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Social Insurance, Commitment, and the Origin of Law: Interest Bans in Early Christianity

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  • Jared Rubin

Abstract

Despite the historical importance of ideology-based, economically inhibitive laws, we know little about the economic factors underlying their origin. This paper accounts for the historical emergence of one such law: the Christian ban on taking interest-a doctrine that shaped the evolution of numerous financial contracts and related organizational forms. A game-theoretic analysis and historical evidence suggest that the Church's commitment to providing social insurance for its poorest constituents encouraged risky borrowing, which the Church attempted to limit by banning interest. The analysis highlights the applicability of the rational choice framework to seemingly irrational actions and laws, the role of nonmonetary sanctions in circumventing commitment problems, and the importance of economic forces vis-Ã -vis ideology. (c) 2009 by The University of Chicago. All rights reserved.

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  • 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.
    • Handle: RePEc:ucp:jlawec:v:52:y:2009:i:4:p:761-786
    DOI: 10.1086/595796
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    2. Michalopoulos, Stelios & Naghavi, Alireza & Prarolo, Giovanni, 2016. "Islam, inequality and pre-industrial comparative development," Journal of Development Economics, Elsevier, vol. 120(C), pages 86-98.
    3. Becker, Sascha O. & Rubin, Jared & Woessmann, Ludger, 2020. "Religion in Economic History : A Survey," The Warwick Economics Research Paper Series (TWERPS) 1273, University of Warwick, Department of Economics.
    4. Mark Koyama, 2019. "Peter T. Leeson, WTF?!: An economic tour of the weird," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 32(1), pages 81-84, March.
    5. 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.
    6. 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.
    7. 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.

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