IDEAS home Printed from https://ideas.repec.org/a/eee/exehis/v47y2010i4p420-442.html
   My bibliography  Save this article

Evading the 'Taint of Usury': The usury prohibition as a barrier to entry

Author

Listed:
  • Koyama, Mark

Abstract

The development of capital markets in medieval Europe was shaped for centuries by the religious ban on lending money at interest. This paper examines how this prohibition developed as the outcome of strategic behavior by religious, commercial and political elites. A model is developed to analyze this hypothesis and to examine how the usury prohibition developed over time. It suggests that an important reason for the persistence of the ban was that it created a barrier to entry that enabled secular rulers, the Church, and a small number of merchant-bankers to earn monopoly rents.

Suggested Citation

  • Koyama, Mark, 2010. "Evading the 'Taint of Usury': The usury prohibition as a barrier to entry," Explorations in Economic History, Elsevier, vol. 47(4), pages 420-442, October.
  • Handle: RePEc:eee:exehis:v:47:y:2010:i:4:p:420-442
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0014-4983(10)00026-4
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Reed, Clyde G. & Bekar, Cliff T., 2003. "Religious prohibitions against usury," Explorations in Economic History, Elsevier, vol. 40(4), pages 347-368, October.
    2. De Lara, Yadira Gonzalez, 2002. "Institutions for contract enforcement and risk-sharing: From the sea loan to the commenda in late medieval Venice," European Review of Economic History, Cambridge University Press, vol. 6(02), pages 257-262, August.
    3. De Lara, Yadira Gonzalez, 2001. "Enforceability And Risk-Sharing In Financial Contracts: From The Sea Loan To The Commenda In Late Medieval Venice," The Journal of Economic History, Cambridge University Press, vol. 61(02), pages 500-504, June.
    4. Jared Rubin, 2009. "Social Insurance, Commitment, and the Origin of Law: Interest Bans in Early Christianity," Journal of Law and Economics, University of Chicago Press, vol. 52(4), pages 761-786, November.
    5. Brighita Bercea & Robert B. Ekelund & Robert D. Tollison, 2005. "Cathedral Building as an Entry-Deterring Device," Kyklos, Wiley Blackwell, vol. 58(4), pages 453-465, November.
    6. Acemoglu, Daron, 2003. "Why not a political Coase theorem? Social conflict, commitment, and politics," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 620-652, December.
    7. Ekelund, Robert B. & Hebert, Robert F. & Tollison, Robert D. & Anderson, Gary M. & Davidson, Audrey B., 1997. "Sacred Trust: The Medieval Church as an Economic Firm," OUP Catalogue, Oxford University Press, number 9780195103373.
    8. Raymond de Roover, 1944. "What is Dry Exchange? A Contribution to the Study of English Mercantilism," Journal of Political Economy, University of Chicago Press, vol. 52, pages 250-250.
    9. de Roover, Raymond, 1946. "The Medici Bank Financial and Commercial Operations," The Journal of Economic History, Cambridge University Press, vol. 6(02), pages 153-172, November.
    10. Robert B. Ekelund Jr. & Robert F. Hebert & Robert D. Tollison, 2008. "The Marketplace of Christianity," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262550717, January.
    11. Kimball, Miles S, 1988. "Farmers' Cooperatives as Behavior Toward Risk," American Economic Review, American Economic Association, vol. 78(1), pages 224-232, March.
    12. Ekelund, Robert B, Jr & Hebert, Robert F & Tollison, Robert D, 1989. "An Economic Model of the Medieval Church: Usury as a Form of Rent Seeking," Journal of Law, Economics, and Organization, Oxford University Press, vol. 5(2), pages 307-331, Fall.
    13. Melitz, Jacques, 1971. "Some Further Reassessment of the Scholastic Doctrine of Usury," Kyklos, Wiley Blackwell, vol. 24(3), pages 473-492.
    14. Glaeser, Edward L & Scheinkman, Jose, 1998. "Neither a Borrower nor a Lender Be: An Economic Analysis of Interest Restrictions and Usury Laws," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 1-36, April.
    15. Sheilagh Ogilvie, 2007. "'Whatever Is, Is Right'?, Economic Institutions in Pre-Industrial Europe (Tawney Lecture 2006)," CESifo Working Paper Series 2066, CESifo Group Munich.
    16. Briggs, Chris, 2009. "Credit and Village Society in Fourteenth-Century England," OUP Catalogue, Oxford University Press, number 9780197264416.
    17. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
    18. Davidson, Audrey B. & Ekelund, Robert Jr., 1997. "The medieval church and rents from marriage market regulations," Journal of Economic Behavior & Organization, Elsevier, vol. 32(2), pages 215-245, February.
    19. Becker, Marvin B., 1957. "Three Cases Concerning the Restitution of Usury in Florence," The Journal of Economic History, Cambridge University Press, vol. 17(03), pages 445-450, September.
    20. Davidson, Audrey B., 1995. "The medieval monastery as franchise monopolist," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 119-128, June.
    21. Rubin, Jared, 2010. "Bills of exchange, interest bans, and impersonal exchange in Islam and Christianity," Explorations in Economic History, Elsevier, vol. 47(2), pages 213-227, April.
    22. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    23. Narayana R. Kocherlakota, 1996. "Implications of Efficient Risk Sharing without Commitment," Review of Economic Studies, Oxford University Press, vol. 63(4), pages 595-609.
    24. Dieter Schmidtchen & Achim Mayer, 1997. "Established Clergy, Friars and the Pope: Some Institutional Economics of the Medieval Church," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(1), pages 122-122, March.
    25. Peltzman, Sam, 1976. "Toward a More General Theory of Regulation," Journal of Law and Economics, University of Chicago Press, vol. 19(2), pages 211-240, August.
    26. André Lapidus, 1991. "Information and Risk in the Medieval Doctrine of Usury during the Thirteenth Century," Post-Print hal-00721678, HAL.
    27. de Roover, Raymond, 1967. "The Scholastics, Usury, and Foreign Exchange," Business History Review, Cambridge University Press, vol. 41(03), pages 257-271, September.
    28. Acemoglu, Daron & Johnson, Simon & Robinson, James A., 2005. "Institutions as a Fundamental Cause of Long-Run Growth," Handbook of Economic Growth,in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 6, pages 385-472 Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koyama, Mark, 2016. "The long transition from a natural state to a liberal economic order," International Review of Law and Economics, Elsevier, vol. 47(S), pages 29-39.
    2. Arruñada, Benito, 2016. "How Rome enabled impersonal markets," Explorations in Economic History, Elsevier, vol. 61(C), pages 68-84.
    3. Finley, Theresa & Koyama, Mark, 2016. "Plague, Politics, and Pogroms: The Black Death, Rule of Law, and the persecution of Jews in the Holy Roman Empire," MPRA Paper 72110, University Library of Munich, Germany.
    4. repec:eco:journ2:2017-02-07 is not listed on IDEAS
    5. Remi Jedwab & Mark Koyama & Noel Johnson, "undated". "Negative Shocks and Mass Persecutions: Evidence from the Black Death," Working Papers 2017-4, The George Washington University, Institute for International Economic Policy.
    6. Nogues-Marco, Pilar, 2017. "Money Markets and Exchange Rates in Pre-Industrial Europe," Working Papers unige:100808, University of Geneva, Paul Bairoch Institute of Economic History.
    7. Benito Arruñada, 2015. "The institutions of Roman markets," Economics Working Papers 1471, Department of Economics and Business, Universitat Pompeu Fabra.
    8. Mark Koyama, 2013. "Timur Kuran: The long divergence: how Islamic law held back the Middle East," Public Choice, Springer, vol. 154(3), pages 341-343, March.
    9. Murizah Osman Salleh & Aziz Jaafar & M. Shahid Ebrahim, 2011. "The Inhibition of Usury (Riba An-Nasi'ah) and the Economic Underdevelopment of the Muslim World," Working Papers 11002, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    10. Anderson, R. Warren & Johnson, Noel D & Koyama, Mark, 2013. "From the Persecuting to the Protective State? Jewish Expulsions and Weather Shocks from 1100 to 1800," MPRA Paper 44228, University Library of Munich, Germany.
    11. Garcia, Daniel, 2016. "A Pound of Flesh for the King," MPRA Paper 73266, University Library of Munich, Germany.
    12. repec:eee:exehis:v:65:y:2017:i:c:p:68-93 is not listed on IDEAS
    13. Zegarra, Luis Felipe, 2017. "Usury laws and private credit in Lima, Peru. Evidence from notarized records," Explorations in Economic History, Elsevier, vol. 65(C), pages 68-93.
    14. Eddy Fang & Renaud Foucart, 2014. "Western Financial Agents and Islamic Ethics," Journal of Business Ethics, Springer, vol. 123(3), pages 475-491, September.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:exehis:v:47:y:2010:i:4:p:420-442. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/622830 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.