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A New Role for an Old Rule: Usury and Speculation

photograph of GameStop store exterior sign

Can Aristotle tell us anything about short selling GameStop stock? I think so! But to understand what, we need to turn to one of the strangest parts of ancient and medieval ethics: the prohibition on loaning money at interest.

Part 1: An Old Argument Against Usury

Dante Alighieri, in Canto XI of his Inferno, places usurers in the 3rd ring of the 7th circle of hell. Those who lend money at interest, then, are placed lower in hell than the greedy, the gluttonous, and the lustful. In fact, they are placed in the same circle as (and a lower ring than) murderers!

Nor was Dante unusual in his condemnation of usury. Plato and Aristotle each condemned loaning money at interest, as did the Catholic Church for most of its history. Indeed, usury is still widely condemned by Islamic thinkers in light of passages in the Qur’an. There was reasonable, if not complete, uniformity amongst ancient and medieval ethicists in the condemnation of loaning money at interest.

I want to look at this old prohibition against usury, not because I think it applies today, but because I think part of the underlying principle might have new applications in the modern economy.

There tend to be two elements to the old arguments against usury. First, there is a confusing worry that there is something iffy about profiting off money as such. Second, there is a worry that usury contributes to inequality. Thus, Thomas Aquinas, in his discussion of usury, starts his objection by saying that to “take usury for money lent is unjust in itself, because this is to sell what does not exist, and this evidently leads to inequality which is contrary to justice.” Some philosophers emphasize one of these two points more than others (thus Plato seems to focus on inequality while Aristotle focuses on the unnaturalness of profiting off the medium of exchange); but I think to really understand the ancient worry we need to put them together.

Part 2: An Old Argument in New Terms

Economic activity should be contributive, not extractive. That is, we should profit by taking a proper subset of our contribution to the common good, not by simply shifting money from someone else to myself.

If I’m a farmer, I make money by growing crops that contribute to the wellbeing of others. I then sell those crops at a profit. My profit is a subset of the total good that I produce. If I’m a painter, I make money by improving the appearance of the buildings we live in. If I’m an academic, I make money by increasing the store of human knowledge or by educating others. In any of these jobs, even were I not to get paid, the world is a better place for my efforts. And because the world is a better place for my efforts, it is good that I be remunerated for what I produce.

In contrast, if I make a profit not by taking some share of the extra good I produce, but just by extracting goods from others and accruing them to myself, then that is not a legitimate way to make money. Such behavior is what is sometimes called ‘rent-seeking.’ The problem with extractive activities is that your good always comes at someone else’s expense. You are benefited only to the extent that others are hurt. (Note not any redistribution is rent seeking, mere redistribution from the rich to the poor actually can produce increased value since a dollar is worth more to a poor person than a rich person given the principle of diminished marginal utility.)

Now, it is, of course, possible to make the world a better place by the furnishing of money. Thus, suppose you come to me with a business idea but need an investment to start the business. I think it is a good idea, so I give you $10,000 in exchange for part ownership of the business. You put in the work, I put in the capital. Now, if this business thrives, say by selling pasta, then the world will be better off (people have access to pasta) and we will both make some profit.

But that is not what happens when I loan money at interest. Elizabeth Anscombe points out this distinction in her article “Two Philosophers’ Objections to Usury” where she discusses the “distinction between investing in a capital venture, with a view to sharing the profits if it should succeed, and demanding interest on the mere strength of a loan.” If I invest in your company, my profit scales with the amount of pasta you sell (namely the amount of good that you do). But if instead I simply loan you money at interest, then you owe me the same return whether the business succeeds or not. That is, I make a claim to the money whether or not you successfully contribute to the common good.

This, then, is the worry about profiting off money as such. It is not that you cannot use your current money to make more money (of course you can, by investing), the problem comes when the investment just is the money, because then your profiting is shorn off from any contribution to the common good.

Now, how is this connected with equality? Well, if profiting off just having money is a form of rent-seeking behavior, it is a particularly pernicious form because it is a rent-seeking behavior which siphons money from the poor to the rich. If the rich invest money with a poor person, the rich person will profit only if the poor person profits as well. But if instead the poor person takes out a loan with the rich, then the rich person profits regardless of the good that accrues to the poor person.

Part 3: An Argument in New Form

I don’t think this argument against usury still applies today. It does not, as far as I can tell, quite make sense. In particular, I think it fails to take seriously how the continual expansion of the economy means that it actually does create real value by having capital now rather than later. However, I do think there is a way to apply some of this reasoning to a lot of what goes on in various forms of speculative investing. Consider three different investments (I’m not an expert on this subject, so take my descriptions with a grain of salt).

Currency Speculation. Suppose that I think that in the future the value of the dollar will increase relative to the euro. Thus, I trade some of my euros with you in exchange for dollars as a form of investment. If the value of the dollar, then, goes up relative to the euro, I can pocket a nice little profit. But note, that if my dollars go up in relative value, your euros must have gone down. If we trade dollars for euros as an investment, then one of us can make money only if the other person loses it.

Shorting Stocks. I think a company is currently valued too highly. Because of that, I borrow a stock that you own, sell it to someone else, and then when the price of the stock falls buy a new cheaper stock to pay you back with. I make some money, you still have your original stock (plus whatever fee I paid to borrow it), but we did not actually create any value for the common good. So where did the value come from? It came because the person who bought the short stock lost money. Any dollar that I make by shorting a stock, someone else must have lost by buying that stock.

Bitcoin. Suppose I expect the value of bitcoin to increase in the future, while you are worried it will decrease. Thus, I buy some of your bitcoin, the price increases and I pocket a profit. Now, I was able to profit here, but only because you lost on the trade. Bitcoin, does not itself, contribute to the common good. Thus those who profit off bitcoin, it seems to me, might be profiting off money in precisely the way Aristotle was critical of.

These forms of financial speculation, then, really are in a deep sense like gambling. People often describe them as gambling in the sense that they are risky, but they are like gambling in another sense, that the money you make does not come from the creation of new wealth, but rather from extracting wealth from a loser. You win only to the extent that someone else loses; and that is no way to make a living.

Now, I don’t actually think all gambling is morally troubling. When my friends and I play bridge, I often like playing for a ‘penny a point.’ But we play for money, not because we actually want to make money, but because the game is more fun and the strategy more balanced when some money is on the line. If I win one night, and my friend wins the next, the actual financial exchange might cancel out, but we are all the richer at least in having played better games. I don’t think there is any problem with gambling, in this sense; rather I think gambling is wrong when one’s final end really is to take the money of someone else.

Now, economists do tell me that my examples are oversimplified and that there actually is real value created by these financial maneuvers, perhaps in a way that parallels my bridge example. The person who buys my euros might not be saving them, they might be planning to use them for something that contributes to the common good (though, again, I will make my money whether they do so or not). Likewise, economists tell me that short selling stocks plays an important role in preventing the development of financial bubbles.

And maybe that is right. But it is at least worth noting, that even if some value is created by these practices, the profit one pockets is not a percentage of that value. I profit because someone else loses money; were no one else to lose money my profit would be far less. I expect that most who engage in such financial speculation would not do so, unless they thought they were net pocketing the money of others (in a way I would play bridge for money, even if I expect everything to equal out in the end).


There is something morally troubling about ‘making money off money.’ That worry may no longer apply to all forms of usury (though it surely does still apply to exploitative loans like those provided by many payday lenders), but I think it may apply to new financial transactions that Plato and Aristotle had never conceived of.

Of course, I doubt many of my readers are hedge fund managers. So does this advice apply to you?

I’m not sure, but I think it might. Just as the hedge fund managers did something wrong, potentially so too did those redditors squeezing the short. That succeeded (to the extent it did), not because investment in GameStop contributed to the common good, but because others lost money.

Now I’ll be the first to admit I don’t feel much sympathy for hedge fund managers who lost money; and I already mentioned the possible positive good created by redistribution. But all the same, it doesn’t quite feel right. If these hedge fund managers really have rights to that money, then I’m not sure I should profit even at their expense. And if they don’t have rights to the money, I’d rather the redistribution come by taxation rather than playing a game they might still win.

My practical advice is this: Whenever you see yourself making a profit, ask yourself where the total value is being produced in the common good, and make sure, as a first step, that you are not profiting more than the value you create.

For-Profit Coronavirus Vaccines

photograph of ampoules in automatic inspection machine conveyor

Drug giants Pfizer and Moderna announced that they have developed COVID-19 vaccines which have effectiveness rates over 90%. But these are just two of the many drug companies contracted by the U.S. government to develop and distribute a vaccine to combat the pandemic through Operation Warp Speed. Unlike the other companies, however, Pfizer and Modern plan to profit off of their vaccine. Pfizer CEO Albert Bourla justified this move by explaining that he wanted to “liberate [Pfizer] scientists from bureaucracy…When you get money from someone that always comes with strings…they want reports.” Moderna meanwhile has yet to offer a justification for its decision to set vaccine sales at a profit price.

Should drug companies making COVID-19 vaccines sell these vaccines at cost? Is profiting off of a public health crisis wrong? And who bears the burden of ensuring public health crises are addressed effectively: government or private industry?

Major U.S. drug companies have taken a range of financial positions when it comes to coronavirus vaccines. Companies such as Johnson & Johnson and AstraZeneca have pledged that they will be producing and distributing vaccines at cost. In other words, they will be charging enough to cover the costs of material and labor, rather than charging more in order to increase their corporation’s net wealth. Pfizer is in a unique position, because while they have decided to their vaccine for profit, they have also refused government money for research and development. Perhaps the most extreme stance has been taken by Moderna, who received government funding for research and development and have announced they will not sell the vaccine at cost.

Is it reasonable to expect drug companies not to make a profit off of a potentially life-saving treatment? Those who see no problem with the profiteering of vaccines might argue that these companies deserve to profit from the hard work and innovation they have put into developing these vaccines at a record speed. Pharmaceutical companies’ right to private patents of the coronavirus vaccine argue that “IP (intellectual property) is a fundamental part of our industry and if you don’t protect IP, then essentially there is no incentive for anybody to innovate.” While this logic is often deployed in the interest of free market economies, the difference in the current situation is that companies withholding patents have been heavily funded by governments across the world, and are not necessarily selling a competitive product to consumers. However, Pfizer and Moderna are both drug companies, and some might point out that their entire business model is reliant on profiting off of death and disease.

Other defenders of Pfizer and Moderna might argue that it is the government, not private industry, which is tasked with addressing public health. Perhaps the larger problem is that we do not have a public healthcare system which can adequately develop medical technology to combat the COVID-19 pandemic. In fact, when the outbreak first started in the U.S., it was very apparent that the Center for Disease Control was far less equipped to handle a public health crisis than private industry. It is also important to remember, however, that the necessity for private intervention came after the U.S.’s decision not to use the World Health Organization’s distributed tests.

Those who are against the profiteering of COVID-19 vaccines by drug companies might point to the fact that these vaccines are not simply a novel innovation but are a necessity to ensure the public good and its health. Charging more than necessary for the vaccines could limit access and prolong the pandemic, leading to more lives lost. Oxfam has taken a strong stance on the necessity of affordable vaccines, recently stating that a life-saving vaccine would be “zero per cent effective to the people who can’t access or afford it.” Critics of vaccine profiteering might also argue that it is especially wrong for companies like Moderna to sell vaccines at a profit since they received government funding for research and development.

Another criticism of vaccine profiteering might be based on the morality of profiting off of crisis in general. In a previous article, I examined the moral distinctions between other kinds of crisis capitalizers. Drug companies such as Pfizer and Moderna hold the power to develop and distribute potentially life-saving vaccines. Perhaps this situation makes the desire for profit even more insidious. While nobody has necessarily called for these companies to operate below cost, it does not seem outlandish to expect a lack of self-interest given the scope of such a serious and pressing disaster. Some might also believe that some degree of altruism should be expected in this situation as these companies have the capacity to ensure these vaccines are as accessible as possible to every member of society. The billionaires running  vaccine research made billions of dollars in the days following their announcement of a potential coronavirus vaccine. Though some have claimed that COVID-19 is a “great equalizer” it is clear this is not the case. Income inequality has gradually become one of the major political issues in America and suggesting that the wealthiest members of society donate to help the rest of us is not as radical of a moral suggestion as it has sometimes been regarded.

Even scientists who develop vaccines find what these drug companies are doing unethical. In an interview, Margaret Liu, the chairperson of the International Society for Vaccines, called Moderna “greedy” and suggested that “the taxpayers who have funded all of this should have expected better negotiation from the US government.” Others have expressed opposition to private licenses and disdain for public institutions which allowed private drug companies to sign contracts without this guarantee. Philanthropic organizations, such as the Bill and Melinda Gates Foundation, have also been criticized for their support of pharmaceutical patents on a life-saving COVID-19 vaccine.

While it’s clear that certain pharmaceutical companies see the pandemic as an opportunity, economists have predicted that their profit will likely be short-lived. At this point, Operation Warp Speed has already contracted out funds with no strings attached. In the future, it is up to us to decide whether or not we are comfortable with public funds funneling directly into corporate profits.

Moral Distinctions between Crisis Capitalizers

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After announcing an expectation-exceeding fiscal quarter, Apple CEO Tim Cook unabashedly stated that despite “uncertain times, this performance is a testament to the important role our products play in our customers’ lives and to Apple’s relentless innovation.” Cook’s statement comes amidst waves of criticism due to Big Tech’s apparent invincibility to the pandemic-driven economic crisis. News of unprecedented profits and increasing stock shares is often juxtaposed to highlight the giant disparity between a few lucky corporations and billionaires with the majority of Americans and businesses financially suffering. While some activists and politicians have proclaimed the gross immorality of those continuing to profit during the pandemic, there has been little discussion surrounding the moral distinction between these so called “crisis capitalizers.” Is there something inherently immoral about profiting from the pandemic? And is there significant moral distinction between profiting off of a crisis rather than profiting during it?

The sheer inequality of the current economy might be enough to argue that anyone still profiting during this time has an obligation to help those suffering. Since March, 51 million Americans have filed for unemployment. The United States just reported its worst economic drop ever recorded in one quarter, with US GDP collapsing by 32.9%. To make matters worse, over 40 million Americans are at risk for eviction, after relief programs expired on July 31 with no economic safety net in place. Meanwhile, the profits of businesses and individuals in the tech industry have been soaring. The Guardian reported that Amazon’s profit over the past quarter was $5.2 billion, shockingly higher than this time last year. Both Facebook’s and Apple’s quarterly revenue have also exceeded projections. This stark economic inequality between the majority of Americans and the “1%” might be immoral in itself. When one considers the fact that these very same corporations have notoriously been exempt from paying taxes in recent history, it is troubling to witness their general lack of action in contributing to alleviating the economic crisis fueled by the pandemic. In terms of the billionaire individuals at the helm of these tech corporations, only about 1 in 10 billionaires worldwide have verifiably contributed monetary donations to COVID-19 relief efforts. The moral obligation for wealthy individuals to act is even more pertinent considering the underwhelming response to both the health and economic crisis by the United States government.

However, others have argued that profiting during the pandemic is not immoral, and should in fact be celebrated as a sign of adaptation and resilience. In an article on Medium, Bloomberg Beta head Roy Bahat argues that it is important to acknowledge the difference between taking advantage of the pandemic and adapting to it. He considers it “okay, even noble for businesses to thrive right now,” since companies are “helping to keep people employed.” Bahat makes a point, especially considering the fact that the US is facing one of its worst unemployment crises in history.

Is there something to be said for businesses’ ability to adapt? Many independent entrepreneurs have adapted to the crisis such as those on popular small business website Etsy, which is projected to double its quarterly income. The success of Etsy has also meant the success of “anyone with creativity and 20 cents.” Additionally, the profits of many of the thriving corporations are the product of their sales revenue, reflecting consumption of products. One might argue that if we all stopped buying products from Amazon and Apple, and stopped using Facebook, perhaps the revenue of these organizations would not have increased during the pandemic. If we consider current corporate profits are simply a reflection of consumer demand, it appears as though these companies have adapted to fill an economic niche. In fact, some might argue these very corporations are actually filling a crucial role in ensuring access to necessities during a crisis.

While the morality of profiting during the pandemic might be considered up for debate, can the same be said for profiting off of the pandemic? Profiting off of a crisis can be considered immoral from many different ethical perspectives. While profiting during the pandemic clearly requires the participation in an inequitable economy, profiting off of the pandemic could be considered more sinister in both its proximity to the crisis itself and in its willingness to use suffering for personal gain. If one believes healthcare to be a human right, the entire concept of private industry profiting off of medical assistance is potentially immoral. Those who identify strongly with Kantian ethics would be most disturbed by instances during the pandemic where access to goods and services is limited to use people’s need to survive as a means to an end. Profiting off of crisis also is potentially immoral because it might showcase inherent selfishness, which reflects a corrupted internal character. Lastly, profiting from the pandemic might even be considered wrong on consequentialist grounds if withholding goods and services necessary for survival leads to further sickness and economic suffering. This is especially true if individuals are unable to afford/access healthcare to treat or prevent COVID, or if an individual/company is attempting to profit off of phony healthcare products which arguably endanger the general public.

Alternatively, some might argue that though the medical/pharmaceutical industry is directly profiting from the pandemic, it is more consequentially balanced than its critics paint it to be. Take the widespread demand for masks for instance. Masks have been prescribed by public health officials to slow the spread of coronavirus, yet masks remain a for-profit industry. While some politicians, like Senator Bernie Sanders, have argued masks should be subsidized and free for all, there remains a giant market for masks — both from large medical companies and small independent businesses using their skills to make decorative or high-end masks. From a utilitarian perspective, the market for medical supplies to combat COVID is promoting good as widespread mask use has been projected to save lives. Cheap medical masks are largely accessible, protecting those who wear them and profiting the companies that sell them. Higher end customizable ones arguably encourage more people to wear them and give satisfaction both to those selling them and those buying them. Similarly, pharmaceutical companies profiting off of test kits — and potentially vaccines in the future — could be argued to be a net positive (from a consequentialist perspective) if these products are largely available to the general public. Perhaps it is especially important that private industry take a role in developing a vaccine for COIVD-19 considering the fact that most medical research in the US is already privately funded.

Perhaps even more complicated are those who are less clearly profiting directly off of the pandemic. Large department stores, like Walmart and Target, sell PPE and important cleaning products, but also reportedly resulted in an uptick in sales items related to quarantine and work-from-home. For Target, the sales bump in April actually exceeded its typical holiday profits. Whether or not to categorize such organizations and profits within the “profit off of” or “profit during” category depends largely on what types of products we consider necessities, how those goods get marketed to consumers, and who benefits.

Whether or not we believe profiting during the pandemic is immoral depends largely on if we interpret these profits to reflect adaptation or exploitation. And that perception likely rests on whether or not we believe the sale of those products tends to produce the most good for the most amount of people. Our answers to these questions go a long way in determining if we truly believe there exists a moral distinction between these “crisis capitalizers.”

Social Issues as Product Promotion: Exploitation or Artistic License?

On April 4, Pepsi recalled an ad less than 24 hours after its release on account of ridicule for its insensitivity towards social justice movements. In the ad, Kendall Jenner is in a photoshoot when she notices a protest occurring outside. Prompted by a head nod from one of the protesters, she joins the crowd and eventually hands the police officers on duty a Pepsi; outbursts of applause and cheering come from the crowd when the officer accepts the Pepsi.

Continue reading “Social Issues as Product Promotion: Exploitation or Artistic License?”