Saint Thomas on the Ethics of Business Practice

prefatory remarks

Saint Thomas Aquinas discusses the ethical aspects of business, in particular the ethical boundaries to profit as the aim of business, in his Summa Theologica II-II, q. 77. The interested reader can look at the actual and complete text of the Summa Theologica in English translation at the following site: An English Translation of the Summa Theologica should also be available at any good public library, any library, that is, which has not tried to sweep the great books of the past under the rug in favor of Harlequin romances. Thomas talks about business ethics in the course of a discussion of fraud. Thomas is in the course of discussing the various virtues of the good man, and the vices opposed to them, and so his remarks on business practice are incidental. His approach, as usual, is twofold. He will cite the ancient philosophers, here represented by Aristotle and Cicero, in order to support his arguments on the basis of reason alone. He will also cite Sacred Scripture, both New and Old Testament, and the Church Fathers, and here we may find some remarks of Saint Augustine, in order to show the same argument from the point of view of the doctrine revealed by God and accepted by faith. Because of his two-fold approach, we can recommend reading Saint Thomas Aquinas to all. Those who do not accept religious doctrine may still find much they do accept from his philosophical approach. I also mention this, because some writers who profess Christian belief, also say that this belief has no place in the "public square". What is meant is that a man may privately hold Christian moral beliefs or those of some other religion, but in such public matters as business, trade and legislation, he must keep his beliefs to himself out of respect for the beliefs or lack of beliefs of others. When Saint Thomas makes a point in ethical and moral matters, he always provides two approaches, a philosophical approach that is addressed to all reasonable men, and a religious approach, addressed to those who have faith. What he says in philosophical terms has every right to be heard, and heard loudly, in the public square. I might add also that in this article my assistance to the reader consists mainly in this: where Thomas provides a short citation of Aristotle or some other source, I provide a fuller reading. I may occasionally cite some authors who have also written on this subject. Other than that, what I write is so much electronic straw.

Is it morally permissible to sell a thing for more than it is worth (Summa Theologica II-II, q. 77, a.1)

The first word on this question comes from Sacred Scripture: Do unto others as you would have them do unto you..(Matt. 4, 12). Now one wishes to pay more for a thing than it is worth, so they should also not sell a thing for more than it is worth. Thomas then cites Cicero, from his book De Officiis, which means On Duties. In this book, Cicero discusses many of the ethical aspects of public life, the ethics of holding office and doing business. It was and is a widely read book, and when Thomas cites it, he probably presumes that the reader is very familiar with it. This is the quote:
Tollendum est igitur ex rebus contrahendis omne mendacium; non illicitatorem venditor, non, qui contra se liceatur, emptor apponent. We must, therefore, take away all lying from business dealings; the seller will not engage a bogus bidder to run prices up, nor will the seller engage some other person to bid against himself to keep them down. (Cicero, De Officiis, book III, c. 15)
Cicero continues, that buyer and seller should state their price out front when they meet. They should each state their price, and we may infer that if they both state what they think is a just price from the outset, they will do business. Cicero, as do the other ancient philosophers, thanks that an activity is not morally good, unless its ultimate goal is something which is morally good. It is not wrong to pursue riches, but it is wrong to pursue riches merely for their own sake. Cicero writes:
Neque enim solum nobis divites esse volumus, sed liberis, propinquis, amicis maximeque rei publicae. Singulorum enim facultates et copiae divitiae sun civitatis. For we do not aim to be rich merely for our own sakes, but for the sake of our children, our neighbours, friends and most of all, for our community. For the private fortunes of individuals are the wealth of the state.
Here Cicero strikes a fine balance. On the one hand, the man who seeks riches for their own sake is morally corrupt, but there is such a thing as a rich man who is primarily seeking the good of his community. The industry of the businessman is a virtue, the fact that he is resourceful and works hard, and his industry (or industriousness) provides benefits to others. However, selfishness is not a virtue but a vice, and neither Thomas nor Cicero, nor any ancient philosopher would agree with the saying that "private vice is public virtue", which unfortunately is widely accepted as a cornerstone of business.

Thomas then gets to the principles behind business. Here he makes his most important point. There are two different kinds of exchange, two different ways of exchanging goods or doing business.

  1. In the first type, we have buying and selling, or the simple barter of goods, for the benefit of both parties. Both parties have a specific need, and the transaction meets both of their needs fairly and equally. In the second type, we have selling goods for the purpose of obtaining wealth.
Here Thomas cites Aristotle's book The Politics(Book I, ch. 3, n. 11). Aristotle distinguishes two types of exchange. The first is natural exchange. Two parties barter for the goods needed by their communities, whether these are their households or their cities. The goods that are necessary for life are the true riches, and it is easy to say when one has enough of these. "...for the amount of such properties sufficient in itself for a good life is not unlimited". Aristotle compares the business of life, which is the business of maintaining a household, with any other art. In the other arts, there is a limit to the number of tools the craftsman needs to do his work. Riches are also a collection of tools for the householder and craftsman alike. Just as a carpenter does not need more than a few tools, so the head of the household does not need more than a certain amount of money. Even if we suppose that a person wanted a comfortable, and even luxurious life, even then he could still determine when he had enough money. The second type of exchange is wealth-getting. The business of seeking wealth for the sake of wealth does not have any natural limit. When our purpose is to get sufficient food , clothing and shelter, or any other goal in a human measure, we know that there is a definite and measurable goal. But if wealth is the aim, when do we reach it? Aristotle says that this activity of seeking wealth for the sake of wealth is not natural.

Aristotle explains that there are two ways of using a thing, for example, a shoe. First, we can use it for what it is. Second, we might use it merely as an article of exchange. When one man barters a thing for something else, he is still using the thing for what it is. The exchange of commodities for commodities is natural, and it exists so individuals and communities can obtain the things they lack. Money came into existence when the first communities were no longer self-sufficient. They had surpluses of some goods and deficits of others. Commodities are not easily portable, so money made exchange easier. So, there are two ways of using property: 1/ to use the property with its end in view; 2/ for the increase of property as such. Aristotle says that the man who primarily seeks wealth is seeking life, but not the good. The desire for life is naturally unlimited, but there is a natural limit to our desire for the means of life. However, the wealth-seeker desires the means of life without limit. In other words, he desires a means as if it were an end, and this is the essence of all moral problems. For example, the wealth-seeker does cultivate a sort of courage, but he harnesses it to obtaining wealth. The function of courage is not to help us seek wealth, but to inspire daring, so that we are willing to take personal risks for something that is truly worthwhile, such as the life of our countrymen. Medicine is for the purpose of health, and the military art is for the sake of the security of one's country, but the wealth-seeker subordinates all these to his own aim of wealth. The pursuit of money for the sake of money is most patently immoral in the case of usury. Money was brought into existence for the sake of exchange, but usury actually increases the amount of money in circulation. The charging of interest actually treats money as if it were a living thing capable of having children, and the Greek word for usury - tokos - also means offspring, or production of offspring.

Aquinas continues. Something that has been brought in for the benefit of all should not be more expensive for one than for another, or a greater burden or inconvenience to some than to others (magis in gravamen). The same thing should be available equally to all, and for this purpose money serves as a common measure, and one thing will have a set price on the market. (cf. Aristotle, Nicomachean Ethics, Book V, 1133 a 29). If the price exceeds than the quantity of the thing, says Aquinas, or the thing exceeds than the quantity of the price, then the equality of justice is destroyed. This is rather a strange phrase, but I understand it as follows. Let us suppose that if we were bartering, then one pair of shoes would be a fair trade for twenty loaves of bread. In that case, the price in money for a pair of shoes and the price for twenty loaves of bread should be the same, and otherwise one of the parties is charging too much and we have an instance of injustice. Thomas also states further that to sell the same thing at a higher price to one buyer than to another is unjust and illicit. He brings in a special case. Suppose a merchant has an article, and someone enters the store and for personal reasons is very attracted to this article. This article would bring the customer more delight than it would to others, or perhaps he has some very special need for the thing. The merchant would suffer no great loss in the sale, whereas the customer (at least in his own mind) would greatly gain. Can the seller charge a higher price, since at least to the customer the article is very valuable? Aquinas says no. The special value of the article to the buyer does not come from the seller, but from the condition of the buyer. No one should sell to another what is not his own. The buyer is merely allowed to pass own his own loss. Then, however, Thomas adds that the buyer who desires it so greatly may of his own free will offer something extra to the buyer. For my own part, I don't understand this stipulation. If an article is for sale at all at a set price, the buyer can obtain it for that price, so why would he offer more for it? Perhaps it is a case here where the article is not for sale. If it were for sale, the owner would ask for a certain price. However, the buyer offers a certain amount hoping that the owner will sell it to him.

Thomas is of the opinion that it is illicit to sell anything for more than it is worth. The first index of what a thing is worth is basic human needs. If the thing meets no human need, it is not worth anything. Of course, many other factors enter into value. However, the special needs of certain people in certain circumstances cannot be one of the factors. There should not be a special high price of water for thirsty people. Thomas admits that the civil law allows some deception. The vendor can charge more and buyer, if he can, may pay less than the thing is worth. However, the civil law is for the whole people, including those who are lacking virtue. Human law cannot prohibit everything that is contrary to virtue, but it is enough if the law prohibits the things that destroy man's social life (convicturs). The law tolerates instances where the price differs moderately from the value, but only if this is not excessive (nisi sit nimius excessus). Thomas here would allow the state to intervene in the economy, and we can imagine that he had in mind situations of monopoly and price-fixing.

The human law may overlook many things simply because some laws would be impossible to enforce. The divine law, however, leaves nothing unpunished, if the equality of justice is not observed in buying and selling. He who has more is obliged to recompense the one who has suffered a loss. Sometimes the just price is not exactly determined (punctaliter determinatum), but rather consists in a rough estimate. Then a little variation in price, some more or some less, does not destroy the equality of justice.

Is it allowed in business to sell something for more than it was bought?(Summa Theologica II-II, q. 77, a.4)

Thomas would say that it is morally licit to sell a thing for more than it was bought, but with many moral restrictions. The basic idea is that the businessman whose primary work is to make goods available to people by his buying and selling is allowed to charge something extra in return for his service, and this is like any other earning. In charging his stipend, he should have in mind meeting his own real needs and the needs of his household. It is also possible that he wants to earn money for the sake of some work of charity. Anything he charges beyond meeting his own needs and a reasonable fee for his labor is immoral.

The first authority Thomas cites is Saint Augustine, who says: The businessman who is eager for profit blasphemes at his losses,, and he lies and swears falsely over the price of his goods. These, however, are the vices of the businessman himself, not of business in general, which can be conducted without these vices. So, according to Augustine, the general practice of business, which involves making profit, is licit. Thomas recalls Aristotle's doctrine in the Politics(cited above) that there are two kinds of exchange, the first which is natural and necessary and involves an equal exchange of goods, and the second which is unnatural. When people do business in order to obtain what they need for life, they are doing something good and necessary, and this is in keeping with nature. When, however, people do business merely for the sake of profit, they are acting out of a disordered desire for profit that knows no limit, but tends to infinity.

Thomas says that business considered merely as business has a certain baseness about it (turpitudo), because when we think of business as such, we do not think of it having any honest or necessary end. At the same time, profit (lucrum), although it does not imply anything especially good or necessary, does not imply anything vicious or contrary to virtue. By itself, then, profit is morally neutral, although we tend to look at it suspiciously. Nothing prevents a businessman from ordering his profit to some other honest and necessary good, and so profit is licit. When somone orders the moderate profit he seeks by business to the support of his household or to help the needy, or even when someone is in business for the benefit of the public, so that his country won't be lacking in the things necessary for life, he is not seeking profit for its own sake, but as the rightful fee for his labor.

To apply this, many are morally outraged by what they see as predatory profits, and would like harsh laws to reclaim these profits, which they see as ill-gotten gains. On the other hand, businessmen will say that they benefit the public, and without their work , the community would not have what it needs. It is very difficult to distinguish the two ways of doing business, and it is almost impossible to pass laws against predatory profiteering. Perhaps the best test would be an honest question. Suppose we were to ask a man in the shoe business what his purpose was. He could answer in two ways: 1/ to make a profit, 2/ to provide the people with the shoes they need. The man who is primarily seeking profit also supplies shoes, and the man who is primarily seeking to provide a service makes a profit, but the goals are different. And it is entirely possible that we may distinguish which man is seeking which goal when we are more closely acquainted with the smaller details of their business practice.