was widely
practised and tolerated long before the Church attempted to insist
on the observance of its usury laws in everyday commercial life.[1]
However interesting an investigation into the commercial and
industrial partnerships of the Middle Ages might be, we must not
attempt to pursue it here, as we have rigidly limited ourselves to a
consideration of teaching. We must refer, however, to the _commenda_,
which was the contract from which the later mediaeval partnership
(_societas_) is generally admitted to have developed, because the
_commenda_ was extensively practised as early as the tenth century,
and, as far as we know, never provoked any expression of disapproval
from the Church. This silence amounts to a justification; and we may
therefore say that, even before Aquinas devoted his attention to the
subject, the Church fully approved of an institution which provided
the owner of money with the means of procuring an unearned income.

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. p. 411; Weber,
_Handelsgesellschaften_, pp. 111-14.]

The _commenda_ was originally a contract by which merchants who wished
to engage in foreign trade, but who did not wish to travel themselves,
entrusted their wares to agents or representatives. The merchant was
known as the _commendator_ or _socius stans_, and the agent as the
_commendatarius_ or _tractator_. The most usual arrangement for the
division of the profits of the adventure was that the _commendatarius_
should receive one-fourth and the _commendator_ three-fourths. At
a slightly later date contracts came to be common in which the
_commendatarius_ contributed a share of capital, in which case he
would receive one-fourth of the whole profit as _commendatarius_, and
a proportionate share of the remainder as capitalist. This contract
came to be generally known as _collegantia_ or _societas_. Contracts
of this kind, though originally chiefly employed in overseas
enterprise, afterwards came to be utilised in internal trade and
manufacturing industry.[1]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 412-14.]

The legitimacy of the profits of the _commendator_ never seems to have
caused the slightest difficulty to the canonists. In 1206 Innocent
III. advised the Archbishop of Genoa that a widow's dowry should be
entrusted to some merchant so that an income might be obtained by
means of honest gain.[1] Aquinas expressly distinguishes between
profit made from entrusting one's money to a merchant to be employed
by him in trade, and profit arising from a loan, on the ground that
in the former case the ownership of the money does not pass, and that
therefore the person who derives the profit also risks the loan. 'He
who lends money transfers the ownership of the money to the borrower.
Hence the borrower holds the money at his own risk, and is bound to
pay it all back: wherefore the lender must not exact more. On the
other hand, he that entrusts his money to a merchant or craftsman so
as to form a kind of society does not transfer the ownership of the
money to them, for it remains his, so that at his risk the merchant
speculates with it, or the craftsman uses it for his craft, and
consequently he may lawfully demand, as something belonging to him,
part of the profits derived from his money.'[2] This dictum of Aquinas
was the foundation of all the later teaching on partnership, and the
importance of the element of risk was insisted on in strong terms by
the later writers. According to Baldus, 'when there is no sharing
of risk there is no partnership';[3] and Paul de Castro says, 'A
partnership when the gain is shared, but not the loss, is not to be
permitted.'[4] 'The legitimacy,' says Brants, 'of the contract of
_commenda_ always rested upon the same principle; capital could not be
productive except for him who worked it himself, or who caused it
to be worked on his own responsibility. This latter condition was
realised in _commenda_.'[5]

[Footnote 1: _Greg. Decr._, iv. 19, 7.]

[Footnote 2: II. ii. 78, 2, ad. 5.]

[Footnote 3: Brants, _op. cit._, p. 167.]

[Footnote 4: _Consilia_, ii. 55; also Ambrosius de Vignate, _De
Usuris_, i. 62; Biel, _Op. cit._, IV. xv. 11.]

[Footnote 5: _Op. cit._, p. 172.]

Although the contract of partnership was fully recognised by the
scholastics, it was not very scientifically treated, nor were the
different species of the contract systematically classified. The only
classification adopted was to divide contracts of partnership into
two kinds--those where both parties contributed labour to a joint
enterprise, and those where one party contributed labour and the other
party money. The former gave no difficulty, because the justice of the
remuneration of labour was admitted; but, while the latter was no
less fully recognised, cases of it were subjected to careful scrutiny,
because it was feared that usurious contracts might be concealed under
the appearance of a partnership.[1] The question which occupied the
greatest space in the treatises on the subject was the share in which
the profits should be divided between the parties. The only rule which
could be laid down, in the absence of an express contract, was that
the parties should be remunerated in proportion to the services which
they contributed--a rule the application of which must have been
attended with enormous difficulties. Laurentius de Rodulphis insists
that equality must be observed;[2] and Angelus de Periglis de Perusio,
the first monographist on the subject, does not throw much more light
on the question. The rule as stated by this last writer is that in the
first place the person contributing money must be repaid a sum equal
to what he put in, and the person contributing labour must be paid
a sum equal to the value of his labour, and that whatever surplus
remains must be divided between the two parties equally.[3] The
question of the shares in which the profits should be distributed was
not one, however, that frequently arose in practice, because it was
the almost universal custom for the partners to make this a term of
their original contract. Within fairly wide limits it was possible
to arrange for the division of the profits in unequal shares--say
two-thirds and one-third. The shares of gain and loss must, however,
be the same; one party could not reap two-thirds of the profit and
bear only one-third of the loss; but it might be contracted that, when
the loss was deducted from the gain, one party might have two-thirds
of the balance, and the other one-third.[4] In no case, of course,
could the party contributing the money stipulate that his principal
should in all cases be returned, because that was a _mutuum_. The
party contributing the labour might validly contract that he should
be paid for his labour in any case, but, if this was so, the contract
ceased to be a _societas_ and became a _locatio operarum_, or ordinary
contract of work for wages. In all cases, common participation in the
gains and losses of the enterprise was an essential feature of the
contract of partnership.[5]

[Footnote 1: _Summa Astesana_, iii. 12.]

[Footnote 2: _De Usuris_, i. 19.]

[Footnote 3: _De Societatibus_, i. 130.]

[Footnote 4: _De Societatibus_, i. 130.]

[Footnote 5: _Ibid._]

Before concluding the subject of partnership, we must make reference
to the _trinus contractus_, which caused much discussion and great
difficulty. As we have seen, a contract of partnership was good so
long as the person contributing money did not contract that he should
receive his original money back in all circumstances. A contract of
insurance was equally justifiable. There was no doubt that A might
enter into partnership with B; he could further insure himself with C
against the loss of his capital, and with D against damage caused
by fluctuations in the rate of profits. Why, then, should he not
simultaneously enter into all three contracts with B? If he did so, he
was still B's partner, but at the same time he was protected against
the loss of his principal and a fair return upon it--in other words,
he was a partner, protected against the risks of the enterprise. The
legitimacy of such a contract--the _trinus contractus_, as it was
called--was maintained by Carletus in the _Summa Angelica_, which was
published about 1476, and by Biel.[1] Early in the sixteenth century
Eck, a young professor at Ingolstadt, brought the question of the
legitimacy of this contract before the University of Bologna, but no
formal decision was pronounced, and, had it not been for the reaction
following the Reformation, the _trinus contractus_ would probably have
gained general acceptance. As it was, it was condemned by a provincial
synod at Milan in 1565, and by Sixtus V. in 1585.[2]

[Footnote 1: _Op. cit._, IV. xv. 11. Lecky attributed the invention of
the _trinus contractus_ to the Jesuits--who were only founded in 1534
(_History of Rationalism_, vol. ii. p. 267).]

[Footnote 2: Ashley, _op. cit._, vol. i. pt. ii. pp. 439 _et seqq._;
Cleary, _op. cit._, pp. 126 _et seqq._]

We should also refer to the contract of bottomry, which consisted of a
loan made to the owner--or in some cases the master--of a ship, on
the security of the ship, to be repaid with interest upon the safe
conclusion of a voyage. This contract could not be considered a
partnership, inasmuch as the property in the money passed to the
borrower; but it probably escaped condemnation as usurious on the
ground that the lender shared in the risk of the enterprise. The
payment of some additional sum over and above the money lent might
thus be justified on the ground of _periculum sortis_. The contract,
moreover, was really one of insurance for the shipowner, and contracts
of insurance were clearly legitimate. In any event the legitimacy of
loans on bottomry was not questioned before the sixteenth century.[1]

[Footnote 1: Ashley, _op. cit._, vol. i. pt. ii. pp. 421-3; Palgrave,
_Dictionary of Political Economy_, art. 'Bottomry'; Cunningham,
_Growth of English Industry and Commerce_, vol i. p. 257.]


Sec. 10. _Concluding Remarks on Usury_.

It is to be hoped that the above exposition of the mediaeval doctrine
on usury will dispel the idea that the doctrine was founded upon the
injustice of unearned income. Far from the receipt of an unearned
income from money or other capital being in all cases condemned, it
was unanimously recognised, provided that the income accrued to the
owner of the capital, and not to somebody else, and that the rate
of remuneration was just. The teaching on partnership rested on the
fundamental assumption that a man might trade with his money, either
by using it himself, or by allowing other people to use it on his
behalf. In the latter case, the person making use of the money might
be either assured of being paid a fixed remuneration for his services,
in which case the contract was one of _locatio operarum_, or he might
be willing to let his remuneration depend upon the result of the
enterprise, in which case the contract was one of _societas_. In
either case the right of the owner of the money to reap a profit from
the operation was unquestioned, provided only that he was willing to
share the risks of loss. But if, instead of making use of his money
for trading either by his own exertions or by those of his partner
or agent, he chose to sell his money, he was not permitted to receive
more for it than its just price--which was, in fact, the repayment of
the same amount. This was what happened in the case of a _mutuum_. In
that case the ownership of the money was transferred to the borrower,
who was perfectly at liberty to trade with it, if he so desired, and
to reap whatever gain that trade produced. The prohibition of usury,
far from being proof of the injustice of an income from capital, is
proof of quite the contrary, because it was designed to insure that
the income from capital should belong to the owner of that capital and
to no other person.[1] Although, therefore, no price could be paid for
a loan, the lender must be prevented from suffering any damage from
making the loan, and he might make good his loss by virtue of the
implied collateral contract of indemnity, which we discussed above
when treating of extrinsic titles. If the lender, through making the
loan, had been prevented from making a profit in trade, he might be
indemnified for that loss. All through the discussions on usury we
find express recognition of the justice of the owner of money deriving
an income from its employment; all that the teaching of usury was at
pains to define was who the person was to whom money, which was the
subject matter of a _mutuum_, belonged. It is quite impossible to
comprehend how modern writers can see in the usury teaching of the
scholastics a fatal discouragement to the enterprise of traders and
capitalists; and it is equally impossible to understand how
socialists can find in that doctrine any suggestion of support for the
proposition that all unearned income is immoral and unjust.

[Footnote 1: See Rambaud, _op. cit._, p. 59.]



SECTION 3.--THE MACHINERY OF EXCHANGE


We have already drawn attention to the fact that there was no branch
of economics about which such profound ignorance ruled in the earlier
Middle Ages as that of money. As we stated above, even as late as
the twelfth century, the theologians were quite content to quote the
ill-founded and erroneous opinions of Isidore of Seville as final
on the subject. It will be remembered that we also remarked that
the question of money was the first economic question to receive
systematic scientific treatment from the writers of the later Middle
Ages. This remarkable development of opinion on this subject is
practically the work of one man, Nicholas Oresme, Bishop of Lisieux,
whose treatise, _De Origine, Natura, Jure et Mutationibus Monetarum_,
is the earliest example of a pure economic monograph in the modern
sense. 'The scholastics,' says Roscher, 'extended their inquiries from
the economic point of view further than one is generally disposed to
believe; although it is true that they often did so under a singular
form.... We can, however, single out Oresme as the greatest scholastic
economist for two reasons: on account of the exactitude and clarity
of his ideas, and because he succeeded in freeing himself from the
pseudo-theological systematisation of things in general, and from the
pseudo-philosophical deduction in details.'[1]

[Footnote 1: Quoted in the Introduction to Wolowski's edition of
Oresme's _Tractatus_ (Paris, 1864).]

Even in the thirteenth century natural economy had not been
replaced to any large extent by money economy. The great majority
of transactions between man and man were carried on without the
intervention of money payments; and the amount of coin in circulation
was consequently small.[1] The question of currency was not therefore
one to engage the serious attention of the writers of the time.
Aquinas does not deal with money in the _Summa_, except
incidentally, and his references to the subject in the _De Regimine
Principum_--which occur in the chapters of that work of which
the authorship is disputed--simply go to the length of approving
Aristotle's opinions on money, and advising the prince to exercise
moderation in the exercise of his power of coining _sive in mutando
sive in diminuendo pondus_.[2]

[Footnote 1: Brants, _op. cit._, p. 179; Rambaud, _op. cit._, p. 73.]

[Footnote 2: _De Reg. Prin._, ii. 13.]

As is often the case, the discussion of the rights and duties of the
sovereign in connection with the currency only arose when it became
necessary for the public to protest against abuses. Philip the Fair of
France made it part of his policy to increase the revenue by tampering
with the coinage, a policy which was continued by his successors,
until it became an intolerable grievance to his subjects. In vain did
the Pope thunder against Philip;[1] in vain did the greatest poet of
the age denounce

'him that doth work
With his adulterate money on the Seine.'[2]

[Footnote 1: Le Blant, _Traite historique des Monnaies de France_, p.
184.]

[Footnote 2: Dante, _Paradiso_, xix.]

Matters continued to grow steadily worse until the middle of the
fourteenth century. During the year 1348 there were no less than
eleven variations in the value of money in France; in 1349 there were
nine, in 1351 eighteen, in 1353 thirteen, and in 1355 eighteen again.
In the course of a single year the value of the silver mark sprang
from four to seventeen livres, and fell back again to four.[1] The
practice of fixing the price of many necessary commodities must have
aggravated the natural evil consequences of such fluctuations.[2]

[Footnote 1: Wolowski's Introduction to Oresme's _Tractatus_, p.
xxvii.]

[Footnote 2: See Endemann, _Studien_, vol. ii. p. 34.]

This grievance had the good result of fixing the attention of scholars
on the money question. 'Under the stress of facts and of necessity,'
says Brants, 'thinkers applied their minds to the details of the
theory of money, which was the department of economics which, thanks
to events, received the earliest illumination. Lawyers, bankers,
money-changers, doctors of theology, and publicists of every kind,
attached a thoroughly justifiable importance to the question of money.
We are no doubt far from knowing all the treatises which saw the light
in the fourteenth century upon this weighty question; but we know
enough to affirm that the monetary doctrine was very developed and
very far-seeing.'[1] Buridan analysed the different functions and
utilities of money, and explained the different ways in which its
value might be changed.[2] He did not, however, proceed to discuss the
much more important question as to when the sovereign was entitled
to make these alterations. This was reserved for Nicholas Oresme, who
published his famous treatise about the year 1373. The merits of this
work have excited the unanimous admiration of all who have studied it.
Roscher says that it contains 'a theory of money, elaborated in the
fourteenth century, which remains perfectly correct to-day, under the
test of the principles applied in the nineteenth century, and that
with a brevity, a precision, a clarity, and a simplicity of language
which is a striking proof of the superior genius of its author.'[3]
According to Brants, 'the treatise of Oresme is one of the first to
be devoted _ex professo_ to an economic subject, and it expresses many
ideas which are very just, more just than those which held the field
for a long period after him, under the name of mercantilism, and more
just than those which allowed of the reduction of money as if it were
nothing more than a counter of exchange.'[4] 'Oresme's treatise on
money,' says Macleod, 'may be justly said to stand at the head of
modern economic literature. This treatise laid the foundations of
monetary science, which are now accepted by all sound economists.'[5]
'Oresme's completely secular and naturalistic method of treating one
of the most important problems of political economy,' says Espinas,
'is a signal of the approaching end of the Middle Ages and the dawn of
the Renaissance.'[6] Dr. Cunningham adds his tribute of praise: 'The
conceptions of national wealth and national power were ruling ideas in
economic matters for several centuries, and Oresme appears to be the
earliest of the economic writers by whom they were explicitly adopted
as the very basis of his argument.... A large number of points
of economic doctrine in regard to coinage are discussed with much
judgment and clearness.'[7] Endemann alone is[8] inclined to quarrel
with the pre-eminence of Oresme; but on this question, he is in a
minority of one.[9]

[Footnote 1: _Op. cit._, p. 186.]

[Footnote 2: _Quaest. super Lib. Eth._, v. 17; _Quaest. super Lib.
Pol._, i. 11.]

[Footnote 3: Quoted in Wolowski, _op. cit._, and see Roscher,
_Geschichte_, p. 25.]

[Footnote 4: _Op. cit._, p. 190.]