J. Schumpeter, Price and Value in Thomas Aquinas

The individualist and utilitarian streak and the emphasis upon a rationally perceived Public Good run through the whole sociology of St. Thomas. One example will suffice: the most important one, the theory of property. Having disposed of the theological aspects of the matter, St. Thomas simply argues that property is not against natural law but an invention of the human reason, which is justifiable because people will take better care of what they possess for themselves than of what belongs to many or all; because they will exert themselves more strenuously on their own account than on account of others; because the social order will be better preserved if possessions are distinct, so that there is no occasion for quarreling about the use of things possessed in common—considerations that attempt to define the social ‘function’ of private property much as Aristotle had defined them before and much as the nineteenth century textbook was to define them afterward. And since he found in Aristotle all he wished to say, he referred to him and accepted his formulations.

This holds with added force for St. Thomas’ ‘pure economics’ (oeconomia with him means, however, simply household management). It was embryonic and really consists of only part of his argument on Just Price (Summa II, 2, quaest. LXXVII, art. 1) and on Interest (Summa II, 2, quaest. LXXVIII). The relevant part of the argument on just price—the price that assures the ‘equivalence’ of commutative justice—is strictly Aristotelian and should be interpreted exactly as we have interpreted Aristotle’s. St. Thomas was as far as was Aristotle from postulating the existence of a metaphysical or immutable ‘objective value.’ His quantitas valoris is not something different from price but is simply normal competitive price.

The distinction he seems to make between price and value is not a distinction between price and some value that is not a price, but a distinction between the price paid in an individual transaction and the price that ‘consists’ in the public’s evaluation of the commodity (justum pretium…in quadam aestimatione consistit), which can only mean normal competitive price, or value in the sense of normal competitive price, where such a price exists. In cases where no such price exists, St. Thomas recognized, as coming within his concept of just price, the element of the subjective value of an object to the seller, though not the element of the subjective value of the object for the buyer—a point that is important for scholastic treatment of interest.

Beyond this he did not go in the article referred to. But other passages, perhaps, support the opinion that, by implication at least, he did take a step beyond Aristotle which was more explicitly taken by Duns Scotus, Richard of Middleton, and possibly others.

Duns Scotus, at all events, may be credited with having related just price to cost, that is, the producers’ or traders’ expenditure of money and effort (expensae et labores). Though he presumably thought of nothing beyond providing a more precise criterion of scholastic ‘commutative justice’—which was rightly rejected by the later scholastics—we must nevertheless credit him with having discovered the condition of competitive equilibrium which came to be known in the nineteenth century as the Law of Cost. This is not imputing too much: for if we identify the just price of a good with its competitive common value, as Duns Scotus certainly did, and if we further equate that just price to the cost of the good (taking account of risk, as he did not fail to observe), then we have ipso facto, at least by implication, stated the law of cost not only as a normative but also as an analytic proposition.

Following Alexander of Hales and Albertus Magnus, St. Thomas condemned interest as contrary to commutative justice on a ground that proved a conundrum for almost all his scholastic successors: interest is a price paid for the use of money; but, viewed from the standpoint of the individual holder, money is consumed in the act of being used; therefore, like wine, it has no use that could be separated from its substance as has, for example, a house; therefore charging for its use is charging for something that does not exist, which is illegitimate (usurious).

Whatever may be thought of this argument, which among other things neglects the possibility that ‘pure’ interest might be an element of the price of money itself—instead of being a charge for a separable use—one thing is clear: exactly like the somewhat different Aristotelian argument, it does not bear at all upon the question why interest is actually paid. Since this question, the only one that is relevant to economic analysis, was actually raised by the later scholastics, we defer the consideration of the clues for an answer, which St. Thomas’ reasoning nevertheless suggests.