Lawyers, capital and interest

Main source: Salvador Trinxet Llorca, “Selected writings about lawyers”

“Capital and Interest: A Critical History of Economical Theory” was written by Eugen V. Bühm-Bawerk and traslated into english.

In this book, Bühm-Bawerk mentioned lawyer when wrote the following:

In Book I,Ch.I
“After the twelfth century, however, the discussion is conducted on a gradually broadening economic basis. To proofs from Revelation are added appeals to the authority of revered fathers of the Church, to canonists and philosophers-even pagan philosophers,-to old and new laws, to deductions from the jus divinum, the jus humanum, and-what is particularly important for us as touching the economic side of the matter-to deductions from the jus naturale. And now the lawyers begin to take a more active part in the movement alongside the theologians-first the canon lawyers and then the legists.”

In Book I,Ch.II:
“The passage has been quoted by Rizy; by Turgot, Mémoire sur les Prêts d’Argent, § 26; and also by Knies, Kredit, part i. p. 347. It runs thus: “It is a fair claim that the values given in the case of a contract which is not gratuitous should be equal on either side, and that no party should give more than he has received, or receive more than he has given. Everything, therefore, that the lender may demand from the borrower over and above the principal sum, he demands over and above what he has given; for, if he get repayment of the principal sum, he receives the exact equivalent of what he gave. For things that can be used without being destroyed a hire may certainly be demanded, because, this use being separable at any moment (in thought at least) from the things themselves, it can be priced; it has a price distinct from the thing. So that, if I have given a thing of this sort to any one for his use, I am able to demand the hire, which is the price of the use that I have allowed him in it beyond the restitution of the thing itself, the thing having never ceased to be my property.”
“It is not the same, however, with those objects that are known to lawyers as fungible goods-things that are consumed in the using. For since, in the using, these are necessarily destroyed, it is impossible in regard to them to imagine a use of the thing as distinct from the thing itself, and as having a price distinct from the thing itself. From this it follows that one cannot make over to another the using of a thing without making over to him wholly and entirely the thing itself, and transferring to him the property in it. If I lend you a sum of money for your use under the condition of paying me back as much again, then you receive from me simply that sum of money, and nothing more. The use that you will make of this sum of money is included in the right of property that you acquire in this sum. There is nothing that you have received outside of the sum of money. I have given you this sum, and nothing but this sum. I can therefore ask you to give me back nothing more than this amount lent, without being unjust; for justice would have it that only that should be claimed which was given.”

In Book III,Ch.IX:
“So far as I know, the old Roman sources of law do not put this fiction formally. They say quite correctly of it that, in the loan, tantundem or idem genus, not simply idem is given back. But at any rate the fiction is there. If, e.g. the so-called depositum irregulare, where the depositary was allowed to employ on his own account the sum of money given over to his safe keeping, and to replace the deposit in other pieces of money, was treated as a depositum,*75 this construction can only be explained by supposing that the lawyers invoked the assistance of the fiction whereby the pieces of money replaced were considered identical with those given in for safe keeping. Modern jurisprudence has occasionally gone farther, and spoken explicitly of a “legal identity” between fungible goods.”

In III.IX.6:
“This second step in the fiction the jurists did make. They knew quite well, to begin with, that they were only dealing with a fiction. They knew quite well that the goods given back are not identical with the goods received; that the debtor does not hold and possess these goods during the whole period of the loan;-the fact being that, to attain the purpose of the loan, the debtor must, as a rule, very soon entirely part with the goods. Lastly, they knew quite well that, for the same reason, the debtor does not get any durable use out of the goods lent. But for the practical purposes and requirements of both parties it was the same as if everything actually were what it pretended to be, and therefore the jurists could employ the fiction. They gave expression to this fiction in the sphere of their science when, on the ground of it, they confirmed the expression for loan interest that had already found a home in the speech of the people, usura, money paid for use; when they taught that interest was paid for the use of the sum lent; and when they made out a usufruct even in perishable goods. This usufruct of course was only a quasi-usufruct, the lawyers being quite aware that they were only dealing with a fiction. On one occasion they even expressed this pointedly, in correcting a legislative act that had given the fiction too realistic an expression.”

“Finally, after many centuries of teaching that the usura was money paid for use, and in an age when the better part of the living spirit of classical jurisprudence had fled, and had consequently been replaced by a greater reverence for transmitted formulas, the justification of loan interest was sharply attacked by the canonists. One of their strongest weapons was the discovery of this fiction in regard to the uses of perishable goods. For the rest, their argument appeared so convincing that one could scarcely see how loan interest was to be saved, if the premiss were granted that there is no such thing as an independent use of perishable goods. Thus the fiction all at once attained an importance it never had before. To believe in the actual existence of the usus was the same thing as to approve of interest; not to believe in it seemed to force one to condemn it. To save interest in this dilemma, people were inclined to give the legal formula more honour than it deserved; and Salmasius and his followers exerted themselves to find reasons which would allow them to take the formula for the fact. The reasons they did find were just good enough to convince people eager to be convinced,-as already won over by a demonstration that was in other respects excellent,-that Salmasius, on the whole, had right on his side; while his opponents, who were evidently wrong as regards the chief point, were suspected even on those points where they were occasionally right. So it happened-not for the first, and certainly not for the last time-that under the pressure of practical exigencies an abortive theory was born, and the old fiction of the lawyers proclaimed as fact.”

Regarding the book and the author, Dr. James Bonar (in Quarterly Journal of Economics, April 1889) wrote that, while it would be bold to affirm that Professor Bühm-Bawerk has said the last word on the theory of Interest, his book must be regarded as one with which all subsequent writers will have to reckon.

Translator’s Preface
Introduction
Book I. The Development of the Problem
I.I The Opposition to Interest in Classical and Mediæval Times
I.II The Defence of Interest From the Sixteenth Till the Eighteenth Century
I.III Turgot’s Fructification Theory
I.IV Adam Smith and the Development of the Problem
I.V The Colourless Theories
Book II. The Productivity Theories
II.I The Productive Power of Capital
II.II The Naà¯ve Productivity Theories
II.III The Indirect Productivity Theories
Book III. The Use Theories
III.I The Use of Capital
III.II Historical Statement
III.III Plan of Criticism
III.IV The Use of Capital According to the Say-Hermann School
III.V The True Conception of the Use of Goods
III.VI Criticism of the Say-Hermann Conception
III.VII The Independent Use: An Unproved Assumption
III.VIII The Independent Use: Its Untenable Conclusion
III.IX The Independent Use: Its Origin in Legal Fiction
III.X Menger’s Conception of Use
III.XI Final Insufficiency of the Use Theory
Book IV. The Abstinence Theory
IV.I Senior’s Statement of the Theory
IV.II Criticism of Senior
IV.III Bastiat’s Statement
Book V. The Labour Theories
V.I [The Labour Theories]
Book VI. The Exploitation Theory
VI.I Historical Survey
VI.II Rodbertus
VI.III Marx
Book VII. Minor Systems
VII.I The Eclectics
VII.II The Later Fructification Theory
Conclusion

Author: international