This volume presents Martin Luther’s contribution to the modern economic sciences, providing a detailed introduction and revised translation of his major pamphlet on economic matters, ‘On Commerce and Usury’ (‘Von Kauﬀshandlung und Wucher’, 1524). In his teachings on indulgences, Luther picked up on the question of hoarding money, and was among the earliest voices in early modern Europe calling for an ‘ethical’ economics. Luther‘s work preﬁgured many later contributions to modern economic theory, from the mercantilists and cameralists to the German Historical School.
About the Author
Martin Luther (1483–1546) was a German friar, priest and professor of theology who was a seminal figure in the Protestant Reformation.
Philipp Robinson Rössner is Lecturer (Assistant Professor) in Early Modern History at the University of Manchester.
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On Commerce and Usury (1524)
By Martin Luther, Philipp Robinson Rössner
Wimbledon Publishing CompanyCopyright © 2015 Philipp Robinson Rössner editorial matter and selection
All rights reserved.
Noch vor dreissig Jahren erfuhr es keinen Widerspruch, als Johann Baptist Say den Werth einer Geschichte der politischen Oekonomie mit den Worten läugnete: 'Sie ist weiter nichts, als die Darstellung der mehr oder minder gelungenen, zu verschiedenen Zeiten und an verschiedenen Orten wiederholten Versuche, die Wahrheiten, woraus sie besteht, zu sammeln und festzustellen. Was würde es uns helfen, abgeschmackte Meinungen und mit Recht verrufene Lehren zusammen zu tragen? Dieselben zu Tage zu fördern, wäre ebenso unnütz als langweilig'. Dieser Ausspruch war die einfache Folge der damaligen Ansicht von der absoluten Wahrheit der neueren national-ökonomischen Theorie, welche man, losgerissen von allem geschichtlichen Boden, von allen Bedingungen des Raums, der Zeit und der Nationalität, als eine rein aus den Principien des Verstandes gefolgerte Summe von Wahrheiten betrachtete, deren Verständniss allen früheren Geschlechtern verschlossen, die aber einmal aufgestellt und entwickelt, für alle Zeiten und Völker wahr und in sich geschlossen sein sollten.
Die Reformation des 16. Jahrhunderts musste vorhergehen, ehe im 18. und 19ten die Dampfmaschine erfunden werden und die National-Oekonomie als selbstständige Wissenschaft erfasst werden konnte. Nicht nur für Kant und Hegel, auch für Adam Smith und die grossen Geister im Gebiete der technischen Erfindungen bildet – so paradox es klingen mag – die nothwendige Voraussetzung die deutsche Reformation.
[As recently as 30 years ago, no one would have objected when John Baptist Say denied a history of political economy its relevance by saying that it was 'nothing more than a compilation with mixed success of past attempts during various times and locations at finding and collecting the eternal economic truths. What help would it be to collect old vulgar and tasteless opinions and theories that had rightly been refuted? Tracing them would be as useless as it would be boring'. This uttering was the expression of a simple consequence of the prevailing idea that current economic theory would have universal currency as an inherent truth, detached from its historical context and conditions of space, time and nationality; a sum of truths and laws derived purely from principles of reason, from which our ancestors had been precluded but which – once they had been discovered and fully developed – would attain universal truth for all times and peoples as a closed theory.
The sixteenth-century Reformation had to precede the steam engine of the eighteenth and nineteenth century and the development of economics as a separate science. In fact, the German Reformation is the intellectual and necessary predecessor not only for Hegel and Kant but – paradoxically as it may sound – for Adam Smith and all the great inventive geniuses of the mechanical age also.]
– Gustav (von) Schmoller, 'Zur Geschichte der national-ökonomischen Ansichten in Deutschland während der Reformations-Periode', Zeitschrift für Gesamte Staatswissenschaft, 16 (1860), 461–716 (461 and 716).
I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue – that avarice is a vice, that the exaction of usury is a misdemeanour [...] We shall once more value ends before means and prefer the good to the useful.
John Maynard Keynes, Economic Possibilities for our Grandchildren, 371–72
Do Markets Need Rules? The Idea and Plan of the Book
A recent blockbuster (2012) on markets and morality found that 'in recent decades, markets and market thinking have reached into spheres of life traditionally governed by non-market norms. More and more we are putting a price on noneconomic goods'. Almost exactly five hundred years ago, things were not so different. Luther's teaching on indulgences publicized by the 95 Theses in 1517 developed into a religious programme that subsequently attained its own inner life generating some long-lasting dynamics, not only in the religious but also in the cultural, social and economic landscape of Europe in the five hundred years to come. In many ways and shapes, Luther's religious critique, as well as his more economic writings – such as the present Sermon on Commerce and Usury, evolved around the very same question, that is the invasion of markets and economistic reasoning into realms where they didn't really belong (the prime example of this is his critique of indulgence sales, on which his Reformation of 1517 was based). In fact, Luther did produce some major insights into matters of economic theory and policy also – something that is not usually acknowledged; these will be the focus of volume. The charges frequently levied against Luther mainly by modern scholars – that he didn't really acknowledge the working mechanisms of an increasingly 'modern' economy or that his theoretical grasp of economics and economic behaviour wasn't quite up to scratch – miss the point, as will be argued in subsequent sections and chapters. It is certain forms of behaviour that Luther identified as fallacious and wrong from an ethical stance; this stance is virtually timeless. So the 'Luther question' in economics does not have anything to do with the somewhat problematic quest for progress in the economic sciences (very popular nowadays still); it is rather up to the view point or perspective we choose when framing actions and decisions and building our models. Luther developed nothing more or less than theimportant insight that it was necessary to bring back ethical stances and value judgements into economics. Or, to use Keynes' dictum above, he would have realized that 'certain principles of religion and traditional virtue – that avarice is a vice, that the exaction of usury is a misdemeanour' are important in terms of guarding our everyday choices and actions – even within the seemingly sterile and value-free realm of economics.
Arguably, with the presently discussed Sermon on Commerce and Usury (1524), Luther not only produced one of the finest pamphlets ever written on business ethics (for this he is well known) but also made a significant contribution to economics and political economy. This is not usually acknowledged, let alone appreciated. It has been, after all, a modern fiction in academic discourse and teaching to separate 'economics' from 'business ethics' – one discipline usually claimed by economists, the other (chiefly) by academic theologians. The following pages will hopefully make clearer why this has led to dire consequences both in our experiences of economic reality and the framework guarding economic decisions and in economic theory and political economy as a general backdrop against which individual economic decision-making processes have evolved during the past five hundred years or so. Luther's sketch dealt with the individual in the contested field of society, economics and culture. Here, Luther engaged with a problem that has captivated mankind from the earliest times of its existence: the phenomenon of the market and its peculiar and uneasy mutual and bilateral interactions with the sphere of religion. On top of that, and quite incidentally, with his stance on indulgences Luther also prefigured an important theoretical insight that would loom large in later political economy writings of the pre-classical age between the 1650s and 1800s: a deep aversion towards hoarding, that is reducing money's velocity in economic circulation by leaving it either unspent or invested in non-productive purposes.
The argument will proceed as follows. A general introduction of the issue (chapter 1) is followed by an economic and cultural context of Luther's life and times (chapter 2), as well as a discussion of his economic ideas within a wider frame of theory and discourses on political economy (chapter 3). A detailed discussion of his stance on hoarding money will be provided in chapter 4, as this is a new field, adding a new note to his writings on economics and theology which previous research has overlooked. A detailed comment of the actual Sermon on Commerce and Usury follows (chapter 5), before the analytical part ends with a brief conclusion in the light of the modern world and its problems (chapter 6). The second part consists of a much revised and updated English version of the original (1524) Von Kauffshandlung und Wucher which will be translated here – contrary to older suggestions which have come up with the somewhat clumsy and quite inexpressive '(On) Trading and Usury' – in its more proper meaning: On Commerce and Usury.
Reasons and causes for this exercise are manifold. At all times and places in recorded history, some people seem to have come up with ideas that would classify as either weird or ingenious, depending upon one's own perspective, as well as the forces of history, tradition and personal socialization within the ties that bind, such as family, kith and kin, confession and religion. In the Middle Ages, court cases were waged against animals – less so as show trials: it seems as though people sometimes genuinely believed in the virtue of accusing and dressing the animal properly as a culprit and formally placing it before a court judge and jury. Witches were burnt until the eighteenth century following rationales the ultimate essence of which seems now to be lost on us, although we can speculate about proximate motivations, causes and reasons, such as religious fears, the desire for scapegoats or opportunities to get rid of someone that was hated. But as late as the 1720s, the last show trials against child witches were staged in the German lands, and scientific treatises about the nature and existence of Angels were published. At the same time, the cultural process known as 'Enlightenment' had taken hold, based on the idea that superstition had been replaced by scientific observation in the ultimate Faustian goal of understanding what held the world together in its innermost nature. The idea took hold that man had finally brought nature under control. The Newtonian revolution was framed primarily within a natural science approach, witnessing the rise of modern engineering, physical science, chemistry and biology, and it also had important spill-overs and multilateral feedback processes into the realm of philosophy and modern social sciences. Around the same time, the idea of natural order emerged. It did so especially in the writings of some French and Scottish philosophers such as Francois Quesnay, the Marquis de Condorcet, Adam Smith and David Hume, who emphasized the notion that a natural order mechanism existed not only in nature and biology but also in the sphere of economics (the suggestion of economics as a separate sphere detached from other realms of human agency co-emerged with this idea also). This mechanism was bound to settle demand and supply spontaneously to the benefit of everybody without the need for outside intervention. In other words, this order should be left uninhibited by mankind. We have come to know this paradigm by the metaphor of the invisible hand which its imputed inventor, Scottish moral philosopher A. Smith, used exactly once in his famous text on the Inquiry into the Nature and Causes of the Wealth of Nations, 1776. Chances are that later theorists of the 'free market' did over-interpret Smith here and read axiomatic and insights into the text which Smith would have never underwritten himself. This does not matter so much as in fact Smith's text provided the foundation stone for the mainstream theory in the social and economic sciences in the centuries to come – regardless how unwittingly or unintentional. And he provided – and still provides – the stepping stone for subsequent theoretical contributions to the debate, be that affirmative (which we may label 'neoclassical') or critical deconstructive (which we may call 'heterodox' economics). This random list of cultural beliefs may certainly be extended at will. But for the present context it is especially the latter, the idea of free markets, which has proven peculiarly superstitious – in the same way as it has been very susceptive. As a discursive figure, it co-emerged with Europe's transformation into an industrial economy over the past three centuries. But strangely, no one has ever managed to prove the existence of free markets empirically. First of all, no market in history has ever or anywhere been completely free, if we define 'free' as 'fully de-regularized'. The mere concept is oxymoronic. Because if a market is entirely free, that is without any regulation, there will be freedom for some people to exploit market asymmetries such as usury, rent seeking, arbitrage, speculation to their benefit and the detriment of others. Which can only mean that the market is still essentially un-free. If, on the other hand, freedom is understood as personal and economic freedom of the individual – in the sense of harmonized capabilities, improved distributions of chances of participation, as well as a general absence of asymmetry and usurious behaviour – then the market requires tight rules. But then again it literally cannot be free. Markets and freedom are mutually exclusive.
This can be illustrated using some historical evidence. In the eighteenth century, for instance, two competing notions of market behaviour and two distinct strands of political economy had developed, or rather diverged from what seems to have been, deep back in time, a shared consensus. The one notion, marked by the natural order idea of the French économistes leading up to the Physiocrats and Adam Smith, had it that free uncoordinated market cleared spontaneously to the benefit of all. The other notion was an idea we may call, borrowing a term coined by Eichengreen for post-1945 European economic development, 'coordinated capitalism'. This was the market theory entertained by the continental economists we have come to know by the name of cameralists. Upon first sight, the market order which the cameralist authors had in mind, from the days of Johann Joachim Becher (1635–1682) and Veit Ludwig von Seckendorff (1626–1692) until high cameralists such as Johann Heinrich Gottlob von Justi (1717– 1771), was very similar to our modern notion of the free market. But it was so mainly in terms of the empirical result or visual figuration; the epistemology and techniques of achieving this economic freedom in the market were radically different (and that has not been usually or particularly well understood by social scientists until late). The cameralists defined 'free' essentially in the same way as the Anglo-Saxon tradition would in the wake of A. Smith, D. Hume and D. Ricardo, in fact, as everyone of us presumably would – as, say, free of exploitation possibilities and rent seeking. This translates as 'free of market distortions' such as monopoly, ruinous competition, speculation, arbitrage and other forms of usurious exchange, or what Martin Luther in the 1520s and Cyriakus Spangenberg in the 1590s called vngleiche hendel (asymmetrical exchange). But the means to achieve freedom were different; in the latter view – the coordinated capitalism model of the continental cameralists and their predecessors, or the medieval authors that have come to be known as scholastic theorists – free markets needed control and supervision if they were to function properly and to the benefit of everybody. This notion subsequently got lost in the Anglo-Saxon liberal and classical and later on neoclassical tradition in the wake of the French and Scottish Enlightenment after c. 1750, where it was held that markets achieved Pareto-optimality spontaneously, meaning an optimum distribution of market outcomes and transactions, when left without regulation and interference. That this could not possibly work in reality would have been obvious to many a continental thinker from the 1400s until later on. Within the Anglo-Saxon scientific tradition, however, which also influenced the epistemological design of modern economics and much of modern social theory across the rest of the world, it attained a certain fetish-like position that does not match particularly well with empirical reality – the explanation of which lies outside the scope of this book.
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Table of Contents
Acknowledgements; CRITICAL INTRODUCTION: 1. Approaching Luther; 2. Contextualizing Luther: The Powers of Time and Space; 3. Luther: Impulsive Economics; 4. The Grip of the Dead Hand: Crisis Economics for a Pre-Industrial Society? 5. Von Kauffshandlung und Wucher (1524): Analytical Summary; 6. Conclusion: What Can We Learn from Luther Today?; ON COMMERCE AND USURY (1524): Notes on the Text; On Commerce and Usury; Bibliography; Index
What People are Saying About This
‘In his deeply erudite introduction, Philipp Rössner offers a vivid contextualization of Luther’s thinking on how commerce should be managed in order to promote a proper Christian society. Rössner not only explores Luther’s ideas on commerce and ethics from the point of view of modern economics, but he uses Luther’s perspective as a critical lens through which he examines, with great nuance and clarity, the state of economic reasoning today.’ Carl Wennerlind, Columbia University
‘Luther’s On Commerce and Usury is much more than a sermon. It is a powerful reminder that markets are human constructs and depend on rules for their existence and operation. This inconvenient truth deserves reflection, as Philipp Rössner demonstrates in his fascinating essay. By delving into the context and meaning of a sixteenth-century classic, he speaks to the present.’ Francesco Boldizzoni, University of Turin