Cardinal Catejan Spanish Scholastic

Cardinal Cajetan: liberal Thomist

Late scholasticism was the product of the sixteenth century, the century that ushered in the Protestant Reformation and the Catholic Counter-Reforma­tion. If the thirteenth century was well described as the golden age of scho­lastic philosophy, then the sixteenth century was its silver age, the era of a shining renaissance of scholastic thought before the shades of night closed in for good. As we have seen, the fourteenth and fifteenth centuries saw the emergence of nominalism and at least the weakening of the idea of a rational, objective natural law - including a natural law ethics - discoverable by man's reason. The sixteenth century witnessed a renascent Thomism, spearheaded by one of the greatest churchmen of his age, Thomas De Vio, Cardinal Cajetan (1468-1534).

Cardinal Cajetan was not only the pre-eminent Thomist philosopher and theologian of his day; he was also an Italian Dominican who became general of the Dominican Order in 1508. A cardinal of the Church, he was the pope's favourite upholder of the faith in debates with the great founder of Protestant­ism, Martin Luther. In his Commentary on Aquinas's Summa, Cajetan of course endorsed the standard scholastic view that the just price is the com­mon market price, reflecting the estimation of the buyers, and held that that price will fluctuate upon changing conditions of demand and supply. In attempting to purge scholastic economics of any trace of Langensteinian 'station in life' theory, however, Cajetan went further to criticize Aquinas for denouncing accumulation of wealth beyond one's status as suffering from the sin of avarice. On the contrary, declared Cajetan, it is legitimate for highly able persons to move up the social ladder in a way that matches their attain­ments. This candid endorsement of upward mobility in a free market was the broadest attempt yet to rid scholasticism of all traces of the ancient contempt for trade and economic gain.

In his comprehensive treatise on foreign exchange, De Cambiis (1499), the great Cajetan set forth the fullest and most unqualified defence yet penned of the foreign exchange market. Sweeping aside the dithering indecisiveness of his fellow Dominican, Fra Santi Rucellai (1437-97), himself a former ex­change banker and the son of a banker, the cardinal was firm and hard-hitting. Since the role of the merchant has long since been established as legitimate, then so should that of the exchange banker, who is simply engaging in a kind of commodity transaction. Besides, modern trade could not function without the foreign exchange market, and cities could not exist without trade. Hence it is needful and right that the exchange market exist. As in other markets, the customary market price is the just price.

In the course of his defence of the exchange market in De Cambiis, Cajetan proceeded to advance the state of the art in monetary theory. He showed trenchantly that money is a commodity, particularly when moving from one city to another, and is therefore subject to the demand and supply laws governing the prices of commodities. At this point, Cajetan made a great advance in monetary theory, indeed in economic theory generally. He pointed out that the value of money depends not only on existing demand and supply conditions, but also on present expectations of the future state of the market. Expectations of wars and famines, and of future changes in the supply of money, will affect its current value. Thus, Cardinal Cajetan, a sixteenth century prince of the Church, can be considered the founder of expectations theory in economics.

Furthermore, Cajetan distinguished between the two kinds of 'value of money': its purchasing power in terms of goods, so that gold or silver are 'equated' with goods being bought and sold; and the value of one coin or currency in terms of another on the foreign exchange market. Here, each kind of coin tends to move to that region where its value is highest, and away from wherever its value is lowest.

On the vexed usury question, though Cajetan was not as radical as his German contemporary Summenhart in virtually eradicating the usury prohi­bition, he did join Summenhart on the doctrine of implicit intention, and was even more radical in the one area where Summenhart had hung back: lucrum cessans. Implicit intention meant that if someone really believed his contract not to be a loan, then it was not usurious, even though it might be a loan in practice. This of course paved the way for the practical elimination of the ban on usury. In addition, Cajetan also joined his fellow liberals in endorsing the guaranteed investment contract.

But Cardinal Cajetan's great breakthrough on the usury front was his vindication of lucrum cessans. Wielding the mighty authority of being the. greatest Thomist since Aquinas himself, Cajetan offered a point-by-point critique of his master's rejection of this exception to the usury ban. He then vindicates, not indeed all of lucrum cessans, but any loan to businessmen. Thus a lender may charge interest on any loan as payment for profit foregone on other investments, provided that loan be to a businessman. This untenable split between loans to businessmen and to consumers was made for the first time - as a means of justifying all business loans. The rationale was that money retained its high profit-foregone value in the hands of business, but not of consumer borrowers. Thus for the very first time in the Christian era, Cardinal Cajetan justified the business of money lending, provided they were loans to business. Before him, all writers, even the most liberal, even Conrad Summenhart, had justified interest charges on lucrum cessans only for ad hoc charitable loans; now the great Cajetan was justifying the business of money-lending at interest.