In his Summa Theologiae II-II, St. Thomas devotes two questions to unjust acts which are committed in buying and selling or lending.
The first of these questions (q. 77), divided into four articles, deals with fraud in the broad sense (fraudulentia), while the second (q. 78) concerns usury. A study of these questions reveals important differences not only between St. Thomas’ teaching on injustices committed in economic life and the ethical attitudes common today, but differences in basic evaluations of the place of commerce in society. In order to make this clear, I will look at the first question, no. 77, setting forth first what Aquinas taught and then contrasting it with commerce and business ethics as these exist in a capitalist society. (For a discussion of question 78, on usury, see my article, “Is Usury Still a Sin?“)
The first article of question 77 is, Whether someone can licitly sell something for more than it is worth? As is usual, St. Thomas first brings up some objections to his own opinion, which he will answer later on. The first is that civil law permits the buyer and seller to “deceive each other” and buy or sell for less or more than something is worth. The second is that common opinion endorses the idea of buying cheap and selling dear. (I omit his third objection, which deals with friends giving each other gifts.)
After offering the objections, Thomas gives his own considered opinion. He first briefly notes that to deceive a buyer in order to sell something for more than the just price is altogether sinful.
But then he turns to the main question, where there is no actual deceit involved. In that case, he says, it is also wrong to sell something for more than it is worth: “to sell something more dearly than it is worth, or buy it more cheaply, in itself is unjust and illicit.” But he instances an exception, the case where a buyer might need or want something greatly while the seller would be especially hurt by its loss. In such a case the seller can charge a premium since he may charge for the damage he will receive by selling the item as well as for its value. But note that Aquinas is not talking about price gouging following a natural disaster. His statement applies only when the buyer will suffer harm (detrimentum or damnum) by its loss. St. Thomas specifically says that a seller may not charge a buyer such a premium price unless he will suffer particular damage by selling it.
Then he proceeds to deal with the objections that were raised. To the first, that civil law permits buying cheap and selling dear, Thomas’ answer is revealing. He states that human law must permit much that divine law will punish, but he also notes that civil law will demand restitution if the price deviates excessively from the just price, “ultra dimidiam justi pretii quantitatem,” i.e., more than half again as much as the just price. St. Thomas notes, however, that a just price cannot be calculated with mathematical exactness, but is a “certain estimate, so that a small addition or subtraction does not seem to remove the equivalence of justice.” With the second objection, that common usage allows such buying and selling, he simply states that “that common desire [to sell dear and buy cheap] is not natural, but is a vice, and therefore common to many who walk on the broad way of vices.”
Let us then go on to St. Thomas’s second article, Whether a sale is rendered illicit on account of a defect in the thing sold? He brings up three initial objections to the opinion. (I omit the first objection, which deals with goods whose appearances or qualities may have been altered by alchemy, as well as with the second, which deals with different measures being used in different localities.) The third objection is that it is unreasonable to expect a seller to be aware of all the defects in the thing he is selling, since “great knowledge is required which is lacking to most sellers.”
Thomas then gives his opinion, which is that whether a defect arises from the quality or the quantity of the thing sold, a seller who knowingly misrepresents what he sells sins and is bound to restitution, as likewise a buyer sins and is bound to restitution if he purchases something for a lesser price than it is worth because the seller out of ignorance is not aware of its true value. And although a seller or buyer who out of ignorance charges or pays an unjust price does not sin, if he later discovers his error, he is then bound to restitution.
His reply to the third objection is simply that one does not expect a seller to know about the “hidden qualities” of the thing to be sold, but “those only by means of which it is rendered apt for human uses,” such as whether a horse is strong or runs well, which “a seller and buyer are easily able to know.”
Then in his third article Aquinas asks, Whether a seller is obliged to reveal the defect of a thing sold? The first objection argues that since the seller does not compel a buyer to buy something, and is not required to examine the buyer’s decision to buy, therefore he may also assume the buyer’s due diligence in examining the quality of the thing sold. The second objection states that it would be foolish for a seller to hinder a sale by pointing out a defect in the thing to be sold, quoting Cicero to the effect that it would be absurd for someone to advertise a house infested with pests for sale. (I omit objection three which deals with one’s obligation to offer counsel or moral advice to someone else.) Then objection four argues that if a seller is not bound to reveal information he has about an impending drop in the price of a good (which usually would cause his own price to drop immediately), then neither is he bound to reveal defects in the merchandise to be sold which would likewise result in lowering the price.
Thomas answers with his own opinion, which is that a seller is bound to reveal faults which either make the item less valuable and would therefore lower its price, or defects which would result in some harm to the buyer. However, if the seller has already discounted the item on account of its defects, he is not necessarily bound to mention those defects if they are obvious, since in that case the buyer might demand an even greater discount.
Thomas replies to the first objection that a buyer cannot judge the quality of something if its defects are hidden, so that the comparison is invalid. As for the second objection, no one is bound to advertise something for sale mentioning only its defects, since the item may well have some good qualities as well. Then lastly, he answers the fourth objection, saying that a future event which will cause a fall (or rise) in prices is different from a present condition which does the same thing, i.e. that in strict justice one is not bound to reveal a future probable drop in price, but if a seller did give that information, or discounted his price, “he would be of very abundant virtue.”
Then we come to the last article in question 77, Whether it is licit by engaging in business (negotiando) to sell something at a higher price than was paid for it? There are three objections adduced. (I omit the first and third objections which are basically arguments from the authority of certain Fathers of the Church.) The second objection argues that anyone who by his commercial activity sells a thing for more than he paid for it, necessarily either buys it for less than it is worth or sells it for more, and thus commits a sin.
In his reply Thomas distinguishes between various kinds of commercial activity. In the first place he mentions a “natural and necessary” sort “on account of necessities of life,” and such exchange properly pertains not to businessmen [negotiatores] but to “oeconomicos vel politicos,” i.e., to those who have some duty concerned with the welfare of the household or the political community, and this sort is praiseworthy. Then there is the kind of commerce engaged in for seeking gain, and this kind “is justly blamed because in itself it serves gain.” But although gain in itself does not “imply anything morally good (honestum) or necessary, neither is it vicious or contrary to virtue in itself,” provided it is done for a good end “and thus commerce is made licit.” Thus gain may be sought moderately for the support of one’s household or to help the poor or to provide for the common good, and the gain sought is simply a payment for one’s labor (stipendium laboris).
In his reply to ojection two Thomas notes that someone can licitly sell something for more than he paid for it if he made improvements in the item or because its price was higher on acccount of being exported to some other place or on acccount of the passage of time or on account of the risk he had in taking it to another place.
I think that anyone who compares the business ethics of St. Thomas with those of today will be struck not only by the differences at specific points – e.g., not taking advantage of a buyer’s ignorance – but on the whole approach to commercial life. But let us first look at some of the specific points before we raise more general considerations. At the very outset we are told that it is wrong to sell something for more than it is worth or to buy it for less than it is worth. This is surely one of the cardinal points at which capitalist economic thought is opposed to that of St. Thomas. For economics, as it has developed according to the spirit of capitalism, would reply not so much that Thomas’ answer is wrong, but that the question itself is absurd. The phrase, “more than it is worth” is meaningless. Prices are determined by a quasi-mechanical process which can be graphed in the familiar manner of neoclassical economics. It is true that under monopoly or other kinds of imperfect competition, firms can charge more than what economists consider the norm of marginal cost, still in the end something is worth whatever a buyer and a seller can agree on. No one forces a buyer to purchase an item, even at a monopolistic price. If a seller offers a product for too high a price, buyers will refuse to purchase it, and then (it is hoped) the self-correcting action of Adam Smith’s invisible hand will intervene and the seller either lower his price or new firms enter the market – all in the long run, of course. And while there is some truth in this account of the operation of market forces, and while, under the rare and elusive condition of “perfect competition,” the market price can sometimes even be an indication of the just price, it is merely an indication. Market forces are not the reason for a just price, even when they can be a sign of such a price. But in a capitalist economy, an economy characterized by the separation of ownership and work, many other factors must exist before we can begin to look at the market price as the just price. In a distributist economy, on the other hand, it is much more likely that a market price would be a just price, since no producer would be in a position to cut his labor costs so as to undersell his competitors. Although the concept of “marginal cost” is of little use in the real world, still the idea that the price should reflect a firm’s costs gets at the heart of a calculation of a just price. Of course, cost includes a just wage for the producer, and Aquinas’ statement in article 4 that we just noted, that the profit of a merchant should be simply a wage for his labor, reflects this understanding.
The next two articles both deal with defects in products and the seller’s duty to make these known to potential buyers. Here again we meet with a point of radical difference from capitalism. Not only is it generally held today to be stupid to reveal an unseen defect, but firms spend large sums on advertising and promoting products that are defective or harmful. In any case, if sellers today really revealed all the hidden defects in their products, I think it would change our buying habits quite a bit.
Thomas’ fourth article gets to the heart of commercial life by asking whether it is licit for someone by engaging in business (negotiando) to sell something at a higher price than he bought it for, i.e., to do this as an occupation. He sets forth definite criteria for any increase in selling price over purchase price. If the seller has made improvements in the product, if on account of a change of place or time the price has legitimately risen, if he underwent risk in exporting it somewhere – all these justify selling something for more than one paid for it. But clearly there is no justification here for unlimited profits. Every increase in cost must be accounted for by some definite title. So although one may licitly engage in commerce, the gain should be payment for one’s labor or risk.
We should also note the general attitude of St. Thomas toward commercial activity. Buying and selling which is for the sake of gain “is justly blamed (juste vituperatur) because it serves the desire for gain which knows no limit but tends into infinity. And therefore business (negotiatio) considered in itself has a certain baseness (quamdam turpitudinem) in so far as it does not imply of itself an honest or necessary end.” With regard to the first point, that “business considered in itself has a certain baseness,” there is ample confirmation of this in our own culture. Writing of New Left critics of American culture, the early neo-conservative scholar, Harry Clor, said in 1969,
American society is said to be devoted to low, dull, and unexciting goals; it is said to be devoid of moral and spiritual inspiration. It is moral mediocrity that is complained of. And this mediocrity is attributed to commercialism, a commercialism that produces an acquisitive, comfort-seeking, security-minded, and, hence, uninteresting way of life.
1. This description of American life is no doubt exaggerated and oversimplified. But it is difficult, as well as unwise, to avoid the acknowledgement that there are some elements of truth in this description. In the United States a remarkable amount of attention is given to the accumulation and consumption of commodities. And we do not seem to mind being called a “consumer society.” It does appear to be the case that for most Americans the pursuit of happiness has come to mean, in large measure, the attainment of economic security and the continual multiplication of the means for personal comfort and enjoyment.[i]
I would like to hope that any of my readers who are Christians, whether Catholic, Orthodox or Protestant, would without demur agree that a society devoted “to the accumulation and consumption of commodities” is hardly a model of what Christians should strive for. Apart from anything else, St. Paul’s strictures in his first letter to Timothy ought to suffice to prove that point:
If we have food and clothing, with these we shall be content. But those who desire to be rich fall in temptation, into a snare, into many senseless and hurtful desires that plunge men into ruin and destruction. For the love of money is the root of all evils; it is through this craving that some have wandered away from the faith and pierced their hearts with many pangs. (I Tim. 6:8-10)
And further, as John Paul II wrote in Centesimus Annus, no. 36,
It is not wrong to want to live better; what is wrong is a style of life which is presumed to be better when it is directed toward “having” rather than “being,” which wants to have more, not in order to be more but in order to spend life in enjoyment as an end in itself.
And yet the fact remains, “In the United States a remarkable amount of attention is given to the accumulation and consumption of commodities.” This is in a nation made up largely of people with some degree of Christian heritage and commitment, and which often likes to think of itself as one of the most religious nations on the earth. Any Christian critique of American culture which fails to comment on this “accumulation and consumption of commodities” and concentrates simply on (say) sexual misdeeds serves only to discredit any claims that might be made for the religion of Jesus Christ.
But there is one more general consideration which we must examine. St. Thomas speaks of that buying and selling which “is justly blamed because it serves the desire for gain which knows no limit but tends into infinity.” Here is another important point to which little attention is given today. In order to understand it, let us look at a different passage from the Summa Theologiae, I-II, q. 2, a. 1 ad 3. There Aquinas writes that “the appetite of natural riches is not infinite, because according to a set measure they satisfy nature; but the appetite of artificial riches is infinite, because it serves inordinate concupiscence….” In other words, if we seek gain in order to fulfill our “appetite of natural riches,” food, clothing, and so forth, whatever serves the necessities or reasonable conveniences of life, then this desire for gain has a natural end, a natural limit. We can eat only so much, we can reasonably keep only so many extra shirts or dresses in our closets. But not so with money, “artificial riches.” Money very easily fits with “the desire for gain which knows no limit but tends into infinity.” We can accumulate as much as we are able. We can receive gigantic salaries, as many CEOs do, money that many people would regard as a sufficient lifetime wage, yet which these receive year in and year out. It is truly incredible that in a country that so often claims to be Christian, such seeking after inordinate riches is tolerated, even defended and justified.
At least part of the reason that conservative Christians are apt to reactively defend such acquisitiveness is that many critics of such behavior are those who in other respects are hostile to Christian morality, e.g., in sexual matters. But Christians would do well to follow the example we saw above of Professor Clor, who was not afraid to admit that the New Left critics had a point. It is silly and ultimately self-defeating to refuse to acknowledge a truth that one’s opponents advance. Rather, if our aim is to seek and defend truth, we should welcome it from whatever quarter it comes, and, if necessary, modify our own positions accordingly.
I have digressed somewhat from my original theme which was Aquinas’ teaching on buying and selling. But I do not think that this digression was entirely useless. If we look at St. Thomas, or at Holy Scripture, or any other Catholic moral or spiritual writer, we shall see an attitude toward wealth and its acquisition which differs radically from that of a society “given to the accumulation and consumption of commodities,” one that does “not seem to mind being called a `consumer society,'” one in which “the pursuit of happiness has come to mean, in large measure, the attainment of economic security and the continual multiplication of the means for personal comfort and enjoyment.” I imagine that some of my critics will accuse me of wanting to reduce our standard of living to that of penury, but I mean no such thing. Rather I think we might look to Pope Leo XIII’s “frugal comfort” as our ideal. There is much more to life than material goods, and one cannot but pity those who do not realize that. In any case, St. Thomas lays down specific moral precepts for our business activity as well as setting forth what should be the goals of society as conceived by Catholic tradition. Anything less is unworthy of a Catholic, and indeed, of anyone else who claims to bear the name of Christ.
[i]. Harry M. Clor, “American Democracy and the Challenge of Radical Democracy” in How Democratic is America? (Chicago : Rand-McNally, 1969, 1973 printing) p. 105.