Love letters from Austria
December 4, 2015 § 14 Comments
My readers might be interested in a discussion of usury which broke out at the Acton Institute blog in the comments to this post. [Link updated 10/18/2017: see here.] My latest comment has not been approved as of this writing, but I thought y’all might be interested in the following criticism from a fellow who believes he is qualified to advise folks on investment. Only a small couple handfuls of people have become multimillionaires by following my lead, I don’t charge for books of investment advice, and I’m not a high priest in the Church of Austrian Economics; so what do I know?
Here is the criticism:
Well you may not be aware of it, but it’s easy for anyone familiar with economic history to see that you have become a sucker for the fallacious Real Bills doctrine. And based on what I read on your blog you’re not nearly as knowledgeable about finance as you think. A little humility will go a long ways toward helping you learn real finance and banking. Your post on banking and fractional reserves shows an incredibly bad grasp of banking.
For the record, I don’t actually have a theory about the areas covered by the Real Bills doctrine. But folks are certainly welcome to draw what conclusions they may.
You also might learn a rhetorical trick or two from the investment brain trust. First, studiously ignore the actual substantive distinction being made (in this case, between actual property which can be alienated from its possessor and personal IOU’s which cannot). Next, ascribe a discredited theory on an obscure (to everyman), difficult, unresolved subject to your interlocutor so that nobody reading will bother to actually do the work to figure out that you are talking out of your hat. Finally, encourage your interlocutor to be more humble and improve his poor state of knowledge.
Enjoy.
UPDATE (below the fold):
In the same critic’s reply to a different commenter you can see quite clearly what I’ve been saying about modern economic theories: that metaphysical anti-realism (versus realism) about economic value, which gives rise to anti-realism about property, is the central issue —
Aquinas had too much reverence for Aristotle. He built his economics on Aristotle’s faulty foundation and that’s why it’s so bad. The biggest problem with Aristotle that afflicts Aquinas as well is the assumption that things have objective value. They don’t and that fallacy, promoted by Aquinas held economic understanding back for centuries. Not until the scholastics at Salamanca realized that all value is subjective did economic understanding make any progress.
Metaphysical anti-realism just is progress. Failing to embrace metaphysical anti-realism is characterized like this:
To think that we have made no progress at all in understanding economics since then is ridiculous. Do you also cling to Aristotle’s and Aquinas’ astronomy in which the sun circled the earth?
Zippy Catholic 
[…] Source: Zippy Catholic […]
This is the philosophical actuary, at least my wordpress account.
It may be the case that you have some unexamined presumptions that are related to or imply the Real Bills theory while not having an explicit theory, as many moderns have no explicit theory of metaphysics (or deny any such thing is possible) while inevitably making metaphysical assumptions.
Since my comments won’t be approved until after the weekend I thought I’d reach out to you here.
Thank you for your comment about a thing being consumed in exchange. However, this makes the discussion in the Summa somewhat misleading as Aquinas talks about something the use of which cannot be separated from its being. However, anything is like this, but only considered as exchangable. I’m trying to reconcile the Summa and the De Malo. Could you give the full reference so I can read the surrounding article?
I certainly see how such a view of exchange does in fact make thing like exchange personal IOU’s or opportunity costs impossible as they cannot be alienated from the person. However, this is still consider the nature of the thing as exchangable or not, so I’m still having difficulty insisting this concern the nature of the contract and not the thing. It appears to me it would be both.
semioticanimal:
Somebody who thinks so would have to show his work though, at least if he wants me to take the criticism seriously.
It does, but he is talking about its specific or primary use, that is, what people ordinarily do with a particular kind of thing. He mentions this in the Summa also in the Reply to Objection 6:
“The principal use of a silver vessel is not its consumption, and so one may lawfully sell its use while retaining one’s ownership of it. On the other hand the principal use of silver money is sinking it in exchange, so that it is not lawful to sell its use and at the same time expect the restitution of the amount lent. It must be observed, however, that the secondary use of silver vessels may be an exchange, and such use may not be lawfully sold. On like manner there may be some secondary use of silver money; for instance, a man might lend coins for show, or to be used as security.”
I cited it from a copyrighted e-book, so you’ll have to buy the book if you want the full text beyond what I transcribed for the citation.
Ok, I think I may be beginning to understand but correct me if I’m wrong. Usury concerns the nature of the contract, because it is the nature of the contract that concerns that the thing is either loaned as consumable as with silver or not as with a silver vessel. I’m still inclined to think it rests upon the nature of the thing as a silver vessel is formally different from silver as a means of exchange.
semioticanimal:
Now filter it through Vix Pervenit:
The essence of usury is in the contract, not the property lent.
So an exchange is materially defined by property, the thing being exchanged. An exchange of opportunity cost is impossible as such a thing is not property. Formally an exchange is defined by the terms of the agreement or contract. A loan is formally distinct from a sale in the nature of the contract and not the property exchanged.
It is in the nature of the contract to concern with what respect the property is being exchange as a thing can have many purposes. A silver cup may be exchanged as a vessel or as silver and currency. Thus, materially these exchanges are the same and differ formally in the terms of the exchange, that is whether a vessel or silver as currency is being exchanged.
In the case of usury, the nature of the contract concerns the thing as consumable or alienable from the borrower. In the case of a person, the thing once alienated from the borrower is no longer in use and is not charged for as such. What remains of the contract is the person promise to return “in kind” the value of the thing borrowed, but not the particular thing which has been alienated from him. As such rent/interest cannot be charged for the thing as the particular thing is no longer in his use. This is called a loan only metaphorically or analogously, as a loan strict regards the return of the thing in particular.
In the case of the a loan to a corporation, I remain a bit confused. It would seem that the exchange differs in kind from a loan to a person. The exchange is an exchange of case for a claim against the property of the corporation. The interest charge is then based upon the use of that property against which the lender has a claim?
It is in this sense that I can see that usury concerns the nature of the contract essentially and the nature of the property accidentally. Though I find it interesting to note that Aristotle would not have have contempt for usury on this basis as he would accept slavery as a possible return in the case of default on a personal loan.
semioticanimal:
I’m not an Aristotlean and don’t know the nuances of his thought on slavery, nor would I treat his views as dispositive simply because they are his in any case. But in my experience modern people usually attack straw men when dealing with the Greeks and the Medievals so I tend to approach these paraphrases in modern English layered over modern attitudes cautiously.
It may depend upon the nature of the title (entitlement). A thief might have to work off the value of what he stole and additional damages, that is, his victim might justly have such a title. But a commercial property transaction or property contract between persons qua persons is a voluntary agreement between business partners for mutual benefit; and it would not surprise me if the Philosopher thought that treating friends like thieves was morally wrong.
You really have to ‘put it all together’ to make sense of it, although it makes perfect sense once you’ve grasped the whole picture.
Usury involves contracting for gain – any gain – from a ‘loan’ (transfer of some property without immediate payment in full) for ‘consumption’ (alienation from the borrower when he uses it), where the borrower personally guarantees to replace what he ‘borrowed’ with some different, replacement property (since the property he ‘borrowed’ has been ‘consumed’ in the pertinent sense, that is, he will no longer possess the actual property he borrowed after he uses it in the manner which the contract authorizes).
These specific kinds of ‘loans’, mutuum loans, are only morally licit as acts of friendship or charity. They are not morally licit for any amount of profit or gain, considered as obligatory in some specific amount or degree on the part of the borrower.
It isn’t that there is no such thing as specific property obligations of a specific amount against a person, above and beyond the actual property in question. It is just that those kinds of ‘excess’ obligations only arise in cases of wrongdoing: in the context of lending (voluntary transfer of the possession of property) they arise from breaking the contract. ‘Extrinsic titles’ are by definition not created by the agreement between the parties: they arise when someone breaks the agreement, defrauding his friend or business partner.
Here is Aquinas in De Malo:
I was making a bare minimum claim that Aristotle holds that people can in principle be held as property, which is well-known and uncontroversial whatever his nuances may be. The argument here against usury holds that there cannot be a property claim against a person, because a person cannot be property. It is a different position to arrive at the injustice of usury via person qua business partners as opposed to person qua person.
Though I agree that an argument can be made that there need be a certain equality among business partners that would be violated were even potential enslavement, a manifestly unequal arrangement, be involved in the exchange. Though this may imply situations where one should not exchange with another, where there is an inequality impossible to overcome, such as that the gods do not exchange as business partners with men but give benefits and receive praise.
I’m not sure of course. It was more of a sudden insight not worked out.
semioticanimal:
Again that depends on precisely how those words are interpreted. Personal debts are certainly possible; they just aren’t the same kind of thing as claims against alienable property.
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