On Monday’s Episode of the Tucker Carlson Show, Carlson interviewed Catholic Bishop Robert Barron, largely to discuss topics related to the election of Pope Leo XIV. Most of the interview is unremarkable for our purposes here at mises.org, but at one point, the discussion touched on the problem of usury and the modern financial economy.
Usury has long been a topic of confusion and imprecision among those interested in learning the history of Western political thought vis-à-vis market economics. It is often presumed that Christianity’s historical prohibition on usury would, if applied consistently, prohibit money lending in exchange for any compensation paid to the lender. We often call this compensation “interest” in modern speech.
This was indeed the context around the usury discussion as presented on Carlson’s show, and, unfortunately, neither Bishop Barron nor Carlson demonstrated much knowledge of the topic. Barron seemed to assume that the usury question has not been sufficiently addressed in recent centuries, and implied that the topic is now ignored as a result of pressure from capitalists. As we will see, this is not the case. The topic has not been ignored in recent centuries. Nor does the prohibition of usury necessary proscribe the collection of compensation for making loans.
The Barron-Tucker Discussion
Carlson begins the discussion by asking Barron about “loaning money at interest.” Barron responds that “the Church has been against it from time immemorial”—presumably because of the prohibition on usury. He then goes on to say that a non-specified “transition” happened which changed the thinking on the matter. Barron almost immediately sidesteps the issue, however, and goes into a general discussion of market economics. Overall, Barron appears to imply that the “transition” on the topic was some sort of concession to modern industrial capitalism, and Tucker appears to be (rightly) dissatisfied with this explanation.
Barron likely shifted the discussion on this topic because it is an obscure one, and he probably has not read up on the topic lately. Few have. If we do look more closely, there are at least two key points we can make on the topic. The first is that Church thinking on usury clearly does not forbid a lender from receiving compensation for making loans. The second is that this is not a new idea, and it is certainly not any kind of concession in the wake of industrialization or the advent of modern financial markets. Rather, the idea that lenders can be compensated for their loans goes back at least to the Middle Ages. Moreover, there has never been any clear universal, doctrinal prohibition on receiving compensation for lending money. While some regional councils in the first millennium prohibited this for laypeople, the general consensus was against clergy receiving compensation for lending money. …
his laborious discussion over precise definitions nonetheless continues in modern books. This can be seen, for example, in Thomas Higgins’ ethics textbook from 1949 in which he states:
When the lender of money suffers no detriment in making a loan, he is entitled to nothing more in justice than the return of the money lent. Should he incur loss because of parting with the money lent, he is entitled to compensation for that reason but not because of the loan itself. This title to redress for loss sustained is extrinsic to the loan. Today, money, or rather its modern equivalent, credit, is truly a capital good capable of producing further wealth. Therefore a person who parts with money on a loan loses a chance for profit, and because money lent today is genuinely risked, money may in good conscience take advantage of legal rates of interest.
Again, we see in Higgins the same themes that show up in Aquinas, and later in Benedict XIV.
This is not to say that the economic theory here is sound. It’s not. Higgins’s description of money as a capital good is just one example of his problematic understanding of money.
Nonetheless, Higgins’s discussion—from the standpoint of ethics and moral theology—on lending, money, and usury helps to illustrate the historical reality of the development of thinking on usury. It is not the case, as the Barron-Tucker discussion implies, that all “lending at interest”—as commonly understood—is usury. Nor is it the case that Christian theologians simply chose to look the other way as a means of pleasing the parties of industrial capitalism. Rather, the development of thinking on usury reflects changes in the nature of money and lending over time. These changes mean views of justice and fairness change as well, and new explanations had to be sought in a world where lending money commonly imposes real costs and risks on the lender.
They are both a pair of economic illiterates. Interest on a loan is a very specific thing: the cost of the money’s lost opportunity costs over time. It is the time-preference for money. Another way to say is is that it is the difference in what you pay to have the money today versus what you have to pay to have it in the future at some other time. Interest rates are very high if you want to have your money right now versus some time in the future. Interest rates are lower if you would take the money in the future. But interest rates are the difference between wanting money now or later. The experimentation on humans (usually children) show this to be true. So, perhaps they were both barking up the wrong tree, right?