During the 4^th century BC, Aristotle was of the opinion that money was a medium of exchange, but did not have an intrinsic value of its own since it was merely a human social invention which has no utility in itself [1].

Charging of interest was deemed to be inherently wrong since in addition to not having an intrinsic value; money does not have self replicating properties.  Aristotle’s view was reinforced by, for example, St Thomas Aquinas who was of the opinion that money cannot reproduce itself and St Bonaventure who clearly stated that “In itself and by itself money does not bear fruit but the fruit comes from elsewhere” [2].

Aristotle identified two purposes of money making. The primary purpose indentified was to provide for the household which was deemed to be necessary and honourable. The second purpose identified was retail trade, Defined as the mode by which men gain from one another, it was deemed to be unnatural. He subsequently argues that although money was intended to be used in exchange, it was not to increase at interest, since it was meant to be consumed. He specifically defines the term usury as “the birth of money from money” which he rejects as the most unnatural way of making money since the offspring is identical to the parent.

Through the ages, interest has been a controversial subject, extensively debated by philosophers. Although it was common practice to charge a fee for money or goods lend, various civilisations introduced rules to ban interest all together or to, at a minimum, limit the maximum amount of interest that could be charged. At the same time, investment in trade and partnerships in which the investor takes some form of risk were generally permitted and even promoted. In the early centuries AD the debates about usury and its permissibility were mainly led by religious scholars such as St Thomas Aquinas, Ibn Rushd, John Calvin and many others. In later centuries, with the separation of Church and State in Europe, the debate shifted to parliaments and the leading economists of the time such as Adam Smith.

[1] Aristotle The Politics in Monroe (1948) Early Economic Thought, selections from economic literature prior to Adam Smith, Cambridge: Harvard University Press, 1-30

[2] Goff, J. Le (1990) Your Money or Your Life – Economy and Religion in the Middle Ages, New York: Zone Books

 Dr Natalie Schoon, CFA