Economic Analysis in Talmudic Literature

Economic Analysis in Talmudic Literature Supplements to The Journal of Jewish Thought and Philosophy edited by Leora...

Author: Roman A. Ohrenstein | Barry Gordon

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Economic Analysis in Talmudic Literature

Supplements to The Journal of Jewish Thought and Philosophy edited by

Leora Batnitzky (Princeton University) Christian Wiese (University of Sussex) Elliot Wolfson (New York University)

VOLUME 8

Economic Analysis in Talmudic Literature Rabbinic Thought in the Light of Modern Economics Third Revised Edition

by

Roman A. Ohrenstein and Barry L.J. Gordon

LEIDEN • BOSTON 2009

This book is printed on acid-free paper. Library of Congress Cataloging-in-Publication Data Ohrenstein, Roman A. Economic analysis in talmudic literature : rabbinic thought in the light of modern economics / by Roman A. Ohrenstein and Barry Lewis John Gordon. — 3rd rev. ed. p. m. c Includes bibliographical references and index. ISBN 978-90-04-17462-7 (hardback : alk. paper) 1. Economics—Religious aspects— Judaism. 2. Talmud—Criticism, interpretation, etc. I. Gordon, Barry. II. Title. BM509.E27O38 2009 296.1’206—dc22 2009007857

ISBN 978 90 04 17462 7 © Copyright 2009 by Koninklijke Brill NV, Leiden, The Netherlands. Koninklijke Brill NV incorporates the imprints Brill, Hotei Publishing, IDC Publishers, Martinus Nijhoff Publishers and VSP. All rights reserved. No part of this publication may be reproduced, translated, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior written permission from the publisher. Authorization to photocopy items for internal or personal use is granted by Koninklijke Brill NV provided that the appropriate fees are paid directly to The Copyright Clearance Center, 222 Rosewood Drive, Suite 910, Danvers, MA 01923, USA. Fees are subject to change. printed in the netherlands

To the sacred memory of my beloved parents, Joseph and Gena, to my older sisters, Hana and Rivka, and to my eight-year-old baby sister, Fela, all who perished during the Shoah in the death camp in Belzec, eastern Poland in 1942. —R.A.O.

CONTENTS Foreword ..................................................................................... Clement Tisdell, Queensland University, Australia Preface ......................................................................................... Acknowledgments ...........................................................................

ix xiii xvii

PART ONE

BACKGROUNDS Chapter One The Talmud, Its Method and Related Issues ....................................................................................... Chapter Two Old Wisdom and the Written Law ..................

1 25

PART TWO

MACRO-ECONOMIC ISSUES Chapter Three Economic Self-Interest and Social Progress ................................................................................... Chapter Four Business Cycle Analysis: The Talmudic Insight .....................................................................................

47 61

PART THREE

MICRO-ECONOMIC ISSUES Chapter Five Time Dimension, Opportunity Cost and Market Behavior ..................................................................... Chapter Six Game Theory—The Talmudic Minimax .......... Chapter Seven Risk, Uncertainty and Expectation ................

81 109 125

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contents PART FOUR

DISTRIBUTIONAL EQUITY Chapter Eight

The Welfare Dimension ..................................

145

PART FIVE

THE VALUE OF PERSONS Chapter Nine Categories of Value .......................................... Chapter Ten Human Capital Issues .......................................

171 185

PART SIX

IMPACT ON WESTERN ECONOMICS Chapter Eleven

Jews in the European Economy ....................

203

Name Index ................................................................................ Subject Index .............................................................................. List of Abbreviations ..................................................................

225 230 233

FOREWORD This new edition of Economic Analysis in Talmudic Literature incorporates major extensions to the first edition published in 1992 by E.J. Brill. A second edition published by Vantage Press, appeared in 2003 and incorporated many additions which made the highly acclaimed first edition an even more valuable scholarly work. The tasks of preparing the second edition and the current edition fell to Professor Roman Ohrenstein due to the untimely death of the co-author of the first edition, Professor Barry Gordon. The third edition retains the extensions made in the second edition and provides further valuable insights into the relevance of Talmudic thought to current economic problems and to interpretations of modern economic theory. For example, it is shown to have relevance to current economic concerns about economic recession and inflation in the United States and elsewhere. New insights are added to its relevance to game theory, such as some of the most recent developments outlined by Robert Aumann. Economic Analysis in Talmudic Literature is the only book in existence to provide an in-depth analysis of economics in the Talmud. It highlights paths by which the Talmudic tradition may have influenced the development of Western economic thought, giving particular attention to the impact of cultural interpenetration in the Iberian Peninsula and to interaction between the Christians and the Spanish Jewry, which accelerated the conversion of Jews to Christianity. Although the extent of the influence of Talmudic economics on modern Western economic thought must remain uncertain as well as the exact mechanisms of this influence, it is abundantly clear from this work that many of the central concepts and theories of modern economics have been foreshadowed in the Talmud and in discussions surrounding it. In this treatise, Professor Ohrenstein has significantly extended the original edition of this work by adding extra sections and material including further elaboration, elucidation and clarification of the original text. In this volume, for instance, there is new material on the time dimension in relation to interest, the quantity theory of money and the business cycle, and on the welfare dimension of economics, which indicates that Talmudic scholars had, for example, recognised and made use of the concept of a Pareto improvement. As pointed out in the earlier

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editions of this work and as also emphasised in this edition, Talmudic discussions give considerable attention to the paradox of value and to the capacity of self interest to promote or damage the common good. The Talmudic tradition also makes use of concepts (such as minimax gain) now inherent in game theory, to consider social conflict and suggest means of conflict resolution. In this new edition, extra material is provided on this aspect. In recent years, there has been growing interest in and development of psychological and behavioural economics. Roman Ohrenstein (2007) explores the association between these modern developments in a special issue of The American Journal of Economics and Sociology (Oct. 2007, Vol. 66, No.4). Significantly, this issue was dedicated to Roman Ohrenstein, which honors his scholarly work. It contains a portrait of him, his biography and his article, The Talmudic Doctrine of the ‘Benefit of a Pleasure’: Psychological Well-Being in Talmudic Literature. The article provides additional examples of relevance of Rabbinic thought to modern economics. It also provides additional new insights into why and how Professor Ohrenstein developed his expertise in the relationship between Talmudic literature and economic thought. Of particular significance is the dedicatory inscription which appears on the front cover of that special issue. It reads: “with special appreciation of the work of Roman A. Ohrenstein” who was named a distinguished professor and author. . . . This, then, is a clear reference to his achievement in the field of Talmudic economics. This Third Edition is, indeed, a testimony to the wide recognition this treatise has received in the world of scholarship. It is noteworthy, that S. Todd Lowry (2005) of the Washington and Lee University, in his insightful review of the second edition of the book, and Mordechai Kreinin (1995) of the Michigan State University, in his review of the first edition, both point to Ohrenstein’s creativity in the sphere of Talmudic economic thought. Thus, Professor Lowry states that “Chapters 4–10 systematically mine extensive Talmudic commentary pertinent to economic issues that crystallized into modern interdisciplinary categories”. And with regard to the Spanish Salamancan tradition (Ch. 11), which was augmented by many converted Jewish scholars with their scholarly contribution, he opines that “Ohrenstein provides a provocative and enlightening documentation of the vivid facet of the Hebraic intellectual tradition that was at the elbow of enlightenment scholarship.”

foreword

xi

Mordechai E. Kreinin, in his full-length review of the first edition of this book, pointed out that Jewish law and Jewish thought are not stationary but in a constant condition of change. “Rabbinical writings were always concerned with adaptation of the original text and strictures to changing circumstances and ways of life” (Kreinin, 1995, p. 359). This aspect is reinforced by Ohrenstein’s updated exposition of developments in the Talmudic concept of interest. Emphasis in Talmudic thought changed from stressing the burden of interest on the borrower to its importance as compensation to the lender for waiting. This later emphasis was a forerunner of more modern theories such as those of Alfred Marshall, which, to some extent, see interest as a reward to the lender for abstinence from direct use of the funds and for waiting, which involved foregone economic opportunities. Concepts already present in Talmudic economic analysis can be found in the work of economists Alfred Marshall, Mandeville, Adam Smith, Böhm-Bawerk, Irving Fisher, and the work of von Neumann and Morgenstern on game theory and social conflict resolution and that of Robert Aumann. The authors, however, do not claim that these economists were directly influenced by Talmudic thought in their views but indirect influences on some of early post-Mercantile economists are possible, for example, through the considerable influence of Judaic thought in Spain commencing in the fourteenth century. Professor (Rabbi) Ohrenstein has expertly extended and updated the original version and the second edition of this work. The first edition was described by Kreinin (1995, p. 368) as “an impressive and exemplary book”. Those who have read the earlier editions will profit further by reading this edition and those who have not done so will profit by a superior introduction to this subject. Clement Tisdell Professor Emeritus of Economics The University of Queensland Brisbane 4072 Australia

xii

foreword References

Kreinin, M.E. (1995). “Economic Analysis in Talmudic Literature” by Roman A. Ohrenstein and Barry Gordon (New York: Koln, 1991), Research in the History of Economic Thought and Methodology, Vol. 13 pp. 359–368 JAI Press, Greenwich, Connecticut. Lowry, S.T. (2005). “Roman A. Ohrenstein, Economic Analysis in Talmudic Literature: Rabbinic Thought in the Light of Modern Economics, Second Edition, revised and enlarged. (New York: Vantage Press, 2003) pp. xx, 233. . . .”, Journal of the History of Economic Thought, pp. 353–354. Ohrenstein, R.A. (2007) The Talmudic doctrine of the ‘benefit of a pleasure’. Psychological well-being in Talmudic literature. American Journal of Economics and Sociology 66(4), 661–680.

PREFACE Economics, as we know it today, began to take shape in Europe during the eighteenth century. Yet, economic analysis has a much longer lineage. Such analysis may be found in the writings of the ancient Greek philosophers, Islamic scholars, medieval schoolmen, and the mercantilists of the sixteenth and seventeenth centuries. The literature of ancient China, as well as that of India, also provide instances. There exists, however, a vast, ancient Jewish literature which contains a wealth of analytical insights on economic issues. This Jewish contribution has been the subject of little scientific investigation in the light of modern economics. The predominant source of that contribution is found in the surviving writings of antique Jewish civilization—the Talmud. Through study of the original dialectics of the Talmud, the present author has been able to discern a wide range of economic discussions that display an extraordinary degree of sophistication when viewed from either contemporary or modern perspectives. Some of these discussions are extensive in scope, singular in approach, analytic in method, and profound as to insight. Sections of the Talmud, and the reflections of subsequent commentators on those passages, are rich in concepts and in statements of functional relationships that were later to become significant in the reasoning of the political economists or that of their professional-academic successors. It is in this latter sense that the Talmudic tradition embodies thought that can be said to “anticipate” later developments. This is not to claim that economists, modern or contemporary, have drawn consciously on Talmudic sources. Nor is it to claim that economics, as a discipline, was conceived or even contemplated by the rabbis. These latter were concerned with matters legal, moral, and theological, as were later the medieval scholastics. Nevertheless, in the process of investigating some of those matters, they were led to insights that were to emerge again in a new disciplinary context. This book attempts to identify certain of those insights. Its findings are intended to be of interest to students of the history of economic thought and of the Talmud, as well as to the general reader in the broad field of the history of ideas.

xiv

preface Method of Inquiry

In order to understand the sages’ universe of discourse, the original text of the Talmud must be studied along with the contributions of definitive commentators. Reference to the commentators is of assistance in establishing when certain conclusions were reached about the meaning of the ancient text. This has to be emphasized, because lately some of the writers on Talmudic economics claim that the given text be examined without the aid of the medieval Talmudic commentators. But in so doing, one will be acting not only as the sole interpretor of the complex Talmudic dialectics, but, ironically, will also tend to proffer his own “renditions.”* Clearly, that approach is neither consistent nor sound. However, in the coincidental treatment of the Talmud and its commentaries, due respect must be given to the differing historical context, especially to its dating, which we are carefully pursuing. I believe this to be the correct approach toward the proper comprehension of the Talmudic complexities. The Previous Edition The first edition was published by the renowned Brill Academic Publishers in The Netherlands. It was coauthored by my dear friend, Professor Barry Gordon. Alas, he passed away in 1994, and I cherish his memory as well as his scholarly legacy. Thus, the style and features to which Barry contributed are continued in this new volume. Needless to say, it has been a great honor for me to have had Professor Barry Gordon as my coauthor. The Present Edition This third edition has been revised and expanded. To broaden the scope of our investigation, new features were added, such as the “Mathematical * The following statement is typical: “I have taken the liberty to substitute my own rendering when this seems to be necessary in order to bring out the economic content or to preserve the flavor of the original” (Ephriam Kleiman), “Concepts in Talmudic Literature.” History of Political Economy, (1987) 19:2, p. 265, fn. 6.

preface

xv

Dimension,” the “Time Dimension,” and the “Welfare Dimension,” as well as other elaborations and improvements. Part One is devoted to background analysis. The opening chapter is designed for readers unfamiliar with the Talmud. It offers an introduction to the work’s scope and development, some illustrations of its methodology, plus features that are basic to free inquiry. The second chapter outlines the biblical background to Talmudic economic analysis, with particular reference to economic observations in the Wisdom tradition, and to the economic content of the legal codes contained in the Torah (Pentateuch). Both the Wisdom tradition and the law codes were vital elements in the intellectual millieu that gave rise to the Talmudic tradition. As such, they provided points of departure for rabbinic debate. Parts Two, Three, Four, and Five take up particular issues in economic analysis; they compare the relevant Talmudic treatments of those issues with those that correspond in the literature of economics. Part Two deals with questions of macroeconomic significance. In Part Three, the focus is on microeconomic matters. Part Four concerns the Talmudic treatment of social welfare and its economic ramifications. Part Five deals with the various categories of value and human capital issues. Part Six considers the heretofore unexplored issue whether Talmudic thought may have had an impact on European economics. It is suggested that Spanish economic thought may constitute one of the main conduits through which Talmudic economic thought flowed into the West. This author has been recognized as a pioneer in the study of socioeconomic issues in Talmudic sources, and in 1985 was awarded with a citation by the American Biographical Institute for “Pioneering Work in Economic Thought in Talmudic Literature.” During my research in this field for over thirty-five years, I have benefited greatly from the assistance and encouragement by a number of scholars. I wish to acknowledge my profound debt to my past erudite teachers of Talmud at the Yeshivot in Europe, and in particular, to my teacher of Talmud at the Jewish Theological Seminary in New York, Professor Saul Lieberman, a world-renowned Talmudic scholar of the twentieth century. Their scholarship and dedication have been a constant inspiration to me. I am especially indebted to the eminent economist, the late Professor Arthur F. Burns, who was both my teacher and mentor at Columbia

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University. It was Professor Burns who encouraged me to explore the economics of the Talmud. I am also indebted to Professor Clem Tisdell of Queensland University, Brisbane, Australia, an internationally recognized scholar in the science of Economics. While Professor Tisdell was Chairman of the Economics Department at the University of Newcastle, I was invited in 1984 to serve as Visiting Professor at that university. Again, in 1989, then Chairman of the Economics Department at Queensland University, Professor Tisdell invited me to conduct a seminar on “Games Theory in Talmudic Literature.” In both instances, I was deeply impressed by his scholarly insight and constructive criticism. Indeed, Professor Tisdell has since then been an inspiration to me and a guiding spirit in the pursuit of my scholarly endeavors. I am profoundly grateful for his valuable perspectives that the Foreword provides. The author is also greatly indebted to Dr. John C. O’Brien, professor of Ethics and Economics, California State University, Fresno, California. For many years, Professor O’Brien, a distinguished social economist, has been in the forefront of those promoting the type of research of which the present volume is one example. Amongst the other scholars whose assistance has been of immense benefit, I would like to thank, in particular, Dr. Will Lissner, former editor-in-chief, American Journal of Economics and Sociology; Dr. Laurence Moss, distinguished economic historian and current Editor-in-Chief of The American Journal of Economics and Sociology; Rabbi Murray Stadtmauer; Dr. Paul Hait, former executive vice-president, New York Board of Rabbis; and Dr. Stephen Moresh, professor of Mathematics, City University of New York. I also acknowledge my debt to former teachers and friends: the late Dr. Tzemach Tzamrion, (University of Haifa); and the late Dr. Philip Alstat ( Jewish Theological Seminary of America.) In addition, I wish to thank the present editors of the International Journal of Social Economics, the Nassau Review, and the American Journal of Economics and Sociology, Brill Academic Publishers, who have granted permission for the author to draw on material first published in these periodicals. Last but not least, I am particularly grateful to my dear wife, Ruth, for her constructive criticism and for helping me in many ways to produce this enlarged volume. —R.A.O.

ACKNOWLEDGMENTS We are indebted to the following publishers for permission to reproduce and/or paraphrase the material from the below listed works published by them. American Journal of Economic Sociology, New York, N.Y., U.S.A. Roman A. Ohrenstein, “Economic Thought in Talmudic Literature in the Light of Modern Economics.” Copyright 1968. Ohrenstein “Economic Self-interest and Social Progress in Talmudic Literature.” Copyright 1970. Ohrenstein “Economic Analysis in Talmudic Literature: Some Ancient Studies of Value.” Copyright 1979. (Also published by the “American Society for Information Science” in microfiche. Copyright 1980.) International Journal of Social Economics (Incorporating, The International Review of Economics and Ethics), MCB University Press, Bradford, West Yorkshire, England. Ohrenstein “Value Analysis in Talmudic Literature in the Light of Modern Economics.” Copyright 1986. Ohrenstein & Barry Gordon “Some Aspects of Human Capital in Talmudic Literature.” Copyright 1987. Ohrenstein & Barry Gordon “Quantitative Dimensions of Human Capital Analysis in Talmudic Tradition.” Copyright 1989. Ohrenstein “Game Theory in the Talmud—An Economic Perspective.” Copyright 1989. Ohrenstein “Risk, Uncertainty and Expectation.” Copyright 1991. Ohrenstein “The Socioeconomic Time Dimension in Talmudic Literature.” Copyright 1996. Nassau Review. Garden City, New York. Ohrenstein “Economic Aspects of Organized Religion: The Early Phase.” Copyright 1970. Ohrenstein “Economic Aspects of Organized Religion: Perspective and Analysis of the Modern Phase.” Copyright 1971. Ohrenstein “Some Studies of Value in Talmudic Literature in the Light of Modern Economics.” Copyright 1981.

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acknowledgments

E.J. Brill Publishers, Leiden, New York, Koln. Ohrenstein “Talmud and Talmudic Tradition” published in Ancient and Medieval Economic Ideas and Concepts of Social Justice, edited by S. Todd Lowry and Barry Gordon. Copyright 1998.

PART ONE

BACKGROUNDS

CHAPTER ONE

THE TALMUD, ITS METHOD AND RELATED ISSUES The Talmud (Hebrew; Learning) is a veritable encyclopedia of Jewish law, literature and science. It encompasses an entire antique civilization, extending from the third century B.C.E. to the fifth century C.E. The efforts of the scholars over the eight hundred years involved, were directed in particular at the exposition and development of the religious, moral and civil law of the Hebrew Scriptures. The result was the erection of a vast storehouse of knowledge and information. In the Talmud almost every facet of human endeavor is reflected. The subjects of talmudic discourse include law, ethics, history, economics, medicine, philosophy, science, mathematics, theology, and folklore, among others. There are two Talmudim (Talmudim: the Hebrew plural); the Palestinian ( Jerushalmi ca. 100 B.C.E.–425 C.E.) and the Babylonian (ca. 300 B.C.E.–500 C.E.). Of the two, the Babylonian is fuller and more systematic.1 The text consists of approximately two and one half million words on some 5,894 folio pages. About one-third is Halakha (legal) and two-thirds Aggada (narrative). Although in matters of religious law, the latter is considered to be more authoritative, yet in matters of historical fact, the former contains “more ancient and hence more trustworthy data” concerning the Judaism of Palestine.2 Since Aramaic was the language of discourse, even among the scholars, over the period concerned, both Talmudim are in Aramaic. However, each employed a different dialect. Within the Talmud, there are two main sections: the Mishnah and Gemara. The Mishnah (“Repetition”), is a compilation of legal, ethical and theological teachings developed by the scholars in the land of Israel, called Tannaim. In the present form, the Mishnah is the work of

1 For the Babylonian Talmud, see Talmud Bavli, Rom edition (Vilno, 1911). An English translation is The Talmud, edited by Isadore Epstein (Soncino Press, 1938). There are other editions and translations. 2 Herman L. Strack, Introduction to the Talmud and Midrash (New York: Harper and Row, 1920), p. 69.

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R. Judah the Patriarch (ca. 140–220 C.E.). The Gemara (Aram. “study,” “completion”), a designation for the comment, oral tradition and discussion about the Mishnah, is the work of the later sages in Eretz Israel and Babylonia, called Amoraim (i.e., “speakers,” “interpreters”). The title Amora is derived from Hebrew amar, meaning “to speak,” “to interpret.” It is a class of talmudic authorities who lived after the final redaction of the Mishnah, thus adding a second element to the development of the oral law. Eventually, the Mishnah and the Gemara were combined in one work and the word Talmud came into use as an appellation of the whole work. The Babylonian Talmud and the Jerusalem Talmud are essentially the interpretation and the elaboration of the Mishnah as it was carried on in the great academies of Babylon and in Eretz Israel. The two groups were in close contact through frequent visits. Outside of the Talmud itself, the talmudic tradition includes important Tannaitic material which has been preserved in various collections. These are Baraitot (i.e., a reservoir of Tannaitic traditions), Tosephtah (“Additions”), supplementing the Mishnah, and Midrash (“Expositions”), involving textual expounding of legal and non-legal teachings, which are also part of the talmudic spectrum. This tradition was subsequently continued by a host of commentators in the Middle Ages, and Rabbinic scholars debate interpretations of the law to this day. The Origin of the Talmudic Tradition There exists an ancient authoritative Jewish tradition that both the Written Law and the Oral Law were received by Moses at Sinai. This dual Torah has been known as Torah She-be Ketav (“the Torah in Writing”) and Torah She-beal pe (a “Torah orally transmitted”). Both the Book and the oral tradition were carefully preserved and assiduously transmitted from generation to generation until the latter was finally written down by the sages. A traditional chronological record of the origin and transmission of the oral tradition in Judaism states: Moses received the Torah on Sinai and handed it down to Joshua; Joshua to the elders; the elders to the Prophets; the Prophets handed it down to the Men of the Great Assembly.3

3 Mishnah ABOT, 1:1. The Mishnah (c. 300 B.C.E.–200 C.E.) opens with this statement to emphasize its veracity and originality.

the talmud, its method and related issues

5

Other Mishnaic sources amplify this by means of solemn testimony. Thus, the Mishnah Pexah 2:6 relates that: Nahum the Scribe said: I have a tradition from Rabbi Measha who received it from Abba who received it from Zugot (i.e. early sages) who received it from the Prophets as a law given from Sinai.

Likewise, in Mishnah Yadaim 4:3: “I have a tradition from R. Johanan b. Zaccai who heard it from his teacher and his teacher from his teacher as a law given to Moses from Sinai.”4 When we compare this tradition to those that were common in other antique cultures and creeds, there is a sound basis for the existence of an oral tradition along with the Written Law. Other ancient peoples entertained similar notions. Sophocles, for instance, refers to the “immutable unwritten laws” as he made Antigone justify the burying of Polinices against the order of King Creon, claiming that these laws “were not born today nor yesterday, they die not and none knoweth whence they sprang.”5 Aristotle, in his Rhetoric, spoke of written and unwritten universally recognized laws. And Cicero (106–43 B.C.E.) echoes this perception in The Laws (De legibus) as he speaks of laws “written and unwritten,” universal and unchangeable, or “natural law.”6 Similar distinctions were made by Philo (ca. 25 B.C.E.–40 C.E.) and particularly by Josephus Flavius (ca. 38 C.E.–100 C.E.). Josephus wrote: By the side of Scripture there had always gone an unwritten Torah, in part interpreting . . . the written Torah, in part supplementing it. The existence of such a tradition in all ages is indubitable.7

4 For an erudite discussion of this subject see, Dov Zlotnick, The Iron Pillar—Mishnah: Redaction Form and Intent (Ktav Publ. House, 1988), p. 42ff. 5 See, Antigone, by Sophocles (496–406 B.C.E.), translated by Robert Fagles, printed in The Bedford Introduction to Literature, by Michael Meyer, Second Edition (St. Martin’s Press, 1990), p. 1020. 6 See, The Laws, by Cicero, translated by Francis Barham in 1841, printed in Introduction to Contemporary Civilization in the West, Vol. 1 (New York: Columbia University Press, 1950), pp. 256–263. For more on this subject, see E. Nielson, Oral Tradition (London, 1961). 7 See, Josephus, Antiquities of the Jews, XIII, 10:6. Interestingly, a similar view was later taken by some Counter-Reformation Catholic clergy at the Council of Trent. They defended the authority of tradition in a way similar to the Jewish idea of the Dual Torah. A statement a.o., reads: “This truth of the gospels is contained partly in written books, partly in unwritten tradition.” On this see, J. Pelican, The Christian Tradition, A History of the Development of Doctrine, Vol. IV (Univ. of Chicago Press, 1984), p. 277. Emphasis added.

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Accordingly, in the writings of the Prophets and in Hagiographa which is part of the Hebrew Bible, we find references to laws and customs that are not found in the Pentateuch. Such statements are recorded in Jeremiah 32:9–12; Ruth 4:5; II Kings 4:1 and in other places. Sometimes the text puts those events in a historical frame of reference by specifying that the given custom had been handed down from time immemorial: “. . . from former times in Israel” (Ruth 4:7). This then is a clear indication of the primordial existence of an oral tradition. This is particularly evident from the Mishnaic treatment of the Pentateuchal law lex talionis of retributive justice: “an eye for an eye, a tooth for a tooth” (Ex. 21:24–25). Written as if in shorthand, the Mishnah (B.K. 8:1) takes it for granted that the law “an eye for an eye” refers to monetary compensation. No source is cited to prove it. The Tannaim found it unnecessary to justify its interpretation of the same, for this, they felt, has always been the oral understanding of the Mosaic Law. The Mishnah records the oral law as a matter of fact. Challenge and Response Inasmuch as the Torah (Pentateuch) contains both explicit and implicit laws, often presented in concise fashion, these laws were subject to interpretation and elucidation. Naturally, during periods of cultural and economic changes, this became even more pronounced. Thus, after the destruction of the first Temple in Jerusalem in 586 B.C.E. and the ensuing Babylonian exile, the Jewish people were confronted with new challenges in the religio-cultural sphere as well as in the socioeconomic domain. The foreign environment along with Zoroastrian customs and mores, necessitated a novel approach to the new demands of life. Even a greater challenge was presented by the campaigns of Alexander the Great in Eastern Mediterranean. The powerful cultural upheaval and the economic changes which were wrought in its wake, called for a new strategy, even reforms, in the face of new conditions and requirements. That vital function was carried out by the Sopherim, “Scribes,” who were not only copyists of the Torah, but also its interpreters. The founder of the Sopherim was “Ezra the Scribe,” (5th cent. B.C.E.). As a royal scribe of priestly descent, he was responsible for a series of religious reforms and for laying the foundation of the new Judean Commonwealth. The Talmud ascribes to him, a.o., the final decision on the text of the Pentateuch and the introduction of the


7

Hebrew script. He flourished at the critical period of transition from the prophetic to the pharisaic era which marks the start of the formation of the Talmud. There followed a succession of Scribes and Sages from whose ranks came the “Men of the Great Assembly.” They went one step beyond interpreting the law by instituting Takkanot (or “enactments”) and Gezeirot (edicts) not derived from the Torah. Though they were made mainly for the purpose of protecting the Law, these were nevertheless emendations of the biblical text based on the oral tradition. This process came to full fruition during the latter part of the Second Temple period when the Sanhedrin, a term derived from the Greek synedrion, meaning “council court,” was inaugurated in 141 B.C.E. The Sanhedrin—a legislative and educative body—went a notch beyond the “Men of the Great Synod.” To be sure they continued to interpret the Law and issued ordinances, as the Men of the Great Synod did. However, they also incorporated old laws into statutory laws which in turn served as a basis for new laws to bring them into consonance with contemporary life. Moreover, in doing so, they kept the law fluid and dynamic. In fact, the Sanhedrin subscribed to the progressive views of the Pharisees. According to Josephus, the Pharisees recognized the oral law as binding, whereas their contemporaries—the Sadducees—did not. The former saw a need for interpretation of the Pentateuch in the light of the new requirements, the latter denied the same. The Sadducees were, therefore, static in their approach: they were opposed to adaptability and eventually disappeared. By contrast, the Pharisees were dynamic in their outlook, as manifested in their discussions and dialectical reasoning. The upshot of those debates came to be known as Halakhah, the Hebrew root of which is halokh, to walk, to be in motion like a stream in constant flow.8 It can be affirmed that the Halakhah responded to the wider demands of Judaism and life so as to meet the new challenges and problems in the spheres of the social, economic, political and theological. In this latter connection, it should be noted that the Second Commonwealth of Judea, particularly in the later period, was not functioning

8 For a penetrating analysis of the theological side of the dispute, see Louis Finkelstein, The Pharisees, Vol. II (Philadelphia: Jewish publication Society of America, 1962), pp. 762–79.

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in splendid isolation. Rather, it was greatly affected by cultural notions stemming from Hellenism. These had to be addressed and dealt with. It is clear then, that the talmudic literature in the making was not merely a Jewish affair, but was also intimately bound up with the entire Greco-Roman world.9 The Talmudic Method The Mishnah, upon its redaction, became the official textbook in the Palestinian and Babylonian academies. The discussions that emanated therefrom, charted the course for the character and content of the “Talmudic Sea” as well as for its methodology. A basic characteristic of the Talmud is that its method is dialectical and its approach is analytical. The dialectics are marked by interminable discussions, arguments and counter-arguments “in search for whys, wherefores and origins.” Theories are advanced and contradicted. These are followed by refutations, qualifications and clarifications. Its ultimate purpose was in search of justice. As stated by Professor Cohen: “Throughout the maze of discussions on civil law in the Talmud, one purpose stands out clearly: the rabbis were always animated by the desire to develop a system of statutes and laws which are in essence just (Deut. IV–VIII)—a sort of Eunomia toward law and order, to borrow a phrase from Aristotle. (Politics V, VII, 2)”.10 Another noteworthy feature of the Talmud is that it is primarily concerned with finding and understanding the truth. Its emphasis is not on acceptance, but on understanding. Although the Talmud to this very day is the primary source of Jewish law, it can not be cited as an authority for the purpose of ruling.11 The rabbis expressed opposing views as they attempted to interpret the law. Yet the final decision was rarely pronounced. Rather, decision was left to history and practical experience, to be hammered out by succeeding generations of Rabbinic 9 See, Saul Lieberman, Greek in Jewish Palestine (New York: Jewish Theological Seminary, 1942); Hellenism in Jewish Palestine (New York: Jewish Theological Seminary, 1950); “Palestine in the Third and Fourth Centuries,” JOR, Vol. 36–37, 1946. 10 See, Boaz Cohen, “Talmudic and Rabbinical Literature,” The Jewish People: Past and Present, Jewish Encyclopedic Handbooks (New York, 1952), p. 69. 11 For additional explanation see “Encyclopedia Judaica,” Vol. 15, pp. 750–78. See also The Essential Talmud by Adin Steinsaltz, tr. from Hebrew by Ch. Galai, (New York: Basic Books, Inc., 1976).


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scholars in accordance with the changing requirements of life. That emphasis is clearly manifested in the Rabbinic literature that followed the Talmud, and it continues to this very day.12 As noted above, a basic characteristic of the Babylonian Talmud is the analytical sharpness and ingenuity with which a subject is examined and crystalized. Every phrase, every word, even syllable is carefully probed and weighed. Accordingly, there is nothing superfluous in the Mishnah. If something appears to be redundant, there must be a reason for it and that reason must be found. Though disjointed and unsystematized as it may sometimes appear, the “rabbinic mind” is coordinated by a complex of “value concepts,” rooted in concrete human experience and woven into the fabric of life.13 Mention should also be made, however briefly, that because of the enormously complicated text of the Talmud which is by no means of one fabric, there is not one authoritarian version, but innumerable variant readings of it. In fact, textual criticism of the Talmud is as old as the Talmud itself. In modern times, however, it became a separate scholarly concern, where scientific method is applied to correct corrupt and incomprehensible passages.14 Methodological Framework Talmudic analysis is framed within a set of rules and methods founded on inductive and or deductive reasoning. Several modes of investigation characterizes Talmudic dialectics.15 Some of these are: a) b) c) d)

Hermeneutics .................... S’vara .............................. Shikul Daxat .................... Rov and Rubba ................

Scientific interpretation Rationality Weighing between opposing opinions Majority and Probability

12 See in particular, A Tree of Life: Diversity, Flexibility, and Creativity in Jewish Law, by Louis Jacobs (Oxford University Press, 1984). 13 See M. Kadushin, The Rabbinic Mind (New York: Jewish Theological Seminary of America, 1952), pp. 97ff. 14 See, in particular, D. Weiss-Halivni, Sources and Traditions, Vol. 1 (Tel-Aviv: Dvir Publishers, 1968) and Vol. II ( Jewish Theological Seminary of America, 1975). 15 The object of dialectics is the establishment of truth concerning doubtful propositions. For Maimonides’ five-way division, see, Mishneh Torah, Introduction.

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Hermeneutics. The oldest rule promulgated by Hillel (first cent. B.C.E.) consists of “seven principles,” the first of which is: Kal-vehomer—“inference from minor to major,” or “from major to minor.” This is followed by the Gzera-shava—“inference by analogy.” In passing from the inductive to the deductive categories, there is the rule of K’lal u-P’rat and P’rat uK’lal—a general proposition followed by a specifying particular, and a particular followed by a general. Whereas the former is in the category of inductive reasoning, the latter is one of scientific deduction.16 Later, R. Ishmael (first/second cent. C.E.) extended the same to “thirteen principles of interpretation.”17 S’vara is an important element of the Talmudic method. It is defined as: a) Reason, common sense, opinion, motive OR b) Logical deduction, reasonable conclusions.18 Whereas the former suggests the practical application of reason or feelings to everyday affairs, which is subjective, the latter implies drawing conclusions and inferences from facts, premises and concepts, which is objective and rational. According to Avi Sagi, S’vara reflects the rational-autonomous activity of halakhic sages,19 an activity that comes “from rational thought and leading to objectively correct determination.” In his view, it is a concept that introduces a “subversive” element into Halakha,20 a sort of “anti-institutionalist openness” along with autonomous solutions to 16 Tosephta, San. 7:11 states that Hillel employed this terminology in one of the seven principles (K’lal u-P’rat, P’rat u-K’lal), though the same may have been known before him. 17 Siphra: 1. This Midrash is a Tannaitic commentary on Leviticus. It originated in Eretz-Israel the second century C.E., and was completed at the end of the fourth century. For a study in depth on hermeneutic rules, see S. Lieberman, Hellenism in Jewish Palestine (New York: The Jewish Theological Seminary of America, 1950), pp. 52–82. 18 For a penetrating analysis of the dynamic function of S’vara, see, David W. Halivni, “The Meaning of S’vara” in S’Vara Journal of Philosophy of Judaism, Columbia University (1990), vol. I, No. 1, pp. 3–5. 19 S’vara. 2(2) 1991, Avi Sagi, “S’vara and the Concept of Torah,” pp. 5–7. See also David Ellenson, “The Other Side of S’vara,” ibid., pp. 8–24. 20 For an erudite study of Halakha, see, Aaron Kirschenbaum, Halakhic Perspectives in Law: Formalism and Flexibility in Jewish Civil Law (New York: K’tav Publishing House, Inc., 1991). He writes, a.o., that “. . . logical consistency and formal rationality remain part and parcel of Jewish legal thinking” (pp. 281–282), and that Jewish law is deeply concerned with equity, fairness and morality. See also, George Horowitz, The Spirit of


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contemporary problems. S’vara thus is a method of discrete, independent reasoning, augmented by empirical observation. A classical example of Talmudic rationality is the way Hillel the Elder legislated new laws in the wake of economic and social change. Thus, according to Scriptures, with the arrival of the Sabbatical years, all debts must be forgiven (Deut. 15:2). But Hillel noticed that the people “were unwilling to lend money to one another,” thereby causing economic and social hardship. To solve the problem, he instituted the Pruzbul. The Pruzbul was a legal device to circumvent that biblical requirement. Under the Pruzbul, the lender handed over the bonds to the Court, and the Court, in turn, gave the lender the “power of attorney” to collect the debt in its name. (See Gittin 4:5, Sheviit 10:3–7). Hillel’s justification for doing so was “mipnei tiqqun ha-olam,” for the sake of social welfare.21 He thus combined rational thought with the power of observation. This empirical approach enabled him to suggest a practical solution by way of modifying the law. Various Talmudic and early Midrashic sources wrestle with Hillel’s seeming contravention of a positive Torahitic law, starting with Mishnah Gittin 34b, followed by the Gemara 36a–37b, Siphrei Deut. 113, Jerus. Talmud: Shviit 10:2–3 and continued by medieval commentators. Whatever the justification, it is apparent that the S’vara—rationality served as a powerful methodological device in this instance, and is an important component of the mechanism within the framework of Halakha. Shikul-Daxat is a method of “balanced reasoning” or the employment of “reasonableness in judgement.” Essentially, it is an exercise in rational decision making, after weighing alternative opinions. The object is, of course, the establishment of justice. For example: two levels of legal authorities, one of higher and one of lower rank, hold different views concerning a juridical question, yet no ruling has been established according to either of them. The decision maker is thus Jewish Law (New York: Central Book Company, 1953); Menachem Elon, Hamishpat Ha-Ivri ( Jerusalem: Magnes Press, 1978). 21 S’vara, ibid. See the interesting symposium on Prozbul: Was Hillel True to Tradition? The three articles by the participating scholars are: P. Shiffman, “Prozbul and Legal Fiction”; David Kraemer, “Prozbul and Rabbinic Power”; David M. Gordis, “Prozbul and Poseq,” all three articles are on pp. 61–73. There is a vast literature dealing with this matter. See also Seth Weissman’s interesting paper (unpublished): “Hillel’s Prosbol and the Growth of Social Anonymity: The Abolition of Debt Forgiveness in Jewish Law During the First Century.” The paper was presented at the International Conference, organized by the Departments of Economics Bar-Ilan University, Israel and University of Illinois at Chicago, Dec. 16–17, 1998.

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faced with choosing between two doubtful propositions. His position is then secured when the relation between the two opposites, including the prevailing custom, is made clear for the purpose of adjudicating the case in question. Rov (“majority rule”) and Rubba (“Probability”). Both principles are closely associated in Talmudic dialectics; both are of paramount importance in Talmudic methodology. To illustrate the nature and method of Talmudic controversy, we shall limit ourselves to a few examples in which the power of Rov and Rubba are highlighted respectively. Talmudic Argument—A Paradigm The following episode recorded in the Talmud is filled with drama and suspense. The story is presented in a legendary fashion and revolves around a heated debate between R. Eliezer and the Sages concerning a stove of a certain construct. Is the stove ritually clean or unclean? R. Eliezer declares it clean and the Sages unclean.22 It has been taught: On that day, R. Eliezer brought forward every imaginable argument but they (the Sages) did not accept them; (whereupon he said), ‘if the Halakha (the law) agrees with me, let the carob-tree prove it.’ Thereupon the carob-tree was torn a hundred cubits. ‘No proof can be brought from a carob-tree’—they retorted. Again, he said to them: ‘If the Halakha agrees with me let the stream of water prove it.’ ‘Whereupon the stream of water flowed backwards. ‘No proof can be brought from a stream of water’—they rejoined. Again, he urged: ‘if the Halakha agrees with me let the walls of the schoolhouse prove it.’ Whereupon the walls inclined to fall. But R. Joshua rebuked them, saying: ‘When scholars are engaged in an Halakhic dispute, what have ye to interfere?’ Hence, they did not fall in honour of R. Joshua, nor did they resume the upright in honour of R. Eliezer, and they are still standing thus inclined. Again, he said to them, ‘If the Halakha agrees with me, let it be proved from Heaven!’ Whereupon a Heavenly Voice cried out: ‘Why do you dispute with R. Eliezer, seeing that in all matters the Halakha agrees with him!’ But R. Joshua arose and exclaimed, ‘It is not in Heaven’ (Deut. XXX:12). ‘What did he mean by this?’ Said R. Jeremia: ‘that the Torah has already been given on Mount Sinai: we pay no attention to a Heavenly Voice in matters of Halakha, because Thou hast long since written in the Torah at Mount Sinai: After the majority must one incline.’ (Ex. 23:2)

22 Baba Mezia, 59b. Translated into English with notes, glossary and indices . . . under the editorship of Rabbi Dr. I. Epstein (London: The Soncino Press, 1962).


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This remarkable story illustrates one of the major characteristics of the Talmudic method. In matters of Halakha, human reasoning is asserted to be independent. The declaration that the Torah is no longer in Heaven, and that a Heavenly Echo or other sort of “miracle” cannot serve as proof if it is contrary to human reason, is considered to be of paramount importance. “Even if God were to step in and solve a human legal dispute”—to borrow a phrase from Perry Dane—“that effort by G-d’s own rules would be nugatory.”23 Furthermore, the story suggests that if the sharpness of an argument is employed in a manner as if to tear out a tree from the ground or to prevent a stream from running its natural course, or to destroy a schoolhouse, it is deemed to be contrary to good common sense. The game must be played according to the rules. In matters of halakhic dispute, the majority view must prevail. The Torah is “The Law of Life,” manifested in the Halakha which responds to life’s situations and demands. As the above story continues metaphorically, it emerges the question was not yet fully resolved. In order to ascertain the complete veracity of the majority view, further investigation was still required. Only after receiving unqualified confirmation of their position, on this matter, did the majority decide to discipline R. Eliezer for insubordination. Though R. Eliezer was an intellectual giant, he accepted his censure contritely and with a humble spirit.24 To summarize, this story illustrates that the Talmudic argument rests on the following principles: a) the independence of human reason in matters of law b) the principle of majority rule c) rationality is the mode of inquiry and application A Sugya (Pericopy): The Notion of Probability In Talmudic dialectics the principle of majority rule is associated closely with questions of probability. The strength of that association is underlined by the fact that the term for probability is Rubba, which is

23 Perry Dane, “The Oral Law and Jurisprudence of the Textless Text,” S’vara 2(2), (1991), p. 14ff. 24 See, Y.I. Halevy, Dorot Rishonim (1987) where the character of R. Eliezer is analyzed in great detail. Halevy (Dorot I, 5, 374ff ) defends him, whereas Weiss (Dorot II, p. 8) criticizes him.

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the Aramaic counterpart of the Hebrew noun, Rov, meaning “majority.” Hence, as one further illustration of the talmudic methodology, it is appropriate to consider the rabbis’ employment of the principle of probability. This latter constitutes one side of a coin for which the principle of majority rule provides the other. The following Sugya probes their relationship.25 Our analysis is based on Talmud (Hulin, pp. 11a–12a), and on an outstanding recent study of Louis Jacobs.26 To establish the ground of debate, this Sugya opens with a question: Where do we derive the rule laid down by the Rabbis that we are guided by the principle of probability (rubba)?

The response to this query is one of surprise: “how.” Scripture, it is observed, clearly states: “Turn after the majority” (Ex. 23:2). Here, the reference is to a verse in the Book of Exodus which reads (Revised Standard Version): “You shall not follow a multitude to do evil; nor shall you bear witness in a suit, turning aside after a multitude, so as to pervert justice.” The Talmudic scholars interpreted the first part of the verse as indicating that the majority should be followed except in the case of “following to do evil.” The debate proceeds by way of a rejoinder to the foregoing. This rejoinder can be paraphrased as follows: Granted that in certain instances we apply the principle of rubba. For example, in the case of a capital charge before the Lower Sanhedrin where twelve judges declare the accused innocent and eleven declare him guilty, the principle of rubba is followed because a definite majority is “before us.” So too, in the case of “nine vendors” with ritually clean meat and one unclean, where a chunk (of meat) was found on the street, we assume that it has “separated from the majority,” for the very same reason. But, what if the majority is not “before us,” as in the case of a levirate marriage of a boy or girl under age? Here, the debater is referring to the Book of Deuteronomy, 25:3–10 which enjoins that if a man dies childless, his surviving brother should marry his widow for the explicit purpose of raising an heir in the dead brother’s name. Ordinarily, such a marriage is forbidden, a prohibition

25 A sugya is an aggregate of diverse issues used in a Talmudic discourse augmented by an array of pros and cons, contradictions and refutations, give and take, etc., for the purpose of hammering out a normative principle or a cardinal rule. 26 Louis Jacobs, The Talmudic Argument (Cambridge: University Press, 1984). See especially the section Rubba (pp. 50–63).


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which clearly implies that if either the levir or the widow is sterile, they should not marry each other. The problem in the case of a levirate marriage of a boy or a girl under age is that it is impossible to ascertain whether or not either one is fertile. In this case, the majority is not “before us.” Hence, how does one follow the principle of probability, understood as “turning after the majority,” in this instance? This point is well taken, since the subject of levirate marriage of those under age is a disputed one (Yebamot, 61b). Rabbi Meir is against such a marriage because it may turn out that either one may be sterile. On the other hand, the Sages approve of the marriage on the ground that most minors turn out to be fertile. These eminent authorities, then, accept the principle of Rubba even though the majority is not “before us.” The debate does not end at this stage. Rather, it has just begun. The battleground is now ready, the forces are arranged, and the Amoraim, like skillful chess-players, are poised to engage their brilliant strategies. Each tries his hand on the Talmudic chessboard in order to prove his point and to settle the question. Ten attempts are made, and ten proofs are offered. Some of these are refuted, whilst others stand. The upshot is that, although the principle of Rubba is generally followed, it is applied only with certain qualifications to levirate marriage of the underaged. An Exception The foregoing section illustrates something of the character of Talmudic controversy. It is further illustrative of that character to remark that, despite the emphasis on the rule of the majority, an exception is allowed in one important area. The rabbis are not given to adhere slavishly to general principles when these do not appear to serve the cause of justice in society. The rule of the majority is not followed in monetary matters. Hence, in pecuniary disputes the probability principle is not applied. Rather, the claimant in any such case must present satisfactory evidence and thereby prove his claim in a court of law.27 The reason for this exception is that the defendant is allowed to possess two attributes which tell

27

See, B.K. 27b, 46 a–b; Hulin 10b; Yeb. 31a. See also, Tossafot B.K. 27b.

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in his favor. The first of these attributes is a “minority” status. The second is the status of having a “presumption.” An example of the talmudic reasoning in this regard is the case where the defendant sold an ox to the claimant, and the ox was found to be a gorer. The claimant now wants his money back on the ground that his purchase was a “mistaken transaction.” Most people, it can be allowed, acquire an ox for purposes of ploughing, and a gorer is not satisfactory for that purpose. Yet, this does not necessarily put the defendant in the wrong. He can claim “minority” status in that he can contend that he sold the ox for consumption as meat. Secondly, the defendant is given the “presumption” of being the owner of the money in question. When the status of “minority” and the status of “presumption” are combined, these are held to constitute a counter-balance to the principle of Rubba. If the claimant is to have his money, he must present sufficient evidence in court. The onus of proof is on the claimant, despite the fact that the majority of persons purchase oxen for ploughing. In conclusion, it should be remarked also that a range of special circumstances may justify departure from the principle of majority rule. As Menachem Elon, an Israeli Supreme Court Justice, writes: Concepts such as ‘darkhei shalom’ (ways of peace), ‘tikun olam’ (reforming the world), ‘pekuakh nefesh’ (saving an endangered life) and ‘sheat hadechak’ (in time of an emergency) are extra spirit (‘neshama yetera’) of the world of halakha. They are an integral part of the law.28

Given such circumstances, it is not impossible that a decision is based on a minority. Scarcity, Choice and Freedom In further delineating the Talmudic methodology, it is important to emphasize that for a scholarly undertaking to be fruitful, it must function within an environment that is free for the human spirit, to explore unhindered new frontiers of knowledge. This indeed, was the case concerning Talmudic investigation. It was conducted within a climate of

Etta Bick (ed.), Judaic Sources of Human Rights (Tel Aviv: Israel Diaspora Institute, Tel Aviv University, 1989), p. 11. 28


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intellectual freedom. Intricate questions were given free play in search of new scholarly vistas, broader horizons, nay, to swim against the current of the contemporary Zeitgeist. What follows is a brief discussion of an assortment of issues that were basic to free inquiry. The Notion of Scarcity It has been said that scarcity is the bane of civilization. Thus, for most modern economists, the economic problem is the problem of scarcity. In this respect, those economists follow the understanding of Lord Robbins in his influential, An Essay of the Nature and Significance of Economic Science (1932). But scarcity has also a brighter side, for it entails choice, and choice necessitates freedom. This section shows that the talmudists were no strangers to those phenomena. They are, in fact, a fundamental feature of the biblical paradigm. Accordingly, one of the earliest metaphors about the nature of scarcity, is highlighted in the Book of Genesis (ca. 900 B.C.E.) via the story of the “Garden of Eden” in general and the dialogue between the “primordial serpent” and “primordial man,” in particular (Gen. 3:1–19). The dialogue turns on the question of whether or not mankind is to taste of the fruit of knowledge. Expedience (in the guise of the “crafty serpent”) argues in favor of this most “desirable fruit.” Knowledge will enable men and women to become wise and creative, reach high levels of consciousness, nay, they may even become Godlike, “knowing good and evil.” As the story unfolds, biblical Adam and Eve make their choice, opting for the fruit of knowledge—to be “little lower than angels.” We are all familiar with the grand finale of the biblical epic of “paradise lost.” Having tasted of the “fruit of knowledge,” the primordial couple is driven from their utopia, and without the opulence of “God’s garden,” they must now wrest their subsistence from an earth which abounds with “thistles and thorns.” Thus, when primordial mankind came to realize that in order to survive they would have to eke out their subsistence from an inhospitable environment, reflections on the economic problem began.

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chapter one Problem of Scarcity

From almost its outset the Book of Genesis is concerned to emphasize the problem of scarcity along with the element of choice. As Adam and Eve depart the Garden of Eden, the Lord informs Adam: Cursed is the ground for thy sakes in sorrow shalt thou eat of it all the days of thy life. Thorns and thistles shall it bring forth to thee; and thou shalt eat the herb of the field. In sweat of thy face shalt thou eat bread. (Gen. 3:17–19).

For the writer, or writers of Genesis, mankind has chosen to tend to its consumption needs in an independent fashion, rather than leave the matter to the benevolence of its Creator. Hence, mankind is obliged to forsake the Garden as part of the logic of its choice. Mankind has embraced the problem of wresting its subsistence from the earth at the cost of personal toil and trouble. It has committed itself to coming to grips with a nature that might prove niggardly and with an environment that could be inhospitable. Nevertheless, the Creator is prepared to honor mankind’s choice to be responsible itself for the production of the goods and services which will sustain it.29 It is noteworthy that with this story and those that follow about work, expansion, ingenuity and division of labor, etc., the Book of Genesis II–XI unfolds a panorama of human struggles for existence and economic ascendancy, mainly as a result of nature’s scarcity. Aside from this display of interest in the economic dimension, Genesis also conveys lessons of universal import, both normative and positive: A. Knowledge is a double-edged sword; it is part good and part evil; it can cut for you and it can cut against you. B. Man as an economic actor has freedom of choice, but with an opportunity cost as its price. But a basic prerequisite of economic freedom is human freedom.

See Roman A. Ohrenstein, “Economic Thought in Talmudic Literature in the Light of Modern Economics,” American Journal of Economics and Sociology (April, 1968), pp. 192–93. For more extensive analysis of Genesis on these issues see, B. Gordon, The Economic Problem in Biblical and Patristic Thought (Leiden: E.J. Brill, 1989), pp. 1–5. 29


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Talmudic Treatment of Scarcity At this juncture, a glimpse at the Talmudic treatment of scarcity may be of interest. For the Talmudic scholars the biblical notion of scarcity serves as a point of departure for social analysis of the phenomenon, as will be discussed later. Suffice it to mention that in Talmudic writings, scarcity is viewed as a social problem which can arise from a variety of causes. Among others are: setbacks in the distribution system which prevents adequate (unchanged) aggregate supply from reaching the consumer, a leftward shift in the supply function or as a result of climactic changes that can be calculated on the basis of the movements of the sun and constellations. The latter may cause fluctuations in the price of commodities, bringing with it cyclical variations of either prosperity or depression. Such advanced notions about the effect of scarcity on the economy (elaborated upon in Ch. IV), must have been influenced, at least in part, by the prevailing spirit of freedom of inquiry, as discussed below. Freedom and Freedom of Thought Historically, the concept of freedom is a cherished cornerstone of Judaic tradition. It is most clearly expressed in the biblical statement concerning freedom of will: “. . . I have set before you life and death, the blessing and the curse; therefore choose life. . . .” (Dt. 30:19). The ethos of freedom is well reflected in the talmudic debates where scholarly freedom of inquiry, even entering into the “orchard” to study esoteric philosophy (Hag. 14a), is a legitimate intellectual pursuit. The Sages were so eager to be identified with this principle that they rendered the biblical word Haruth (“engraved”) into Heruth (freedom). Thus, according to Ex. 32:16, the Commandments were “engraved” on the tablets. But the scholars were quick to make a word play of that term. They declared “Do not read Haruth (“engraved”) but Heruth (“freedom”), since the Torah is said to be the constitution of freedom.30

See, Erubin 54a; Curiously, Joseph Spengler in his Origins of Economic Thought and Justice, Southern University Press (1980) writes on p. 4, fn. 2: The word ‘freedom’ had no equivalent in ancient Near Eastern languages, including Hebrew (emphasis added). The cited sources clearly show the contrary. 30

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In addition to Heruth, the biblical “D’ror,” usually translated as “liberty” (Lev. 25:10) also connotes “freedom.” Talmudic dictionaries note that the root of D’ror is “Dor,” meaning to move (freely). Analogically, the Hebrew name for sparrow is also “d’ror.” The Talmud describes its characteristic as “a bird living in the house as well as in the field, preferring to move freely” (Beitza 24a, Sabb. 106b). Here “liberty” and “freedom” are interchangeable. The Mishnah, too (Pes. X:5), in describing the requirement of the Passover ritual, employs a.o., the term “Heruth” to emphasize the significance of human freedom, while the Midrash extends the same to “freedom from political oppression” (Ex. R. 32:1). It may well be said that Jewish tradition not only permitted but also encouraged freedom of thought. In the words of Adin Steinsaltz: Voicing doubt is not only legitimate in the Talmud, it is essential to study. To a certain degree, the rule is that any type of query is permissible and even desirable, the more the merrier. No inquiry is regarded as unfair or incorrect as long as it pertains to the issue and can cast light on the aspect of it. This is true not only of the Talmud but also in the way it is studied and pursued.31

Such freedom of inquiry encompasses a whole range of issues including market-oriented economic phenomena, as will be discussed later. To be sure, there were also attempts to restrict that freedom. There are references in the Talmud (San. 10:1, Ab. Zarah, 26b), prohibiting the study of Greek philosophy. However, utterances of that nature are described in the Talmud (Yoma 69b) as Horaxat Shalah (“temporary legislation”). As a rule, intellectual freedom was basic to the talmudic debate. The Mathematical Dimension It is generally accepted that mathematics is predicated on a free mind.32 To highlight this aspect of freedom of the intellect, a few words about

31 Adin Steinsaltz, The Essential Talmud (Bentham Books, 1976), pp. 8–9. Steinsaltz is considered one of the foremost Talmudic scholars of this generation. 32 See, Joseph J. Spengler, Origins of Economics and Justice, ibid., pp. 22–23 and his subsequent discussion “Excursus on Early Mathematics,” pp. 23–26. He also maintains that there is a correlation between the development of modern economics and the development of mathematics. Whereas, William Spiegel in, The Growth of Economic Thought


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mathematics in the Talmud is in order. It will illustrate the Rabbis’ propensity to think in mathematical and spatial categories—an important aspect of the economic process. Historically, all mathematical development has its psychological roots in more or less practical requirements. Generally, it is the tool of business, economics and science. The first aspects of applied mathematics had its origin in counting, weighing and measuring, needed in early barter. Biblical literature abounds with references to elementary mathematics. But even in the Bible, one can find measurements indicating the approximation of the value of Pi (the ratio of the circumference of a circle to its diameter). Thus, the “Sea of Solomon” described in I Kings 7:23, is said to have been 10 cubits in diameter with a circumference of 30 cubits, with the value of Pi being 30/10 = 3. The book of Kings was edited about 550 B.C.E., but its sources date back several centuries. Significantly, the Mishnat Ha-Middot (“Mishnah of Measurements”) which according to S. Gandz33 researches, dates from about the first half of the 2nd century C.E., deals with the elements of plane and solid geometry, and in which Pi is given the value 3 1/7, corresponding to the Archemedian value. Some scholars question the accuracy of its dating. It is, however, certain that the talmudic scholars knew geometry (Eruv. 14b,76b), and had a fine grasp of trigonometric theory. The latter they used to calculate the fixing of the calendar (San. 11a ff, Tosephta-San. II:2), the intercalation of the years, and most important, the weather patterns its seasons, storms and rhythms that appear in cycles, their influence on the harvest and thereby on the business cycle—a subject I will later discuss at length. Moreover, the mathematical knowledge of those scholars was much more profound. Nachum Rabinovitch, in his scholarly volume34 demonstrates with facts and figures from Talmudic and post-Talmudic sources,

(Prentice Hall, Inc., 1991), p. 33, writes a.o. that Aristotle was “a builder of mathematical models which have become so prominent in modern economic theory.” 33 Solomon Gandz, Studies in Hebrew Mathematics and Astronomy, (New York: Ktav Publ. House, Inc., 1970), p. 308. Prof. Gandz, a scholar of note, writes inter alia: “It is a literary product of this time (100–200 C.E.), however, with a purely general scientific content only . . .” (pp. 306–307). See also Peter Beekmann, A History of Pi, third edition (New York: St. Martins Press, 1971), pp. 74–76. 34 Rabinovitch, Nachum L. Probability and Statistical Inference in Ancient and Medieval Jewish Literature (University of Toronto Press, 1973), pp. 11–19.

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that the sages mastered the theoretical and empirical complexities of probability: its variety of forms and functions as well as the scope of their applicability. The Rabbis even tackled the logical-philosophical difficulties to which they give rise, and suggested decision-theoretic guidelines for accepting and/or rejecting competing hypotheses. For such reasoning of probabilism and the statistics that support it, the author claims, “there seems to be no parallels in Greek or other writings of antiquity” (p. XII). To elaborate on this, will take us far afield. It will, therefore, suffice to mention that on page 162, Rabinovitch quotes a mathematical problem which Abraham Ibn Ezra (1092–1167) scrutinized in his Sefer ha-Mispar (“Book of Numbers”), a question based on a Talmudic discourse (B.M. 14a and Keth. 93a). Here is the problems: Question: Jacob died and his son Reuben produced a deed duly witnessed that Jacob willed to him his entire estate on his death. The son Simeon also produced a deed that his father willed to him half of the estate. Levi produced a deed giving him a third, and Judah brought a deed giving him one quarter. All of them (the deeds) bear the same date.

Barry O’Neill35 elucidates the above as follows: “The problem is that the wills seem equally valid but are mutually inconsistent in that they give away more than the total estate. How should the total estate be divided? It seems fair that sons with a larger claim should receive more, but precisely how much more should each get?” As Ibn Ezra attempts to solve the problem, he first refers to the views that are held by “gentile mathematicians” on similar matters. Then he cites the Talmudic rule on which he bases his solution. And here Rabinovitch observes that “it is not implausible that even among those (gentile) mathematicians there were some who were at least familiar with the Talmudic probability idea underlying the Jewish solution. He then observes that “. . . we have here an instance of the important concept of ‘mathematical expectation’ which in the modern form is

35 Barry O’Neill, “A Problem of Rights of Arbitration from the Talmud,” Mathematical Social Sciences 2 (1982), pp. 345–371. See also Jekutiel Ginsburg, “Rabbi Ibn Ezra on Permutations and Combinations,” The Mathematics Teacher 15 (1922), pp. 347–356. See in particular the interesting article by Elishakoff Isaac and Piness Eliot, Do Scripture and Mathematics Agree on the Number Pi? In this most erudite study, the authors probe the mathematical intricacies of Pi as they appear in Biblical, Rabbinic and Kabalistic literature in the light of engineering practice. [B’OR HaTORA 17, 5767/2007].


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apparently due to Leibnitz.” Such profound thinking is, indeed, evidence of a free intellect. Some Tannaim were particularly proficient in mathematics, though (like Alfred Marshall) were not overwhelmed by it (Avot III:18). Thus, R. Eleazar Hisma and R. Johanan Nuri (2nd cent. C.E.), were praised by R. Joshua b. Hanania for their great knowledge and ability “to calculate the number of drops of water in the sea” (Horayot 10 a–b). It is therefore safe to posit that those scholars must have at least hypothesized about this matter. Such measurement, if attempted, would have involved calculating the number of square miles of the area, the depth of the sea, the volume, and perhaps the different sizes of the drops—quite a task for a mathematician or natural scientist even today. To sum it all up, the ability of the Talmudic scholars to reason in mathematical and spatial categories, the sophisticated methodological devices discussed earlier, along with the intellectual climate of freedom of thought, have greatly contributed to the sharpness of their debates and enhanced the quality of their economic statements, as will be shown hereinafter. Endnote The purpose of this chapter has been to provide an outline of the intellectual setting for economic analysis in the Talmud, with reference to the formation of the work, its methodology and some related subjects basic to free inquiry. However, it is an outline only, and some readers may wish to inquire further concerning the setting. For those readers, the following full-length studies are strongly recommended: David Weiss-Halivni, Midrash, Mishna and Gemara (Cambridge, MA: Harvard University Press, 1986); Moses Mielziner, Introduction to the Talmud (New York: Block, 1967); George Horowitz, The Spirit of Jewish Law (New York: Central Book Company, 1953); Herman L. Strack, Introduction to the Talmud and Midrash (New York: Harper and Row, 1920); Dov Zlotnick, The Iron Pillar —Mishnah, Redaction, Form and Intent (KTAV Publishing House, Inc., 1988).

CHAPTER TWO

OLD WISDOM AND THE WRITTEN LAW In the foregoing chapter, we demonstrated that Talmudic argument rests on the principle of majority rule, and on the affirmation of the independence of human reason in matters of law. This latter affirmation has strong biblical roots which are grounded in the Wisdom tradition of early Jewish literature, and in the concern of the ancients to establish objective codes governing social conduct. Wisdom emphasized the role of intellectual endeavor in arriving at the truth of a matter. Law established the goals towards which those professing wisdom should direct their attentions. It is in the contexts of Wisdom and the Law that the biblical backgrounds to the major thrusts of Talmudic economic analysis can be best appreciated. The Talmudic scholars went well beyond their biblical predecessors, in terms of analytical refinement, on a number of points, especially as they were obliged to deal with economic relationships of increasing complexity. Some of the processes of refinement are detailed in the chapters which follow. Nevertheless, the talmudists remained true to the biblical insights on economic life which struck them as relevant. Certain of those insights became major points of departure for talmudic economic analysis. The purpose of this chapter is to outline the scope and limitations of economic analysis in biblical Wisdom literature, with special reference to the older sections of the Book of Proverbs. Secondly, the chapter surveys the economic content of the wide-ranging legal codes upon which the non-oral elements of the talmudic tradition are based. Old Wisdom It is generally recognized now that at some point (which might be as early as the reign of Hezekiah, 714–686 B.C.E.) the wisdom tradition among the Hebrews experienced a significant reorientation. Before the change, Wisdom,

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chapter two . . . concerned itself with norms of individual behavior conducive to a good and satisfying life for that person, and to the community wellbeing . . . This kind of wisdom was mundane, empirical, practical, and prudential in subject matter and tone. Its sanctions were chiefly those of success and social approval.1

Although acknowledgment of a divine order shaping the affairs of mankind is an essential feature of literature in this vein, much of its emphasis is secular, utilitarian and humanistic. There is a good deal of common ground between Old Wisdom and the post-metaphysical tradition of modern Western thought in which Economics has attained the status of a distinct discipline.2 New Wisdom offers a considerable contrast. With regard to the contrast, von Rad writes that, . . . there appears what can almost be called a counter-movement. More specialized, theological questions had arisen, and later wisdom saw itself faced with the task, without sacrificing to the secularity of creation the knowledge that had been acquired, the task of bringing the world and man back once again into the center of God’s sphere of activity.3

Wisdom, in this new guise, is not simply the manifestation of a human activity. All wisdom is from God, as is the Torah. As the counter-movement developed, instruction in Wisdom and the Law were brought together. “The Torah,” observes Johannes Lindblom, “was then regarded as the epitome of all Wisdom and the standard of Wisdom; and the teaching in the Wisdom schools manifestly also included instruction in the principles and commands of the law.”4 Eventually, wisdom came to be identified with Torah, an identification which, as Moshe Weinfeld remarks, meant that, “both were conceived together as a heavenly element which descended from heaven to take its abode among the children of Israel” (Ben-Sira 24).5

1 R.B.Y. Scott, The Way of Wisdom in the 0ld Testament (New York: Macmillan, 1971), pp. 137–8. 2 Cf. H.W. Heaton, Solomon’s New Men (London: Thames and Hudson, 1974), p. 140. 3 G. von Rad, Wisdom in Israel (London: S.C.M., 1972), p. 317. 4 J. Lindblom, “Wisdom in the Old Testament Prophets,” in M. North and D. Winton Thomas (eds.), Wisdom in Israel and in the Ancient Near East (Leiden: Brill, 1969), p. 196. 5 M. Weinfeld, Deuteronomy and the Deuteronomic School (Oxford: Clarendon, 1972), p. 256.

old wisdom and the written law

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The origins and time of entry of Old Wisdom in Israel are matters of some contention. One widely accepted view associates these with the reign of Solomon (960–931 B.C.E.). The sources, it is claimed, are Egyptian in the main, and the foundation of a local tradition was bound up with the need for formal schooling of civil servants on the Egyptian model. William McKane, for example, states: It is a reasonable assumption that the Instruction was appropriated by Israel as early as the reign of Solomon, when a class of officials came into existence to serve the new structure of the state, and when there was a consequent need for Instruction with the same educational function as it had in Egypt. There it was located in schools where an elite was trained for the service of the state; likewise, when Solomon created a civil service (perhaps on the Egyptian model) there would have been a demand for a similar type of school and for such an instrument of vocational educations.6

Despite the strong grounds for this view, some writers contest one or more of the propositions it affirms. R.N. Whybray, for example, believes that Israelite wisdom literature is not so much a court phenomenon as one which is a predominantly native development with roots in the nomadic or semi-nomadic period of the nation’s formation. In addition, it does not stem from the endeavors of a distinct class of “wise men” whose profession was that of instructing civil servants. Rather, “it was written for an adult educated class not confined to court circles, for their instruction and entertainment, by some of the more gifted members of that class whom their contemporaries and successors honored with the epithet hakam.”7 In favor of Whybray’s demur, it can be observed that from an economist’s viewpoint, Old Wisdom is of interest because of its regard for micro-economic analysis. It is almost totally innocent of macroeconomic propositions, yet one might have expected that if this literature was intended for the instruction of those who were to occupy the corridors of power in central government there would have been a proportion of dictums of a macro-economic nature, i.e., comments 6 W. McKane, Proverbs, a New Approach (London: S.C.M., 1970), pp. 8–9. See also, E.W. Heaton, op. cit., p. 130. A New Testament text which might be cited in support of a Jewish belief in an Egyptian origin for the Israelite wisdom tradition is, Acts 7:22. The text states: “So Moses was taught all the wisdom of the Egyptians and became a man with power both in his speech and his actions.” 7 R.N. Whybray, The Intellectual Tradition in the Old Testament (Berlin and New York: de Cruyter, 1974), pp. 60–61.

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designed to draw the attention of the decision-making elite to functional relationships between aggregate variables. There is little in the Book of Proverbs, for example, which can compare with the macro orientation of the detailing of Joseph’s agrarian policy in the Book of Genesis (Gen. 47:13–26). Proverbs 14:28 proposes a functional relationship between total size of population and the status of the ruler concerned, but otherwise, the Book offers scant guidance on aggregates for the national policy adviser. Proverbs and Economic Analysis Whatever the point of entry or the intended audience of Old Wisdom, it is clear that its exponents were involved in economic analysis at the micro level. This is not to say that in their conceptions, Economics as a discipline attained distinct status as a branch of the division of intellectual labor. Almost certainly, it did not. Nevertheless, it is striking that a number of the analytical propositions common to modern Economics textbooks echo the insights of the wise men. On the topic of exchange relationships, a widely-read, modern textbook states: In economic transactions, one party does not lose what the other gains . . . The money the buyer parts with is necessarily identical with the money the seller receives. But the welfare significance of the good to the buyer is not identical to the money he parts with. In terms of utility, he enjoys a ‘consumer’s surplus’.8

The existence of such a surplus for the buyer is identified also by the ancient writers. They observe (in the context of the ritual haggling associated with Eastern market exchange): “ ‘A bad, bad bargain!’ says a buyer, but as he makes off he congratulates himself ” (Pr. 20:14).9 With respect to consumer behavior, another modern textbook relates: “The wants that can be satisfied by consuming goods and services may

8 P. Samuelson, K. Hancock and R. Wallace, Economics (Sydney: McGraw Hill, 1975), p. 490. 9 Unless indicated otherwise, the translations of quotations from Proverbs are those of W. McKane, op. cit. In addition, the same writer’s classification of particular proverbs is followed with respect to their exemplifying either old or new wisdom.


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be regarded, for all practical purposes in today’s world, as insatiable.”10 Not only in “today’s world,” but, if the wise men are correct, this generalization was true in ancient times. They remark: “Sheol and Abaddon are insatiable, a man’s eyes are never satisfied” (Pr. 27:20). Further, like the modern economist, the ancients perceive that although it may be valid to posit the insatiability of wants in general, particular wants are satiable. The compilers of Proverbs are no strangers to the Law of Diminishing Utility, which, they hold, applies even in the case where a wholesome delicacy like honey is the consumption item in question: “If you find honey, eat what suffices you, lest you have surfeit of it and vomit it up” (Pr. 25:16). “The person who is satiated tramples on honey, but everything bitter is sweet to the one who is hungry” (Pr. 27:7). This second sentence is of particular interest in that it indicates that the sages were quite aware that economic behavior has two limits. Calculating, allocative activity becomes irrelevant not only at extremes of abundance but also at the extremes of dearth.11 Further generalizations in Old Wisdom concerning economic behavior relate, for the most part, to the acquisition of wealth by the individual. These generalizations are made from the standpoint that it is a good thing for the individual to be wealthy, provided he is capable of coping with the situation. The writers warn against any personal obsession with gaining wealth or with retaining it, especially as the gaining may be personally debilitating and the retention extremely demanding (Pr. 23:4–5). Nevertheless, they affirm that, “a rich man’s wealth is his strong city, but the poverty of the poor is disaster for them” (Pr. 10:15). Again, they declare: “The crown of wise men is their wealth, but the wreath of fools is folly” (Pr. 14:24). This last statement is especially indicative of the attitude of the earlier wisdom writers, and William McKane comments: The sentence means that wealth is a fitting adornment of wisdom and is an aspect of the general recognition of his worth to which a wise man is entitled. His wealth is not an extraneous factor nor an alien intrusion, but is a confirmation of his intrinsic merit as a sage and the position of commanding influence which he has attained. It is therefore

10 R.G. Lipsey, An Introduction to Positive Economics (London: Weidenfeld and Nicolson, 1979), p. 53. 11 This same insight concerning dearth and the irrelevance of economic calculation is offered by the Greek poet, Hesiod (c. 750 B.C.E.). On Hesiod, see, B. Gordon, Economic Analysis Before Adam Smith (London: Macmillan, 1975), p. 5.

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chapter two associated with the climax of his career and in this sense is the crown of his efforts.12

The same understanding of a link between Wealth and Wisdom is expressed in dramatic form in the Book of Kings. There, the personal wealth of the archetypal wisdom figure, Solomon, as well as the prosperity of the kingdom during his reign, are explained as gifts of God associated with the granting of Solomon’s request for the gift of wisdom. Wealth is added as an adornment for the wise. It is a by-product of a fulfilled desire to attain discernment, as the dialogue between Solomon and God illustrates (I Kings 3: 9–13). The Acquisition of Wealth Given the association of Wealth and Wisdom, it is understandable that the Book of Proverbs pays attention to the factors involved in the attainment of riches. The factor which is emphasized most frequently is diligence, i.e., steady application and perseverance. There are numerous sentences to this effect, e.g., “Half-hearted effort makes for poverty, but diligence makes for wealth” (Pr. 10:4). Again, only “a little folding of the hands” is likely to give rise to the onset of poverty and beggary (Pr. 4:30–34).13 Beyond diligence, there is the factor of investment. In this respect, the wise men counsel caution. They observe that, “wealth gained speculatively dwindles,” and that, “all who are in a hurry produce nothing but scarcity” (Pr. 13:11; 21:5). They cannot support an eager thrust with a view to quick profit. Yet, at the same time, they cannot abide the individual who does not employ accumulated wealth: “Do not eat with a miser, nor let your appetite be whetted by his tit-bits, for he is like a hair in the throat” (Pr. 23:6–7). Rejecting these extremes of feverish speculation and dogged hoarding, Old Wisdom seems to recommend that those persons who have the resources should undertake a broad range of expenditures beyond those required by their personal or household needs. Whether or not all or any of these outlays ought to be geared to the expectation of profit is not clear. Yet, it is observed, such a course will result in the accumulation of capital. In addition,

12 13

W. McKane, op. cit., p. 466. See also, Pr. 12:24; 12:27; 13:4; 18:9; 20:13; 21:25.


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the enlightened self-interest of those who adopt this course will prove to be to the advantage of society as a whole. The relevant passage reads: “There is the man who disburses his wealth freely and yet is always getting richer, there is another whose miserliness leads only to want. He who creates prosperity is himself prosperous, and he who satisfies others is himself satisfied” (Pr. 11:24–25). Taken together, the foregoing sentences suggest that the contributors of the earlier material in Proverbs recognized the relationship between investment and the attainment of wealth, but they lacked the degree of personal involvement in “high finance” which might have enabled them to be more specific about that relationship. This lack is not surprising if, as E.W. Heaton contends, “the man of Proverbs is a highly-motivated member of the lower middle class.”14 Apart from diligence and sober engagement in expenditure beyond that required for personal consumption, Old Wisdom counsels attention to the technical problem of achieving optimal combinations of factor inputs in production. A production function, it is realized, is subject to the law of variable proportions, and hence, it is observed: “Where there are no oxen, there is a crib of grain, but crops are increased by the strength of an ox” (Pr. 14:4). The significance of this sentence has been remarked by William McKane, who writes that, draught animals are an indispensable asset for a farmer and that without them his labor is unproductive . . . The balance between the grain which the oxen consume and their productive capacity has to be ascertained. They are a kind of capital equipment which has to be used economically; it is important not to have too few or too many, but to employ the number which secures maximum production at the lowest costs.15

A further factor in the acquisition and proper management of wealth is the avoidance of involvement in business deals which entail credit arrangements. The wise man will shun the role of debtor, since, “A borrower is a slave to the man who lends” (Pr. 22:7). He will also be extremely cautious about becoming a “sleeping partner” who is personally liable: “Do not make a habit of striking hands, of going surety for

14 15

E.W. Heaton, op. cit., p. 124. W. McKane, op. cit., p. 471.

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debts. If you have no resources to settle them, why should your bed be taken from under you!” (Pr. 22:26–27). The risk of loss of capital (“your bed”) is seen as being particularly high in deals which involve outsiders: “Take his garment (capital) for he has gone surety for a stranger; secure yourself against him, for his is liable for foreigners” (Pr. 27:13; see also, 20:16). The best course, it would appear, is to follow the path of individualistic, capitalist endeavor. “He who hates contracts,” it is claimed, “will be secure” (Pr. 11:15). It is unwise to extend one’s legal responsibilities beyond the circle of family and/or friends of long-standing. The Legal Codes A compilation such as the Book of Proverbs illustrates something of the range of analytical insights concerning economic behavior with which the founders of the Talmudic tradition are likely to have been familiar. However, of even greater importance for the direction of economic enquiry in the Talmud are the prescriptions of the law codes of the Pentateuch. Those codes include a close concern with the detail of the day-to-day conduct of economic relationships, and they are most comprehensive in this regard. In the Book of Exodus, the main collections of law are the Decalogue (Ex. 20:1–17), the Code of the Covenant (Ex. 20:22–23:33), and the Code of the Renewal of the Covenant (Ex. 34:10–26). There is a restatement of the Decalogue in the Book of Deuteronomy, (Dt. 5:6–21), and the same Book provides an extensive set of regulations known as the Deuteronomic Code (Dt. 12:1–26:15). Leviticus adds the Holiness Code (Lv. 17–26) plus an appendix which deals with dedicatory gifts (Lv. 27:1–34). Within these bodies of law there are extensive examinations of the use of free labor, arable land, real capital, and money. In addition, the codes address issues of economic welfare, consumption patterns, and valuation. The Use of Free Labor As with the Book of Genesis, the law codes affirm that work is a divine ordinance for man. In the priestly version of the Decalogue, for example, God commands: “For six days you shall labor and do all your work”


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(Ex. 20:9). The same prescription is given in Deuteronomy 5:13 (cf., Ex. 34:21, and Lv. 23:3). No attempt is made to specify a list of, or to rank, legitimate occupations, but one type which is expressly, and repeatedly, forbidden is the fashioning of graven images whether in metal, wood or stone.16 A general, and quite fundamental, restriction on the application of labor is the command to rest on the sabbath day. This edict is not for free adult male Israelites alone, but it extends to their dependents and even their work animals: “The seventh day is a sabbath for Yahweh your God. You shall do no work on that day, neither you nor your son nor your daughter nor your servants, men or women, nor your animals nor the stranger who lives with you” (Ex. 20:10). The Book of Exodus offers two kinds of rationale for this containment of productive activity. One kind looks toward the God-man element in the covenant relationship. The reasoning is: “For in six days Yahweh made the heavens and the earth and the sea and all that these hold, but on the seventh day he rested; that is why Yahweh has blessed the sabbath day and made it sacred” (Ex. 20:11). The other kind refers to the man-man aspect of covenant obligation: “For six days you shall do your work, but stop on the seventh day, so that your ox and your donkey may rest and the son of your slave girl have a breathing space, and the stranger too” (Ex. 23:12). Deuteronomy 5:14 also suggests this second, humanistic rationale. However, it continues: “Remember that you were a servant in the land of Egypt, and that Yahweh your God brought you out from there with mighty hand and outstretched arm; because of this, Yahweh your God has commanded you to keep the sabbath day” (Dt. 5:15). Here, an historical occurrence has replaced a sacral one (God’s resting) as the explanation.17 Despite the variations, these texts convey a common message: for men who live with God, work is not to constitute the whole of their existence. Work may be a divine ordinance, but it does not exhaust the meaning of life.

16 Ex. 20:4, 23; 34:17; Dt. 5:8; Lv. 19:4; 26:1. For discussion of the prohibition see, Anthony Phillips, Ancient Israel’s Criminal Law: A New Approach to the Decalogue (Oxford: Blackwell, 1970), pp. 48–52. 17 Reasons for the shifting emphases are considered in Anthony Phillips, op. cit., pp. 66–73.

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chapter two The Use of Arable Land

The principle of six periods of work followed by one period of rest is carried over to condition the manner in which the Israelites are to use the soil of the Land which God has given them. They are to allow it to lie fallow for one year in every seven. The Book of the Covenant states: “For six years you may sow your land and gather its produce, but in the seventh year you must let it lie fallow and forego all produce from it. Those of your people who are poor may take food from it, and let the wild animals feed on what they leave. You shall do the same with your vineyard and your olive grove” (Ex. 23:10–11). It might be inferred that, given the references to “the poor” and “the wild animals,” an amalgam of humanitarian and ecological considerations underlies this statute. However, it must be allowed that this law could have been promulgated as a form of required response to the God-man relationship of the covenant. Alternately, it may even represent an adoption of a Canaanite custom long established in the region. The origins of the sabbatical year remain matters for wideranging speculation. While Deuteronomy considers the question of the seventh year, it makes no reference to the land (Dt. 15:1–18). Here, the emphasis is on remission of debts and the release of debt slaves. By contrast, the Holiness Code reaffirms the principle of a fallow land. Nature, as well as man and his animals, is to observe God’s law. The Code declares that “the land is to keep a sabbath’s rest for Yahweh . . . It is to be a year of rest for the land” (Lv. 25:2–5). Leviticus proceeds even further. It extends the general numerical principle associated with work and rest to proclaim the necessity of a “fiftieth year,” the Year of Jubilee. In that year, “you will not sow, you will not harvest the ungathered corn, you will not gather from the untrimmed vine. The jubilee is to be a holy thing to you, you will eat what comes from the fields” (Lv. 25:11–12). An additional provision of jubilee is the return of possession of agricultural land to the descendants of the family which had been allocated that land in the original expropriation of Canaan (Lv. 25:23–28). A member of another family who has purchased the right to the use of that land is obliged to give it up.18

18 Leviticus 25 also provides for the redemption of land outside jubilee. Either the original vendor, or a relative of his, has the right to buy back family land which has


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Underlying both jubilee and sabbatical is the conviction that the Land belongs to God. He is its true owner. The Land’s “resting” is an acknowledgment of this ownership, as is the proposed periodic return to the original occupying family. Whether or not the sabbatical laws, let alone those of jubilee, were ever observed, and in what form and in which periods, are the subjects of considerable debate. Did the laws have a practical character, at least in simple rural economies? Were they applied at fixed time intervals throughout Israel, or rather, invoked in a piecemeal fashion as the duration of individual contracts of sale dictated? Whatever the answers which emerge, however, it is clear that for some of the lawgivers, land as a factor of production was a vital part of the covenant relationship. The soil of Canaan was the free gift of God to his chosen ones. No man-made arrangements concerning its use could be permitted to obscure that reality.19 It is indicative that, according to traditional teaching, the year of Jubilee was begun with the blowing of the ram’s horn on Yom Kippur. This practice is symbolic of the need for cleansing and purification. The ensuing period was to be a time of spiritual renewal which necessarily involved reformation of existing economic relationships. The legislators refused to divorce the spiritual and the economic. The Use of Real Capital In the economies of antiquity, slaves were crucial elements in the structure of private and public capital. This was the case in the Israel of the kings, but the Jewish legislators sought to contain this feature of the economy within strict bounds. The freedom of the owners of this type of capital to use it as they wished was far from absolute. This was especially so where Hebrews had been forced into slavery because of debt. The Book of the Covenant contains a number of specific provisions to protect both male and female slaves (see especially, Ex. 21:1–27). If, for example, a slave loses an eye or a tooth because of a blow from his master, the slave is to be set free. Again, a female slave cannot be sold to a foreigner, and she retains her conjugal rights should her master take been sold to an outsider. For detail, consult, Raymond Westbrook, “Redemption of Land,” Israel Law Review, Vol. 6 (1971), pp. 367–375. 19 Cf. Walter Brueggemann, The Land: Place as Gift, Promise, and Challenge in Biblical Faith (Philadelphia: Fortress, 1977), p. 60.

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another wife. All male Hebrew slaves must be released from bondage in their seventh year of service, should the slave desire such release. This latter law, according to Anthony Phillips, represents the secularization of an earlier custom which “provided for the release of Hebrew male slaves at the end of every seventh year in order that they might be able to take part in the covenant renewal festival.”20 The fact that the slave might forego the opportunity for freedom also points to a circumstance of- pre- monarchical Israel. Robert North writes: “Whereas in a democratic society the loss of liberty is an unmixed evil, in an unpoliced tribal society it was far less than the evil of being free.”21 Release after six years of service is a provision which is taken up and developed in the Deuteronomic Code (Dt. 15:12–18). Here, the departing slave is to be given “a generous provision from your flock, your threshing-floor, your winepress.” Freedom is to be granted women as well as men. The master, who may be regretting the loss of these useful factor inputs, is consoled with the economic-rational consideration that he has been getting cheap labor over the recent past. A slave, it is affirmed, “is worth twice the cost of a hired servant and has served you for six years.”22 Another consideration invokes the God-man dimension of the covenant. The law of release was anticipated by the liberating action of God himself: “Remember that you were a slave in the land of Egypt and that Yahweh your God redeemed you; that is why I lay this charge on you today.” It is a prior action of God then which gives this law its fundamental rationale. God has shown himself to be a releaser of Hebrew slaves. Those who understand themselves as the People of God cannot readily act in a contradictory fashion. Rather, they must imitate their Lord. There is some contrast at this point between Deuteronomy and the legislation from the priestly source. In Leviticus there is no mention of the release of individual slaves after they served for six years. All Hebrew debt-slaves are to be set free during Jubilee with their families, and their ancestral property is to be restored to them. In the interim, each of them is to be treated “like a hired man or a guest” (Lv. 25:39–42).

A. Phillips, op. cit., p. 74. R. North, Sociology of the Biblical Jubilee (Rome: Pontifical Biblical Institute, 1954), p. 142. This grim reality is usually neglected by the proponents of romantic notions concerning conditions of life before the monarchy. 22 Concerning this observation, see, Yair Zakovitch, “Some Remnants of Ancient Laws in the Deuteronomic Code,” Israel Law Review, Vol. 9 (1974), pp. 349–351. 20 21


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No analogous considerations are to be shown non-Hebrew human capital. This latter “shall be your property and you may leave them as an inheritance to your sons after you, to hold in perpetual possession. These you may have for slaves; but to your brothers, the sons of Israel, you must not be hard masters” (Lv. 25:45–46). The sons of Israel have been taken from the service of Pharaoh in Egypt and have been dedicated to the service of God (Lv. 25:42). The action of God has placed them in a special category which requires a care that no other action of God has indicated as appropriate for foreigners.23 Apart from slaves, there are other types of capital, animate and inanimate, upon which conditions of use are placed. It is forbidden to sow two kinds of seed in the one field, or to plough with an ass and an ox harnessed together, or to allow different strains of cattle to interbreed (Dt. 22:9–10; Lv. 19:19). The owners of oxen face substantial penalties for failure to protect persons and property from the beasts (Ex. 21:28–36). These same animals must not be muzzled when they are treading out grain (Dt. 25:4). Trees are of concern to the lawgivers. Newly planted fruit trees must be allowed to mature for five years before their produce is systematically harvested (Lv. 19:23–25). In Deuteronomy, one of the laws of warfare forbids the destruction of fruit trees in aid of the siege of a town (Dt. 20:19–20). Here the reader is asked: “Is the tree in the fields human that you should besiege it too?” This particular edict, together with those on the treatment of oxen and of birds (Dt. 25:4; 26:6–7), are seen by some commentators as demonstrating that Israel’s covenant with God involved definite obligations concerning Nature. Eugene Maly, for example, writes: “Respect for nature, therefore, whether it be in the form of oxen, birds or trees, is not simply a humanitarian gesture. It is part of the divine imperative that determines Israel’s ultimate destiny.”24

23 The bases of the non-cosmopolitan nature of early Jewish social thought are explored in Harry M. Orlinsky, “Who is the Ideal Jew: the Biblical View,” Judaism, Vol. 13 (1964), pp. 19–28. 24 E.H. Maly, “Man and Nature in the Old Testament,” Studia Missionalia, 19 (1970), p. 313. On the significance of Dt. 20:19–20, see also, G. von Rad, Deuteronomy, a Commentary (London: S.C.M., 1976), p. 133.

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chapter two The Use of Money

There is no doubt that the lawgivers view money as a useful social institution. This is evident even in the earlier codes which go so far as to positively require payments in money rather than in goods, in some instances. For example, the Code of the Covenant states: “When a man leaves a pit uncovered, or when he digs one but does not cover it, should an ox or donkey fall into it, then the owner of the pit shall make up for the loss: he must pay its owner money, and the dead animal shall be his own” (Ex. 21:33–34). Another instance of a requirement to meet damages with a sum of money is Ex. 22:16–17. Further, the later codes employ money as a means of enhancing the nation’s service to the Lord. Deuteronomy, for example, promotes monetization in aid of cultic observance. That observance obliges the Israelites to bring a tithe of their produce, in kind, as an annual offering to God, “in the place he chooses to give his name a home.” However, the obligation to tithe in kind is not absolute: “If the road is too long for you, if you cannot bring your tithe because the place in which Yahweh chooses to make a home for his name is too far, when Yahweh your God has blessed you, you must turn your tithe into money, and with the money clasped in your hand you must go to the place chosen by Yahweh; there you may spend the money on whatever you like, oxen, sheep, wine, strong drink, anything your heart desires” (Dt. 14:24–26). The transformation in thought which this concession represents has been remarked by Gerhard von Rad. He writes: “From the standpoint of old conceptions of a sacrifice this is an astonishing rationalization of cultic usage.”25 Rationalization of usage is also a feature of Leviticus. The Holiness Code requires the priests of the sanctuary to be extraordinarily adept at handling the intricacies of a money economy if they are to ensure fulfilment by Israel of its covenant obligations. In the twenty-seventh chapter of Leviticus, God gives Moses on Mount Sinai a list of detailed instructions on how sanctuary tariffs and estimates are to be calculated in terms of silver shekels. The contents of this chapter are indicative of the thoroughgoing integration of the life of the Temple with the system of economic exchanges throughout the nation.

25

G. Von Rad, op. cit., p. 103.


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The major respect in which the use of money is restricted is in the sphere of lending. It is not clear just how far the restrictions are intended to extend. However, there are certain circumstances in which it is forbidden to use money for the purpose of earning interest on a loan. The Code of Covenant, for example, states that interest must not be taken on loans to the poor (Ex. 22:25–26). Deuteronomy might be interpreted as going further than this in prohibiting interest-taking on any loan from one Israelite to another (Dt. 23:20–21). On the other hand, Leviticus 25:35–37 could be understood to allow for interest in the case of commercial loans or of loans to the well-to-do. Probably, there was not a complete ban on interest in lending among Israelites, but the scope for the legitimate use of money in that respect cannot be established with precision.26 Economic Welfare The Codes of the Pentateuch do not confine themselves merely to the containment of the use of the factors of production. The fruits of the employment of those factors must be distributed, consumed, and exchanged in accord with the dictates of the covenant which ensures Israel’s identity. God did not go to the trouble of redeeming the Nation so that, in its turn, it could set up a social order as harsh and inhumane as the one from which it was delivered. God’s chosen people are to reflect in their daily communal interchanges that same pattern of care and consideration which he has shown. They are an elevated and priestly people which is obliged to act with the combination of compassion and rationality that acceptance of such status demands. Widows, orphans, strangers, and the Levites made destitute by the cultic centralization of the Deuteronomic reform are accorded special attention.27 Hence, the Code of the Covenant counsels care for such disadvantaged persons (Ex. 22:21–24; 23:9). Deuteronomy is much more specific regarding welfare provisions. This code requires that the 26 For more extensive discussion consult, B. Gordon, “Lending at Interest: Some Jewish, Greek and Christian Approaches, 800 BC–AD 100,” History of Political Economy, 14 (1982), pp. 406–426. 27 Levites who had previously tended shrines in rural areas must have faced particular difficulties. The Levites, according to custom, had “no share or inheritance with Israel; they shall live on the foods offered to Yahweh and on his dues” (Dt. 18:1). On the status of the Levites, their duties and their dues, consult the Book of Numbers (Num. 3; 4; 8:5–26; 18:1–32; and, 35:1–8).

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poor are enabled to participate in the feasting associated with certain annual festivals (Dt. 16:10–14). Further, in every third year, the poor have the right to a tithe of the harvests (Dt. 14:28–29; 26:12–13).28 They also have gleaning rights in any harvest period. Deuteronomy states: “When reaping the harvest in your field, if you have overlooked a sheaf in that field, do not go back for it. Leave it for the stranger, the orphan and the widow, so that Yahweh your God may bless you in all your undertakings. When you beat your olive trees you must not go over the branches twice. Let anything left be for the stranger, the orphan and the widow. When you harvest your vineyard you must not pick it over a second time. Let anything left be for the stranger, the orphan and the widow” (Dt. 24:19–21). This passage on gleaning rights affords a vivid illustration of the combination of rationality and compassion which informed the development of Jewish welfare legislation. Perhaps, the custom of leaving a portion of a crop in a field was intended originally as a means of propitiating the fertility spirits of the soil by allocating them a share in the crop. Here, the ancient custom is retained, but it is demythologized and humanized. The principle of gleaning rights is also affirmed in Leviticus 19:19–20 and 23:22. Other groups identified as warranting special attention are the poor day-laborers and those who have fallen into debt. Many of the daylaborers led a hand-to-mouth existence, so their employers are instructed to pay them each day before sundown (Dt. 24:14–15; Lv. 19:13). Relief for debtors is a feature of the sabbatical year. Every seventh year, all claims in respect of debt are to be remitted (Dt. 15:3–4). Regulation of Consumption The lawgivers of the Pentateuch are not greatly affected by the ascetical considerations which characterize some non-Yahwistic religions. The Nazarite Vow (Num. 6:1–21) seems to represent some concession to asceticism, but in general, the corn and the wine and the oil of the Land are to be accepted as the gifts of God to his people. Should

28 The tithe was a levy in support of the maintenance of the sanctuary and to provide for participation in sacrificial meals there. Now, in every third year, this to be retained for distribution in the area in which it was collected. On the relationship of the triennial tithe and the Temple tithe, see, Yair Zakovitch, “Some Remnants of Ancient Laws in the Deuteronomic Code,” Israel Law Review, Vol. 9 (1974), pp. 346–349.


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God choose to give these in abundance, his people will not spurn the generosity displayed. However, personal consumption may need to be limited at times with a view to caring for the poor. Further, that consumption is to be regulated in the service of due worship of the Lord of the Covenant. Cultic observance requires the offering of the first fruits of the harvest. (Ex. 22:19; 34:26; Lv. 23.9–21). First-born are “given to God”. (Ex. 22:30; 34:19; Dt. 12:17–18; 15:19–22). There are to be tithes of produce (Dt. 14:22–23), which tithes are payments to God as owner of the Land. A range of dietary practices is prescribed in Dt. 14:3–21, and elsewhere. These extend to abstaining from torn flesh (Ex. 22:31; Lv. 17:15–16) and avoiding the consumption of blood (Dt. 12:16; 12:23–25; 15:23; Lv. 17:10–13; 19:26). Clothing too is a matter for concern. For example, the wearing of garments “woven part of wool, part of linen” is forbidden (Dt. 22:11; Lv. 19:19). Provisions such as these may represent, in part, the remnants of very ancient taboos. They may also represent, in part, sound common sense for physical well-being in the environs of the ancient Near East. One member of the community whose habits are singled out for special mention in the Deuteronomic Code is the king. Restrictions are placed on the king’s multiplying the possessions at his personal command. He is not to increase the number of his horses or the number of his wives. Further, he must not “increase his gold and silver excessively” (Dt. 17:16–17). In general, his lifestyle must not be too far removed from that of his fellow countrymen. As von Rad writes: Deuteronomy sees in kingship not an office which Yahweh could use for the welfare of his people, but only an institution in which the holder must live in a sphere of extreme peril because he is tempted by his wealth either to turn away from Yahweh or to lift up his heart above his brethren.29

Prices and Values There is no attempt in the codes to establish a fixed structure of prices for goods and services of everyday trade. Rather, the laws assume the existence of competitive markets in which prices fluctuate freely.

29 G. von Rad, op. cit., p. 120. Antipathy to the rule of kings was to continue on over the centuries into Rabbinic Judaism. Consult, David Polish, “Pharisaism and Political Sovereignty,” Judaism, Vol. 19 (1970), pp. 415–422.

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The explicit requirement concerning those markets is simply that the persons who deal in them adhere to the practice of using full and just weights, measures and balances (Dt. 25:13–16; Lv. 19:35–36). In the case of land, the criterion to be used for its valuation is expected productivity. Land, for the Israelites, is not strictly a sale commodity. God has declared: “Land must not be sold in perpetuity, for the land belongs to me, and to me you are only strangers and guests” (Lv. 25:23). Hence, a member of the covenant community can never actually sell the ancestral land allocated for the use of his family. He can only sell its productive potential, i.e., “a certain number of harvests” (Lv. 25:16). This implies that the purchase price will be a direct function of its expected annual yield and the number of years for which the purchaser is to hold it. Such a method of valuation emerges explicitly in instructions about land which are consequent on recognition of the custom of Jubilee, the fiftieth year. In that year, the use of each parcel of land is to revert to the descendants of the original, Jewish occupants. Sale and purchase of the use of land must reckon with this custom. Leviticus instructs: “If you buy and sell with your neighbour, let no one wrong his brother. If you buy from your neighbour this must take into account the number of years since jubilee: according to the number of productive years he will fix the price. The greater the number of years, the higher shall be the price demanded; the less the number of years, the greater the reduction; for what he is selling you is a certain number of harvests” (Lv. 25:14–16).30 The productivity criterion also appears in the earlier Code of the Covenant when it is considering damages to land. This Code states: “When a man puts his animals out to graze in a field or vineyard and lets his beasts graze in another’s field, he must make restitution for the part of the field that has been grazed in proportion to its yields. But if he has let the whole field be grazed, he must make restitution in proportion to the best crop recorded in the injured party’s field or vineyard” (Ex. 22:4–5). In the case of slave-capital, the Code of the Covenant is prepared to set the definite sum of thirty shekels as the value of a unit of such capital (Ex. 21:32). However, there is no attempt to explain how this sum has been established as the appropriate one. The thirty shekels is

30

Cf., the arrangements for redemption of land in Lv. 25:24–28.


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applied explicitly to both male and female slaves, and there is no mention of age. Rather more revealing is the discussion of redemption of slaves in the Holiness Code. Here, use is made of a going market price as a criterion of evaluation. That price is the wage rate of free labor. The Israelite who wishes to redeem a compatriot from a non-Hebrew owner, “must count the number of years between the year of sale and the jubilee year; the sum of the price of sale must be calculated at the annual rate for these years, his time being valued as that of a hired man” (Lv. 25:50). Elsewhere in Leviticus there is consideration of values which might be attached to free persons. This occurs in the appendix on dedicatory gifts. (Lv. 27:1–34), and here the productivity criterion appears to reemerge. The question is that of the value of a person has been vowed to God but is now to be freed from the obligations of that vow. “Such persons,” Martin North observes, “were originally set apart for the performance of auxiliary cultic services. Leviticus 27 now clearly provides for release from the fulfilment of such a vow through a moneypayment.”31 The size of the money-payment can vary between fifty silver shekels and three. The highest sum is attached to a man aged between twenty and sixty, the lowest sum to a girl aged between one month and five years (Lv. 27:1–8). Underlying this range there seems to be an assessment of the relative current, annual average productivity of persons in the various categories. In Noth’s opinion: “The essential basis of this assessment lies apparently in the valuation of the person’s worth in terms of work at the moment in question.”32 The appendix on dedicatory gifts is of general interest in that it illustrates the high degree of market knowledge required of the priests of the sanctuary and/or their assistants. To carry out their duties correctly, they need to be extremely well informed on commercial affairs. For example, the priest must be a good judge of the values of a variety of types of livestock and of houses (Lv. 27:9–15). Again, he must know the yield of fields in order to apply the productivity criterion: “If a man consecrates one of the fields of his patrimony to Yahweh, its value shall be calculated according to its productivity, at the rate of fifty shekels to one omer of barley” (Lv. 27:16). This task implies a command of a constant flow of information concerning the

31 32

M. Noth, Leviticus, a Commentary (London: S.C.M., 1965), p. 204. Ibid., p. 205.

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relative prices of agricultural commodities. Indeed, it would seem that if some departments of the Temple are to function properly, it must be a major center for the exchange of economic intelligence. Almost certainly, it could have housed some of the best applied economists in the nation.33

33 For analysis of further dimensions of the economics of the Hebrew scriptures, see, B. Gordon, The Economic Problem in Biblical and Patristic Thought (Leiden: E.J. Brill, 1989), pp. 1–42.

PART TWO

MACRO-ECONOMIC ISSUES

CHAPTER THREE

ECONOMIC SELF-INTEREST AND SOCIAL PROGRESS In this chapter we move on from the backgrounds to talmudic economic analysis and begin to consider some of the rabbinic discourses which look forward to much later controversies amongst social theorists. At the outset, it should be emphasized that like other analysts in antiquity and the middle ages, the Talmudic scholars did not set out to establish a systematic body of economic doctrine in the modern sense. Nevertheless, they explored so many of the fundamental issues relating to the operation of free-market economies that, taken together, their insights represent an extremely comprehensive anticipation of European debate in later centuries. Since much of that debate was bound up with the onset of analytical perspectives inspired by an increasing disposition towards economic liberalism, it is appropriate to begin a treatment of the Talmudic anticipations with an investigation of the manner in which the early writers dealt with the role of self-interest in the solution of communal economic problems. An Ancient Controversy Talmudic discussion of self-interest and its role was well underway by the second century B.C.E. At this time, Aggadah, the non-legal contents of the Talmud and Midrash, had begun to register the impact of nonJewish, particularly Greek, concepts.1 A deal of theological controversy was generated as a result. This controversy was evident within the Sanhedrin (or, “council court”) which was a prominent institution of the latter part of the Second Temple period.2 There, as Hellenistic notions gained momentum, the sage, Antigonus of Socho (a leading figure in

1 C.f., R.J. Zwi Werblowski and G. Wigoder (eds.), Encyclopedia of the Jewish Religion (New York: Holt, Rinehart and Winston, 1965), pp. 15–16. 2 Consult Abot of R. Nathan, Vol. I, Ch. 5, 13b. On the theological aspects of the controversy, see Louis Finkelstein, The Pharisees (Philadelphia: Jewish Publication Society of America, 1962), Vol. II, pp. 762–79.

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the “Chamber of Hewn Stones,” as it was called) expressed opposition to the inroads of hedonistic philosophy. Antigonus challenged his fellows, as follows: “Be not like servants who serve their master in order to receive wages. Be rather like servants who serve their master without expectation of wages.”3 The true reward, according to Antigonus, was derived from services rendered out of motives which bore no immediate relationship to selfinterest. This was a position which failed to impress a number of his colleagues. Those who remained in the Chamber objected vigorously. The piety of much of the priestly aristocracy was prudential, as was their ethic. These saw no contradiction between moral virtue and a strong personal attachment to the pursuit of individual material gain. This episode demonstrates that among the eminent scholars there was a substantial division regarding the foundations of legitimate socioeconomic behavior. Antigonus, and like-minded contemporaries, proposed a selfless basis for that behavior, a basis which they believed was both rational and realistic. Their opponents, on the other hand, espoused an enlightened self-interest. These latter found self-interest to be the rational mode, a necessary postulate for analysis concerning the behavior in question, and no necessary ground for moral condemnation of the individual attached to its maximization. In other words, the opponents of Antigonus took the type of stance which Joseph Schumpeter has described as “a highly sublimated egocentric hedonism.”4 The Fable of the Evil Impulse Subsequently, the role of self-interest was explored at length in a Talmudic fable. This concludes that civilization is advanced through the

Abot, op. cit., Vol. I, Ch. 3. For background, see Y.I. Halevy, Dorot HaRishonim (Berlin: Herz, 1923), Part I, Vol. C., pp. 167, 171. Halevy writes: “Antigonus succeeded Simeon the Just as the ‘Mufla of the Sanhedrin’.” The “Mufla” was the Head Judge. Consult also, Z. Frankel, Darkhei Ha Mishnah, pp. 28, 30. On the remuneration of members of the Sanhedrin, see Talmud Jerusalem, Maaser Sheni, Ch. V: 5, and Maimonides, Shekalim, 4:7. The latter is quite explicit that the Sanhedrin, “received their salaries from the Office of Contributions.” This statement is based on Talmud, Kethuboth 105a. Further to this background, it should be remarked that the fact that the Chief Judge of the Sanhedrin bore a Greek name (Antigonus) is some indication of the extent to which Hellenistic influence was present at this period. 4 Joseph Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1962), p. 66. 3

economic self-interest and social progress

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operation of an “evil impulse” which is present in human nature. The fable is based on a story told in the Babylonian Talmud.5 The story involved is both dramatic and suspenseful. In it, the reader is transported back to a deeply moving event from circa 450 B.C.E. as the Talmudic writers visualize how the returnees from the Babylonian captivity mourn their national disaster. The mood is sombre, but suddenly the narrative is transformed into a drama of universal import. Such a transformation is not surprising in the Talmud, since in the complex world of its text, the particular and the general, the logical and the theological, the national and the universal are interwoven in the manner of an oriental tapestry. In this instance, reflections which are national in character become universal in scope. Attention is directed to the significance of Yetzer-Ha-rah, the evil desire, tempter of idolatry, and, in this parable, to immoral action in general.6 A translation and paraphrase of the fable is given below. The literary form which we have chosen for its presentation is similar to that of Bernard Mandeville’s celebrated The Fable of the Bees (1705). This choice is not an arbitrary one, but is designed to emphasize the striking similarity of the views expressed in both fables. The Fable of the Evil Impulse reads, as follows: Alas, alas it is he! the idolatrous passion, Israel has been exiled, the sanctuary destroyed; The righteous were slain, no compassion . . . Yet still he is dancing amidst our void. Hast Thou planted in us the impulse to kiss That we may battle his tempting sword, To receive thereafter Thine eternal bliss?7 The Heavens approved—a tablet fell down, “I agree”—it read—“you spoke the ‘truth’.” A three-day fast they ordered on their own, “Let’s capture him and never let him loose.” Suddenly he came forth from the Holy of Holies, A young lion aglow spitting with fire

Consult, Babylonian Talmud, Yoma, 69–b, Sanhedrin 64–a. For the etymological derivation of “Yetzer-Ha-rah,” or “evil impulse,” and its various meanings, see George Foot Moore, Judaism (Cambridge, Mass: Harvard University Press, 1950) Vol. I., pp. 479–91. 7 The thought here is that Israel would be rewarded for resisting the evil impulse. 5 6

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chapter three They wrestled with him to subdue their follies, He surrendered, roaring—“I lost a ‘hair’!8 Seeing that this is a time for heavenly Grace They prayed for mercy to hand them ‘Yetzer’, the Base. As they triumphantly subdued the evil desire, “Beware!”—the prophet thundered— “If you kill him the world will expire!” For three days the “Evil Yetzer” was imprisoned; Temptations vanished, greed and pride ceased. Hurrah! the battle over, the sex-impulse is won— Alas . . . a fresh egg is needed, there is none.9 What shall we do?—they now intensely thought, Shall we kill him? the world couldn’t survive, No one would build, nothing be sold or bought Neither shall one marry, no children, no drive.10 At last it dawned—a truth profound In scheme divine—a principle sound: Vicious forces as passion, avarice and greed Are vehicles of progress the world doth need.11 The tempter must live to tempt, so let no one dare Deprive the Yetzer-Ha-Rah of his major glare.

Underlying the thought of this fable is the view that mankind has been endowed with two diametrically opposed impulses.12 These two “souls”—the spiritual and the mundane, the virtuous and the vicious—

The “hair” is a metaphor for the biblical Easu (who was “all hairy”). It is also a metaphor for Easu’s mentor-angel who was understood by the rabbis to be the ‘tempter of idolatry’. Consult Samuel Edels (Maharsha), commentary to Talmud Yoma 69b. 9 On this observation, see Rashi, Sanhedrin, 64a. The normal temperature necessary for procreation was reduced considerably both in male and female such that even when the egg happened to ripen the chicken could not lay it. 10 Midrash Rabba ( Jerusalem: Wahrman Books, 1965), Ch. 16. “Were it not for the evil impulse, no man would build, procreate, or engage in business enterprise.” See also, Midrash Kohelet Rabba, 4:4, and Yalkut Shimoni, Pardes ed. (1944), Ch. 16:5, p. 9. 11 Midrash Tehilim, Buber ed. ( Jerusalem: Brothers Rom, 1967), Ch. 37, p. 272: “. . . God said . . . were it not for Kinah the world could not exist since no one would marry or build a house . . .” The term Kinah connotes jealousy, envy, passion, emulation. It is akin to “greed,” “appetite,” and “ambition.” The implication of the foregoing statement is that man was intended to behave in a moderately “vicious” way that was socially expedient. 12 Babylonian Talmud, Brakhot 61a. “. . . Two passions did God create, the good and the bad. . . .” The term “yetzer” or “inclination” is derived from the Biblical “vayiitzar” (Genesis 2:7) with two vowels. From this it was inferred that God “fashioned” man with “two natures.” 8


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are present in each individual, and are designed to compete constantly with one another.13 Both contend for a “reward”—one in the realm of the material, the other in the domain of the spiritual. In this second sphere, the “virtuous act” is seen as constituting its own reward.14 The competition between the two “souls,” or natures, is fierce. Yet, this does not lead the Talmudists to propose a dichotomy between the natural order and the moral order. Further, they do not draw a sharp line of demarcation between the holy and the profane. Such a stance involves a number of problems, and one of these is highlighted by the fable. The complete attainment of moral perfection, it would appear, evokes unacceptable costs. Should pure “virtue” manage to render natural “vice” impotent, the result may be the destruction of an indispensable, equilibrating force in human society, and, perhaps, in the universe as a whole. As the Talmudic reflection indicates: “Vicious forces as passion, avarice, and greed are vehicles of progress the world doth need.” The inference from this latter is that although there are forces of a polarizing nature within any individual—benevolence and passion, righteousness and wickedness, ignorance and erudition—these forces are not necessarily mutually exclusive and may find some measure of common ground.15 Hence, certain propensities which might be regarded as “evil,” or morally debasing, are more correctly understood as “impulses” or natural instincts. In themselves, they are neither bad nor good. Rather, they are morally neutral. What matters is how the impulse or natural instinct is utilized by the individual person.

Babylonian Talmud, Brakhot 5a. Ibid., 61b. See also, Babylonian Talmud, Abot IV. II. “The reward of a good deed is the deed itself.” Although divine retribution was taken for granted by the rabbis, they insisted that it should not serve as a primary motive for virtue. 15 There is a variety of passages bearing on this theme. For example, Talmud, Haggiga 15a states: “Whatever God created, He also created its counterparts.” Babylonian Talmud, Brakhot 61b declares: “. . . The world has been created only for the wholly wicked or wholly righteous (to be enjoyed).” According to Zohar, Tazria 47: “Were it not for the existence of ignorance there would be no erudition”; “Without wickedness there would be no conception of righteousness”; and, “brilliance could hardly be conceived without darkness.” The Zohar or “Splendour” is a kabalistic work which deals with mystical psychology. It is based upon discussions of a group of second century rabbis. Modern scholarship attributes its authorship to Mose de Leon of the 13th century. 13 14

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chapter three Mandeville’s Fable and the Talmud

In the emergence of classical political economy in Europe during the late eighteenth century considerable emphasis was placed on the idea that the exercise of enlightened self-interest was efficacious. Essentially selfish behavior, it was contended, could be conducive to the benefit of society as a whole. This idea was central to the new, liberal economics of Adam Smith and it was anticipated by an earlier philosopher, Bernard de Mandeville (1670–1733). Mandeville’s “poem” The Grumbling Hive (1705), which was renamed The Fable of the Bees, shocked many of his contemporaries.16 However, its leading thesis would not have shocked the Talmudic scholars of earlier centuries. Mandeville found that vice and virtue, although distinctly opposed categories, tend to interact and can reinforce each other. The Talmudists, as we have seen, had arrived at this insight long before. Unlike Mandeville, the rabbis contended that individual persons have the capacity to act from motives that are “pure.” They did not reject the possibility of altruism. On the other hand, there is fundamental agreement between Mandeville and the rabbis when it comes to the psychologizing of economic phenomena. According to Mandeville, human societies exhibit a striking paradox, namely: Parties directly opposite Assist each other as ‘twere for spite.17

The apparently discordant passions harmonize to the end that “private vices” are turned into “public benefits.” To substantiate this assertion, Mandeville leads his readers through the tortuous dealings of merchants and lawyers, priests and judges, moralists and politicians, who, he finds, are all vicious. Yet, their wickedness forms the stuff out of which a benevolent social fabric is fashioned. Mandeville writes: Millions endeavouring to supply Each others’ Lust and Vanity . . .18

16 Bernard de Mandeville, The Fable of the Bees, or Private Vices, Public Benefits, with a commentary by F.B. Kaye (Oxford: Clarendon Press, 1924), 2 vols. 17 Mandeville, op. cit. Also The Grumbling Hive (Oxford: Clarendon Press, 1924), p. 25. 18 Fable, op. cit., i, 18.


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Thus every Part was full of Vice, Yet the whole Mass a Paradise.19

All material civilization, then, is the product of vices gratified. It is not the fruit of virtue. This suggests that it is the consequences of men’s actions which are important rather than the motives involved. Even base motives result in actions which are usually beneficial and agreeable to society. Mandeville went on to amplify his views in a series of prose essays. During the course of these he affirms, “how necessary our appetites and passions are for the welfare of Trade and Handicraft,” and he observes that, “Avarice and Prodigality are equally necessary to society.”20 He reasons that in the final analysis, “a Passion in our Nature . . . may be Good or Bad according to the Actions performed.”21 Such observations are highly supportive of the view that economic progress will be enhanced if free play is given to the pursuit of selfish ends. The vice of selfishness will spur each individual on to maximize his or her gains, thereby contributing to the growth of the wealth of a society. It is evident then that both Mandeville and the Talmudists regard the natural impulse as a constructive force which makes for gains in social utility. In fact, the Talmudists are prepared to go to the same lengths as does Mandeville in emphasizing the social element. This occurs at the point where they differentiate between the “good” and the “very good” natural impulse. In the Midrash, the very good natural impulse is associated quite explicitly with the “evil passion.” The rabbis ask: “But can the evil passion be very good?” The answer is in the affirmative. The reasons given for this answer are that if it were not for the evil passion, no one would marry, neither build nor engage in business, and, “the world could not exist.”22 Here, the Aggadic rendition places the “evil,” i.e., natural, instinct on a higher plane than the good impulse. This somewhat surprising elevation appears to be due to the utilitarian (in the broad sense) function of the evil instinct. Mandeville adopts the same stance. He writes:

19 20 21 22

Ibid., i, 24. Ibid., Remarks, p. 250. Ibid., p. 74. Kohelet Rabba, 4:4.

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chapter three Envy itself and Vanity Were Ministers of Industry23 As Price and Luxury decrease So by degrees they leave the Seas . . . All Arts and Crafts neglected lie; Content, the Bane of Industry Makes ‘em admire their homely Store And neither Seek nor Covet more.24 Fraud, Luxury and pride must live While we the Benefits receive.25

For the Talmudic writers, as for Mandeville, mankind’s propensity to marry, truck and build is a product of the natural impulse. Hence forces such as passion, ambition and greed, which are necessarily associated with that impulse, are indispensable instruments maintaining the world in operational balance. Such forces are utilitarian vehicles for the advance of civilization. Virtue without vice is counter-productive. Within the diversity of man’s motives there is uniformity of design. An operational balance serves to harmonize individual strivings with the interests of society. Other-Directed Action There are many historians of economic thought who have contended that there is a direct link between the writings of Mandeville and the economic liberalism of Adam Smith. For example, Charles Gide wrote: Smith criticised Mandeville in his Theory of Moral Sentiments. But despite his criticism, Mandeville’s idea bore fruit in Smith’s mind. Smith in his turn was to reiterate the belief that it was personal interest (in his opinion, not vice, but an inferior virtue) that unwittingly led society to the path of well-being and prosperity. A nation’s wealth for Smith, as well as for Mandeville, is the result, if not of a vice, at least of a natural instinct . . . which is bestowed upon us by Providence for the realization of ends that lie beyond our farthest ken.26 Fable, op. cit., p. 25. Ibid., i, 34–5. 25 Ibid., i, 36–7. 26 Charles Gide and Charles Rist, A History of Economic Doctrines (London: Heath, 1913), p. 72. 23 24


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Given that link, it is apparent that the talmudic scholars must be accounted notable anticipators of a set of ideas which is central to Smith’s economic philosophy, and this, despite the fact that there is no evidence that Smith had any direct acquaintance with the Talmudic tradition. However, the points of contact between ideas in that tradition and Smith’s philosophy go beyond those that have been considered thus far. The contacts are not confined to insights which the writings of Mandeville illustrate. Further affinities between the ideas of Smith and those of the rabbis derive from the latter’s other-directed theory of human action. With this theory, it is not a question of mankind’s instincts, as above. Rather, it is the issue of the place of conscious motives and their relationship to humanity’s creative potential. The theory also evokes debate concerning the presence of a guiding spirit in human affairs, which spirit makes for economic interdependence. Underlying the Talmudic approach to creative action is the belief that the presence of such action in human affairs is providential. It is Providence which is the force behind mankind’s drive to create. Hence, in a Midrashic statement, Providence is portrayed as a calling upon Israel to plant and build. The statement reads, in part: Even though thou mayest find the land prosperous, thou must not recoil saying: ‘I shall relax and refrain from planting’ . . . Just as thou hast found plantations which others have established before you, thou must do the same for posterity . . . Do not say . . . why should I labour for others . . .?27

In this passage, Providence is depicted as prodding mankind to rationalize its economic activities. It is as if Providence is saying: “How much less fortunate would you be without your ancestors’ sweat and toil. You in turn must do the same for the coming generation.” The import is that any one generation “builds” or “plants” partly on the basis of its awareness of an inevitable interdependence in economic life. Providence ensures that the self-interested, creative action of a generation can be consciously “other-directed.” The Midrashic statement does not end at this point, however. It continues on to a psychological explanation of creative endeavor. The rabbis add:

27 Midrash-Tanhuma, K’doshim 8, Horeb, ed. (Leipzig, 1927). Tanhuma is the oldest Aggadic Midrash. According to S. Buber, publisher of the oldest text (Vilna, 1685), it antedates the Babylonian Talmud.

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chapter three Were it not for the concealment of death from man’s heart, he would neither build nor plant, claiming, ‘tomorrow I die, why should I toil for others?’ Therefore has Providence concealed from man the day of his death so that he would continue to build . . . Now if he be worthy he himself will be the beneficiary; if not, he will serve as a benefactor L’Ahayrim, to others.28

In this second part of the statement, the Midrash treats the individual person as a selfish creature. Were it not for expectations of personal comfort and pleasure, real or imaginary, the individual would refrain from productive activity. If he or she does engage in creative endeavor, it is because of economic self-interest. This point established, the Midrash proceeds to unveil an aspect of the other-directed character of human action which differs from the previous inter-generational consideration. As is stated, if a person merits (“if he be worthy”) that person will enjoy personally the fruit of his or her labor. On the other hand, if a person does not merit, then L’Ahayrim, he or she becomes society’s benefactor. A person may be motivated simply by total self-interest, but the results of that individual’s endeavors may serve the interests of others. His or her action is unconsciously “other-directed.”29 Taken together, the two parts of the foregoing Midrashic statement embrace both action based on sympathetic feelings towards society and action based on unalloyed self-interest. The role of Providence is relevant in both cases. In the first, man’s conscience is prodded by Divine Providence to be concerned with the feelings and reactions of other persons. Some of these others have built and planted before, so how can one do otherwise? The recommendation is: “Do not say, why should I work for others?” The emphasis here is on man’s congenial feeling for the maintenance of harmony in human affairs. By contrast, the second

Ibid. The Midrash also illustrates this point by way of the following incident: The Roman Emperor Hadrian (2nd cent.) while touring Palestine, noticed a very old Jew planting fig trees. “You old man”—he asked—“why are you working in vain? Do you believe that you will eat the fruit of your labor?” The old man replied: “If I will be deserving, I will eat the fruits, and if not, let my children eat them.” Elsewhere in the Talmud, one rabbi recommends consciously other directed action in aid of maximizing economic self-interest. This occurs in a Aggadic rendition of a Biblical exhortation to be charitable to the indigent (Deuteronomy l4:22): “Said, R. Johanan, ‘Aser B’shvil Sh’tisasher’ (Thou shalt surely tithe in order that thou become rich).” Babylonian Talmud, Taanit, 9a. This recommendation appears also in Shabbat, 119a. 28

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part of the statement turns on the notion that man is basically selfish. Yet despite this, Providence has arranged for a proportion of mankind’s self- interested activity to result in public benefit. Those who are not themselves “worthy” can be society’s providential benefactors. Affiliations with Smith The other-directed theory of human action as developed by the Talmudists has its counterparts in the thought of Adam Smith. The aspect of that theory which encompasses action based on sympathetic feelings toward society is represented most clearly in Smith’s Theory of Moral Sentiments (1759). In that book, Smith contends that ethical systems develop by a natural process out of individual personal relationships. The individual decides that certain actions are proper or improper by observing the reactions of others to his or her behavior. A social consensus then develops that approves those patterns of behavior which benefit both the individual and society. Here, Smith’s emphasis is on the significance of “fellow feeling” as a social force. This same emphasis is evident when the Haggadic Midrash directs attention to the action appropriate to reflection on what the individual has gained in economic terms from the efforts of others. A second aspect of the talmudic theory was based on the assumption of the predominance of activity which is entirely self-interested. This line of analysis has more in common with that of Adam Smith in his Wealth of Nations (1776). In this book Smith depicts the individual as continually exerting himself to discover the most personally advantageous employment for both himself and his capital. Further, as in the Haggadic understanding, Smith perceives that this self-dedicated individual may often be the unwitting benefactor of society at large. Such an individual, Smith writes, “neither intends to promote the public interest, nor knows how much he is promoting it . . . he is . . . led by an invisible hand to promote an end which was no part of his intention . . . By pursuing his own interest he frequently promotes that of society.”30

30 Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, edited by Edwin Cannan, (London, 1904), p. 421.

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The rabbis, it is clear, would find nothing strange in Smith’s doctrine of an “invisible hand.” That hand, in their understanding, is the hand of Divine Providence which has deliberately fashioned human nature to produce the sort of unintended consequences which impressed Smith. Their concept of the order within Creation may not be co-extensive with Smith’s “natural order,” but both concepts relate the economic interests of the individual to those of society, partly by reference to unintended consequences. The Talmud and the Adam Smith Problem Professor John C. O’Brien, in his introduction to the 1992 edition of this book (p. xiii), correctly suggests that the “present work” provides an answer to the Adam Smith problem. Thus, in his great work, The Wealth of Nations, 1776, Adam Smith describes the doctrine of self-interest in the economic order with these words: “It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love . . .” (Modern Library, p. 14). “This View puzzled German economists when they contrasted it with something Smith had written some seventeen years earlier: ‘And hence it is, that to feel much for others, and little for ourselves, that to restrain our selfish, and to indulge our benevolent, affections, constitutes the perfection of human nature . . .’” (The Theory of Moral Sentiments, August M. Kelley Publishers, p. 27). Indeed, the Talmud provides an answer to das Adamsmithproblem in The Fable of the Evil Impulse. The fable’s underlying message (see above), is that mankind has been endowed with two diametrically opposed impulses—the two “souls,” the spiritual and the mundane, the virtuous and the vicious which are present in each individual and are designed to compete constantly with one another. In these Talmudic writings, there is not only a solution to the problem in the writings of Adam Smith which bothered German scholars, but also a link between the teaching of the Talmud, Adam Smith’s emphasis on self-interest, and Bernard Mandeville’s The Fable of the Bees, 1705. In the earlier sections of this chapter, we demonstrated the strong affinity between the thought of the Talmudic fable of the evil impulse and the Mandeville-Smith position on self-interest and national wealth. The latter sections show the striking resemblance of the Aggadic treat-


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ment of economic action to that which underlies Smith’s advocacy of economic liberalism. The chapters which follow take the investigation of rabbinic insights into more particular areas of economic enquiry. We shall now focus on one of the major macro-economic issues discussed in the Talmud—the business cycle.

CHAPTER FOUR

BUSINESS CYCLE ANALYSIS: THE TALMUDIC INSIGHT One of the most important achievements . . . and one of the few that were truly original, was the discovery and preliminary analysis of business cycles. —Joseph A. Schumpeter History of Economic Analysis, 1954

This chapter attempts to show that the Talmudic scholars, in the course of their discussions, have developed certain notions concerning business disturbances which modern economists have come to recognize as business cycles. We shall endeavor to analyze some of those passages in the light of modern economics. But first a few words about the development of business cycle theories. Business cycle theories are concerned with rhythmic variations in economic activity, with the ups and downs in output, employment and income.1 Today, the study of bossiness cycles is a recognized branch in the science of economics, with a vast apparatus of statistical and theoretical tools of analysis. This was not always so. The mercantilists, for instance, and even the early classicists, did not regard economic disturbances as being recurrent or cyclical. Although they showed some interest in the problem, they tended to associate crises and depression with causes lying outside the purview of economic science (i.e., Malthus, Say, etc.) There is an enormous business cycle literature extant. See in particular, Haberler, G. von, Prosperity and Depression, 3rd ed., 1948, Readings in Business Cycle Theory, selected under the chairmanship of G. von Haberler, (Richard Irwin, Inc., 1951), Readings in Business Cycles selected by R.A. Gordon and Lawrence Klein, (Richard Irwin, Inc., 1965), Wessley C. Mitchell, article in Encyclopedia of Social Sciences, Vol. III, Arthur M. Okun, The Political Economy of Prosperity (New York, 1970), J.A. Schumpeter, History of Economic Analysis (1954), pp. 668–750 and beyond . . . Regarding the relevance of the business cycle, see Roman A. Ohrenstein, article, “Is the Business Cycle Still Relevant?” Nassau Review, 1972. A recent contribution is the 593-page tome, Business Cycles: Theory, History, Indicators and Forecasting, by Victor Zarnowitz (University of Chicago Press, 1992). See also D.O. O’Brien (1997) The Foundations of Business Cycle Theory (Chaltenham UK and Northhampton MA USA: Edward Elgar Publishing, 1997). 1

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It was not until the middle of the nineteenth century that two brilliant scientists, Clement Juglar and W.S. Jevons, developed systematic studies on business cycles.2 Since that time many theories have been advanced, and in Schumpeter’s view “all essential facts and ideas about the business cycle” had been put forward by 1914. The investigations that followed, though highly significant, are, in effect, clarifications, elaborations and statistical verifications.3 The various business cycle theories fall into one of two categories, external (exogenous) and internal (endogenous). The former are caused by factors outside the economic system, such as sunspots, climactic conditions, war, innovations, etc. The latter are the result of internal factors, such as psychological, where people infect each other with either pessimistic or optimistic expectations, monetary aspects caused by the expansion and contraction of money in circulation, overproduction, underconsumption, and a host of other theories.4 *

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The Cycle Phenomenon in Antiquity Although the “cycles” have been characterized as a product of the “Capitalist Age,” they are not entirely a modern phenomenon. From time immemorial, come comments on lean or bad years and fat or good years. A familiar example is the biblical story of Joseph (Gen. 41:1–57). Joseph, the “Divinely inspired” Hebrew slave, is hauled from Egyptian prison to interpret the meaning and message of Pharaoh’s frightening dreams. He does so with Freudian perspicacity and economic pragmatism. As the biblical narrative unfolds, Joseph proves himself to be an expert in environmental as well as in agrarian affairs. Accordingly, he

2 Juglar’s study on business cycles was first published in his Les Crises Commerciales et leur Retour Periodigue en France, En Angleterre Et Oux Etats Unis in 1862, 2nd ed. 1889, later translated into English by W. Thom in 1916. And Jevons, after having made early studies of “periodic commercial fluctuations” supported by statistical investigations in 1862, ascribed this tendency to sunspot cycles which cause rhythmic irregularities in business activity. 3 History of Economic Analysis, ibid., pp. 1122–3. 4 For a more systematic discussion of the various business cycle theories, see W.E. Kuhn, The Evolution of Economic Thought (Cincinnati, OH: South Western Publishing Co., 1963), pp. 333–363.

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forecasts seven years of great abundance followed by a similar period of famine, i.e., a period of prosperity and a period of depression. The seven-year cycles were to occur as a result of the ups and downs in the agricultural sector. And to cushion the effects of the coming depression, Joseph formulates an ambitious inventory policy. He organizes and establishes store cities into which the surpluses were garnered during the good years that they may serve as an “economic shock absorber” during the bad years.5 It is noteworthy that historically, both astrology and the science of astronomy were practiced in ancient Mesopotamia and Egypt. It is, therefore, conceivable that Joseph the Hebrew, the great grandson of Abraham who migrated from Mesopotamia to the Promised Land, had absorbed some of the scientific aspects of those disciplines, first in his father’s house and later in Egypt. Thus, by systematic observation of the celestial bodies and their movements, he was in a position to forecast the periods of rain and drought as it pertained to the climatic conditions in Egypt. The lesson conveyed by this biblical passage was not lost on the succeeding generations of Israelites. It reemerges again in the annals of Talmudic literature, but this time, not as a “court story” as some put it, but as an object of analytical scrutiny of socioeconomic phenomena of modern significance. Stars, Cycles and Harvests The question regarding the necessity of studying the heavenly spheres and their cycles is a recurring theme in the Talmud.6 However, it is R. Johanan (third cent. C.E.) who not only encourages scientific inquiry

For comparison, see Roman A. Ohrenstein, “Inventory Control as an Economic Shook Absorber,” The Economic Quarterly (Hebrew, December, 1975), Israel. The above is a supplement to the book by the same author, Inventories During Business Fluctuations (“Reshafim,” Tel-Aviv, 1973). 6 See, Tractates: Rosh Hash. 24b., Sanh. 68a and Avodah Zarah 18a, 43b, and Sabb. 75a. Incidentally, the heavenly spheres were the object of religious fascination in the pagan cultures of the Greeks and Romans. For example, Cicero, who was steeped in Greek philosophy, and whose models were Heracleides, Ponticus and Aristotle, echoes the philosophers regarding the stars as he writes in his Nature of God 2:90; “When they have seen its definite and regular motions, and all its phenomena controlled by fixed system and unchanging uniformity to infer the presence not merely of an inhabitant of this celestial and divine abode, but also of a ruler . . .” (De natura deorum). 5

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of the solar periods but also seems to offer an economic rationale for doing so. It appears that he, or some of his talmudic successors have come to recognize the existence of a causal link between the solar phenomena and the climatic conditions which affect the harvest, and which in turn bring about variations in business activity. Nowadays, this type of theory attributes cycles to the effect which alternating periods of good and bad harvest has on a region’s total income. As Joseph Schumpeter has observed, “the most exogenous of all factors that influence economic life is variation of harvest in so far as due to weather, a factor pressed into service for the purpose of explaining business fluctuations by W.S. Jevons, H.S. Jevons (his son), and H.L. Moore.”7 The publications to which Schumpeter is referring are: W.S. Jevons, Investigations in Currency and Finance (1884); H.S. Jevons, The Sun’s Heat and Trade Activity (1910); and H.L. Moore, Economic Cycles: Their Law and Causes (1914). This line of analysis was anticipated earlier in the nineteenth century by Thomas Tooke and by the French economist Briaune, and Schumpeter notes also that as early as 1662 Sir William Petty used the term “cycle” with reference to the sequence of good and bad harvests.8 In essence, the harvest theory links prosperity and depression in the economy to the fortunes of the agricultural sector. Those fortunes are linked in turn to the state of the weather. Hence the physical determinants of cycles in weather patterns have a causal relationship with the condition of the economy as a whole. W.S. Jevons, for example, focuses on sunspot activity. In “The Solar Period and Price of Corn” (1875) he writes: If the planets govern the sun and the sun governs the vintage and harvests, and thus the prices of food and raw materials and the state of money markets, it follows that the configurations of the planets may prove to be the remote causes of the greatest commercial disasters. (Investigations, p. 185)

We shall attempt to show that it is highly likely that the rabbis came to understand business fluctuations in terms of what later was called the “harvest theory” of cycles in economic activity. *

*

*

7 J.A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), p. 1133. See also, pp. 876–77 on H.L. Moore. 8 Ibid., pp. 742–45.


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As related before, Johanan, in his expositions, encouraged physical scientific inquiry with respect to solar periods. A leading statement is, as follows: . . . said R. Johanan: whence do we know that it is incumbent upon every person to calculate the cycles of the seasons and constellations? For it is stated (Dt. 4:5–8): ‘. . . keep them, obey them, for this is your wisdom and intelligence in the sight of the nations.’—what kind of wisdom is in the sight of the nations? It is the science of the solar periods and constellations.9

Here, Johanan is recommending the collection of scientific data on solar phenomena, a recommendation which is emphasized by his stress on the noun “sight.” However, why collect the data? His reference to “the cycles of the seasons and constellations” suggests that the wisdom gained is of importance for prediction of the weather. In fact, the notion and necessity of calculating the cycles of the seasons and constellations was a major concern among the talmudic rabbis. The study of “astronomy and geometry” had an eminently practical purpose, namely to coordinate the Hebrew calendar with the movement of the sun which regulates harvest time.10 Indeed, talmudic sources demonstrate that the intercalation of the years was a practice of the Sanhedrin in both Hasmonean and Mishnaic periods (ca. 165 B.C.E.–200 C.E.). A typical statement reads: We declare a leap year for three occasions on account of the spring crop, on account of the fruits of the trees, and on account of the solstice.11

As Professor Power writes: The Hebrew year was not a lunar but a lunisolar. This was necessitated by the harvest offerings at the annual feasts since harvest time is regulated by the sun. Another month, therefore, Adar II (ve-Adar), was intercalated before Nisan (March-April) if further time was needed for the ripening of the barley first-fruits to be offered during the feast of the Pasch (April).12

It ought to be pointed out that the question of how important is it to acquire academic knowledge seems to have been subject of debate Tractate Sabb., 75a. The translation of this passage is by the author. San. 11aff. 11 Tosephta-San. II.2 The Tosephta (Additions) was partly parallel to the Mishmah and supplementing it. 12 H. Power, “Measures, Weights, Money and Time,” in B. Orchard, et al. (eds.), A Catholic Commentary on Holy Scripture (London: Nelson, 1953), p. 112. 9

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since Mishnaic times. Thus, according to Eleazar Chisma, “astronomy and geometry” are mere “fringes to wisdom.”13 Whereas according to R. Johanan, to master the same is not only essential but an “obligation” (Mitzvah). It is against this entire background that Johanan felt obliged to coin his statement regarding the necessity of scientific investigation of the “cycles of the seasons and constellations.” Why should scientific investigation be an “obligation” if not for the purpose of monitoring the weather conditions as discussed above. Elaboration and Refinement Johanan’s position was now open for elaboration and refinement. This was undertaken by the authoritative talmudic interpreter Rashi (eleventh century). He remarks on his predecessor’s rendition of the biblical phrase “in the sight of the nations” in the following passage: It directs our attention to the kind of wisdom which is observable and (scientifically) verifiable, namely the calculation of the course of the sun and constellations, which tell us whether a given year will be rainy or subject to drought (emphasis added), since all the periods are determined by the sun and constellations.14

Rashi is in no doubt as to why the information should be collected. The information bears directly on the weather that can be expected. Rashi’s clarification is also of interest in terms of later business cycle theory because of its specification of the sun rather than the moon, as the prime object of systematic investigation. This specification, it can be added, is entirely in conformity with the tradition to which he was heir. Additional emphasis on the role of the sun in terms of weather conditions is provided by a later talmudic commentator who is known as the “Maharsha” (1555–1631). This commentator is also impressed by the need for systematic investigation of the physical phenomena involved. In his Legal Novellae, Maharsha affirms that it is the sun which

13 “. . . Said R. Eleazar Chisma: astronomy and geometry are ‘Parperaot’ (peripheral, auxiliaries) to wisdom.” Interestingly, preceding Johanan’s statement we read the following: “Said R. Simeon b. Pazzi in the name of (his teacher) R. Joshua b. Levi who related it in the name of Bar-Kapara, ‘he who understands the science of cycles and planets and does not practice it, of him it is said: but they regard not the work of the Lord.’ ” (Is. 5:12). 14 Ibid. Translation by the author.


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determines whether or not seasonal conditions will be wet or dry. Further, the acquisition of wisdom in this field, “is both theoretical and empirical, subject to exact calculations, just as the astronomers who employ scientific instruments to observe the movements of the sun and constellations” (Hiddushai Halakhot, Sabb., p. 42). When the insights of Rabbi Johanan are put together with the comments of Rashi and the Maharsha, there is a strong case for the contention, as will be demonstrated, that the talmudic tradition fostered a harvest-cycle theory of business fluctuations. Even more specifically, it would seem that the tradition directed attention to scientific investigation of solar phenomena as providing the basis for knowledge of the incidence of prosperity and depression.15 In this regard, the tradition may be said to have anticipated an aspect of later economic thought which is associated, in particular, with the research of W.S. Jevons.16 It is especially noteworthy that today’s scientists confirm the talmudic thesis regarding the connection between the terrestrial shifts and solar activity namely “the sun’s effect on the climate.” As pointed out by William J. Broad: For centuries, scientists have known that the sun . . . has seasons and storms and rhythmic activity . . . But only in the last decade or so have . . . solar variations begun to be tied to climate shifts on earth . . . a mechanism that affect the production of clouds and rain . . . (emphasis added). Science Times, Sep. 27, 1997, p. F l.

It is, indeed, remarkable that the ancient talmudic scholars and their medieval successors held views that are conformable to modern scientific scholarship regarding this matter. A Point of Departure Earlier it was shown that Jevons’ theory of trade cycle began in the heavens. He relates the trade cycle to meteorological cycles. The regular

15 Cf., Genesis Rabbah (s.10): “. . . there is no herb which has not a planet in heaven that strikes it and says: ‘grow’.” 16 It can be added that it might be some recognition of the existence of agricultural cycles which underlies the biblical institutions of Shmitah and Yovel. The first of these assumes a duration of seven years, and the second, fifty years. This second duration is approximately of that ascribed to “long waves” by the Russian economist N.D. Kondratieff.

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changes in sunspot activity correlate with drastic disturbances in crop harvests. Inasmuch as R. Johanan has long before recognized the connection between the “Seasons and Constellations” and its effect on weather conditions, did he also extend the scope of this set of linkage? Certainly: As will be shown below, Johanan in his scientific analysis of Batzoret (“supply obstruction”) and Kafna (“supply shock”), demonstrates that not only does he associate general fluctuations in the economy with those of agricultural production and supply, but also ventures beyond the fortunes of the harvest cycle, namely, into pecuniary matters as contributing factors to the general business cycle. Thus, he seems to suggest that in the course of the harvest cycle, other variables, such as money and incomes become active players, with a causal relationship between the two: between the harvest cycle and incomes and prices. Eventually, the latter themselves play an independent role in the business cycle, which affect the local economy as a whole. With this thought in mind, we now turn to the discussion of “seasonal variations” followed by the analysis of Johanan’s business cycle theory. Seasonal Price Variations The Talmudic scholars were keenly aware of the tendency for prices to fluctuate both on micro and macro levels, and that those price changes can occur locally and inter-regionally. They were also cognizant of the possibility of frequent and sometimes disturbing business variations to the point of requiring the implementation of emergency measures. Ordinarily, prices were expected to fluctuate seasonally in normal cycles or to differ from region to region. An instance of such variations is indicated in the Mishnah, Maaser Sheni 4:1.17 It concerns a case where produce was brought from another region, with prices there being either “exorbitant” or “cheap.” Alternately, the Jerusalem Talmud (Maaser Sheni 4:4) speaks of sudden price changes of agricultural products, up or down, by as much as 100 percent. The Mishna in Maaser Sheni treats that as a case of market segmentation. In such an instance the local market price takes precedence either to the detriment or to the advantage of the vendor. See also, Tosephta Avoda Zarah 5:1 which is roughly coeval with the Mishnah. 17


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Other examples of normal price changes appear in two separate Amoraic discussions: one concerns the calculation of the value of a Hebrew slave in the event of his redemption prior to the expiration of his term of service; the other refers to the redemption of real estate before the arrival of the biblical jubilee year in which sold property must be returned to the owner. Both cases pertain to the biblical passage in Leviticus 25:25–28 and 25:47–53. In both cases, the scholars suggest that their prices may fluctuate widely. They depict a market situation where prices rise, decline and rise again. Thus, in the case of the slave, his value may change due to his personal status, such as health and strength, his productive capacity, or on account of variations in the market conditions. A similar situation prevails with respect to the changing conditions of real estate, quality-wise and market-wise.18 Thus, whenever such cycles were due to normal circumstances, prudence dictated to let the market forces take its course without undue intervention. Not so when a major sector of the economy was threatened. What is particularly noteworthy in this connection, is the fact that the talmudic scholars were more apprehensive when the price gyrations were on the down side than if they were spiraling upward. Our Rabbis taught: a state of emergency is declared for goods (which have become dangerously cheap), even on the Sabbath. R. Johanan said: For instance, linen garments in Babylon and wine and oil in the land of Israel. Said R. Joseph: This (is only so) when (these have become so) cheap that ten are sold at (the price of ) six, (i.e., a drop in 40 percent).19

The reason given by the Rabbis for the implementation of emergency measures is that “falling prices endanger the trading sector in the community.” On the other hand, an upswing in the price level is viewed in the Talmud more benignly. A case in point is the inflationary spiral that began in Roman Palestine during the second half of the third century C.E., followed by a series of currency devaluations which,

18 See, TB, Kidd. 20a–b and Arakhin 30a. The question revolves around the method of calculation. Is the amount to be refunded to the purchaser to be based on the slaves (or the property’s) original price or on the current value, i.e., on the market conditions with their wide price movements of “ups” and “downs.” 19 Babyl. Talmud, Bava Bathra 91a. Translation by Maurice Simon under the editorship of I. Epstein, with minor rendition by the author. According to Rashi (eleventh cent.) and other commentators, the above statements refer to a depression in the garment industry.

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after some interval culminated in rampant inflation during the fourth century C.E.20 Thus, the Jerusalem Talmud relates about two Amoraim, R. Hillel and R. Mana, (fourth cent.), who purchased (or possessed) expensive garments, each of them in the value of thirty myriads denarii. (Kelayim 40 a–b). Another discussion revolves around a hypothetical case where fifty myriad denarii may be required to pay for a relatively easy job (T.J., Maaser Sheni, 1:4b). Reference is also made to an oil transaction for 100 myriads (T.B. Menahot, 85b). Some early Midrashic sources also hypothesize about the cost of pearls as well as sums of loans in terms of such astronomical prices. They probably reflected the hyperinflation at that time.21 At any rate, from the cited passage about emergency measures in the event of falling prices, one would expect a similar reaction in case of rampant inflation. Curiously, the response was rather mild; an appeal to prudency. For instance, normally, the possession of a practical trade or occupation was highly regarded by the Talmudic rabbis as a safeguard against poverty.22 But R. Eleazar ben Pedat (d.279 C.E.) thought that in uncertain (economic) times, land is to be preferred. He even cautioned that “eventually, all artisans will stand on land” since “a man who does not own land is not really a man” (T.B., Yeb. 63a), apparently on account of its intrinsic and rather stable value and its life-sustaining qualities. Another scholar recommended prudent diversification of assets. “Said R. Yitzhaki (d. 320). One should divide his wealth into three parts: One third in real estate, one third in merchandise, and one third in cash” (T.B. B.M. 42a). Surprisingly, the rabbis even debated as to whether or not and under what inflationary circumstances may a Jew be permitted to emigrate from the land of Israel. (T.B., B.B. 91a). All of those devices, unlike in deflationary times, were mere defensive measures. This just goes to show that the Talmudic “economists” viewed the two economic phenomena, inflation and deflation, from two different perspectives: concern but not alarm in case of the former, and 20 See, Daniel Sperber, Roman Palestine 200 –400 Money and Prices (Ramat-Gan, Israel: Bar-Ilan University, 1978), pp. 164–181ff. In this scholarly work, the author analyzes, a.o., a whole range of currencies and prices, supported by statistical evidence and solid inquiry. 21 Tanhuma, Exodus-Mishpatim, 15, and Exodus Rabba, 20.9. 22 For more extensive analysis of Genesis on these issues see, B. Gordon, The Economic Problem in Biblical and Patristic Thought (Leiden: E.J. Brill, 1989), pp. 1–5.


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apprehension and alarm in case of the latter—a frontal attack against deflation and measured defense even in the face of spiraling inflation. Why? What was their reason? The answer to this question is the subject of the ensuing discussion concerning cyclical fluctuations. Supply Shook and Economic Fluctuations Earlier we have shown that the biblical Book of Genesis has demonstrated an abiding concern for the problem of scarcity. This idea that was prominent in the earliest books of Jewish literature, has remained a basic point of reference for the rabbis. Our investigation has also shown that the talmudists were no strangers to the idea that scarcity is a fundamental feature of the human condition. They were quick to recognize that scarcity is a phenomenon with wide ramifications. It manifests itself physically, economically and psychologically, inter alia, in the economic dimension of time; in our limited time frame that makes us hostages to temporality; in the notion of time preference along with the talmudic theory of interest; in the rabbis’ sophisticated idea of foregone opportunities or opportunity cost. It will now be shown that the talmudic scholars probed the problem of scarcity by way of analysis of failures of supply of commodities resulting in supply shock. These probings included a theory of economic fluctuations, plus some strong intimation of a quantity theory of money. Supply Shock Whereas the biblical treatment of scarcity is couched mainly in terms that are either quite general or person-specific, the Talmud engages in social analysis of the phenomenon. It distinguishes between different types of scarcity which can afflict a particular community. One of these is Batzoret which arises from structural causes. The other, Kafna, is a much more serious eventuality. This involves a negative shift in the total supply of essential commodities.23 Babylonian Talmud, Tractate Taanit, p. 19b. The discussion of Batzoret and Kafna which follows is based on the original analysis first published by R.A. Ohrenstein, “Economic Thought in Talmudic Literature in the Light of Modern Economics,” American Journal of Economics and Sociology, 27 (1968), pp. 185–96. 23

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The Problem of Batzoret is mainly a problem of distribution which impacts on market price. It assumes no change in aggregate supply. Yields are normal in this instance, but there may be some disturbance in the distribution system which prevents it from working in the accustomed manner. The local transportation system, for example, may not be able to function as usual.24 Here, there will be localized shortages, or a “supply bottleneck,” which need to be made good by importation from other regions. Also, the price level will rise, if only because of additional transport cost. The latter is a sort of “bottleneck inflation.” Kafna, by contrast, involves a failure in aggregate supply engendered by climatic factors or by a major disruption of transport.25 In this instance, the talmudists are contemplating a condition which could be represented in a modern Economics text book by a substantial inward shift of the normal supply curve. A certain quantity of product will be forthcoming on the market only at a price per unit that is well in excess of what pertains in most seasons. The rabbis recognize that Kafna is qualitatively distinct from Batzoret. Kafna may require the implementation of emergency measures to sustain the populace. Fluctuations in supply can be so serious as to demand intervention to prevent market outcomes from spelling social disaster. Professor Paul Samuelson terms such developments as “supply shock.”26 Prosperity and Depression Further exploration of the distinction between Batzoret and Kafna led the talmudists into more extensive examination of the functional relationships between economic variables. Their focus, in this regard, was on the behavior of a regional economy as a whole. Hence, they came to realize that the issues which concerned then could not be resolved

24 Cf., Tossafoth, Tractate Taanit, p. 19a. The Tossafoth is a composite commentary by the disciples of Rashi (d.1105) which supplements that of their master. 25 In terms of ancient economic thought, the transport issue loomed large, and locational issues could often be paramount. The rabbis, for example, were looking to situations in which the flow of products was a matter of conveyance by means of rivers or canals. Inadequate water levels could be major variables conditioning market circumstances. 26 See, Economics, by Paul Samuelson and William D. Nordhous (New York: McGrawHill, 1989), p. 206.


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without reference to the monetary circumstances of the region in question. The opening move in the widening debate was made by Rabbi Hanina (third century, C.E.). In distinguishing between Batzoret and Kafna, he observed: If a Sexah of grain costs one Selax and is obtainable—it is Batzoret: but if four Sexahs cost a Selax but are not easily obtainable then it is Kafna.27

A Sexah was a measurement of quantity which approximated thirteen litres, and a Selax was a monetary unit with an exchange value of four silver dinarii. The Rabbi is claiming then, that when a certain quantity commands a particular price and is freely available for purchase this indicates a shortfall of supply due to distributional problems that are not of major consequence. On the other hand, when that same quantity commands a much lower price but is less readily purchased by the consumer then there is a major scarcity problem which justifies emergency measures. Hanina’s statement might be dismissed as illogical, since he envisages that a commodity will be unobtainable despite a fall of 300 percent in its price, whereas it is available despite a price increase of 300 per cent.28 Yet, Rabbi Johanan (mid-third century, C.E.) finds the statement logical. Johanan explains: This applies only in a situation when money is cheap and commodities are dear, but when money is dear and commodities are cheap, a state of emergency is declared at once.29

Here, Johanan is pointing to the fact that because one measure of grain costs as much as a Selax, or because price may fall by as much as 300 per cent, these do not of themselves indicate the true nature of the scarcity problem at these times. There can be other economic variables at work such that a shortfall of supply is more apparent than real. The true reason for the variations in price level could be bound up with monetary factors, i.e., with inflation or deflation. Johanan seems to have appreciated that economies can be subject to alternating periods of prosperity and depression. He states that there are phases when money is cheap and commodities are dear, as well as phases when money is

27 28 29

Babylonian Talmud, Tractate Taanit, p. 19b. Here, we express the percentage change as a calculation from its base. Ibid., p. 19b.

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dear and commodities are cheap. In times of prosperity, he reasons, business is brisk, and as a tenth century commentator, Rabbi Hananel, adds, personal income is on the rise. Money is in greater abundance, and it tends to become cheaper in terms of other commodities. The money prices of those other commodities rise. As can be seen, here there is a strong recognition of an existing relationship between commodity prices and incomes. This talmudic reasoning has a very modern ring to it, and quite accurately corresponds to the view expressed by Friedrich Hayek, as he states: An increase in aggregate money incomes cannot mean an increase in real incomes and is much more likely to mean a decrease in real incomes to many individual consumers.30

Moreover, in R. Johanan’s analysis, we find the ingredients of Keynes’ notion regarding the “non-neutrality of money,” in that the money component strongly affects business conditions, and in particular, Hawtrey’s standpoint concerning the shifts in the money flow as causes of economic fluctuations.31 These insights permit Johanan to understand Hanina’s position that when a Sexah of grain costs one Selax, it was not a time for emergency measures. The current price reflected the buoyancy of business and increased personal incomes. Batzoret for Johanan signifies price inflation, and since that is a characteristic of a period of prosperity, the state of the market price for grain is not an object of grave concern for the authorities. In times of prosperity, prices may rise as much as threefold, but so might personal incomes. On the other hand, Johanan appreciates Hanina’s depiction of Kafna. This appreciation is based partly on personal experience. Johanan reminiscences: I distinctly recall when one could have obtained four measures for one Selax, yet people were starving in Tiberias for want of a penny (an isar).

30 “Price Expectations, Monetary Disturbances and Malinvestments” by Friedrich A. Hayek, article in Readings in Business Cycle Theory (Homewood, Illinois: Richard D. Irwin, 1951), p. 350. 31 Hawtrey expanded his idea in Currency and Credit (Longmans, Green, 1930), Monetary Reconstruction, (Longmans, Green, 1923), Trade and Credit (Longmans, Green, 1928), Good and Bad Trade (London, 1913). For a critical analysis of Hawtrey’s views, see especially John R. Hicks, A Contribution on the Theory of the Trade Cycle (Oxford, 1959), ch. XI.


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In this situation, money was dear. Commodities appeared to be in plentiful supply, but few could aspire to buy them. Here was a set of circumstances which could justify the proclamation of a state of emergency. Prices had fallen threefold, but it would seem that personal incomes had been depressed to an even greater degree. It is remarkable that modern economic literature discusses the business cycle in an almost similar fashion. Suffice it to mention that Paul Samuelson describes failures in supply in contemporary America as follows: Until recently most discussions have presumed that business cycles are caused by changes in aggregate demand . . . Events of the last two decades cast significant doubt on that presumption. That period witnessed several shocks to productivity or to cost that shifted aggregate supply and affected business conditions. Among the important examples were those that affected the level of potential output including droughts and crop failures in agriculture.32 (Emphasis added.)

It is evident that Johanan’s analysis of Batzoret and Kafna, contains some aspects of Hawtrey’s business cycle theory and some of the “supply shock” theory. Batzoret, with its emphasis on the money-income effect, seems to correspond to Hawtrey’s view of the business cycle as a monetary phenomenon. Whereas Kafna, with its acute failure of supply corresponds to Samuelson’s view cited above. To be sure, from the historical perspective, the views of those scholars reflect different socioeconomic environments. A span of sixteen hundred years separates them. In principle, however, each emphasizes a different side of the same coin. Whereas Hawtrey traces the flow of money and income to the inherent instability of the modern credit system,33 R. Johanan traces it to the instability of supply. In the final analysis, whatever the cause of the business cycle, be that Irving Fisher’s “dollar dance,” or the failures of supply, etc., all cycle theories have a common denominator: their recognition of periodic variations in business activity. Amazingly, the Talmudic notion of being more concerned about the vagaries of recession than about a spiraling inflation, is still relevant today. A case in point, is the credit crunch in America in 2008. To put

Samuelson, ibid. p. 206ff. See in particular Hawtrey’s article, “The Trade Cycle” in Readings in Business Cycle Theory (Richard D. Irwin Inc.). 32 33

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it in a nutshell: In 2008 the sub prime mortgage calamity resulted in a severe credit crunch with dangerous economic results. To forestall an imminent recession, the Government and the Federal Reserve opened the monetary spigot, knowing full well, that such a massive infusion of capital may spur on an inflation. In spite of that, those financial authorities went ahead with the stimulus. Apparently, they feared more an economic recession than an ensuing inflation. Last but not least, a word about the salutary role of credit. The Talmudic scholars seemed to have been aware of the pivotal role that credit plays in the nation’s economy. As discussed earlier (see Ch. 1), Hillel the Elder introduced the notion of the Pruzbol—a legal device to circumvent the biblical law which prohibits the collection of outstanding debts upon the arrival of the Sabbatical year. He “noticed” that as a result of that prohibition “the people refrained from extending credit to one another.” This resulted in a credit crunch which caused social hardship within the economic fabric of the nation. It, therefore, stands to reason, that Hillel must have considered the availability of credit as a stabilizing factor in the economy. Unlike Hammurabi’s Code which merely recognized the existence of money and credit, or even Aristotle who expounded upon the functions of money, Hillel’s bold act of restoring credit to the people seems to point to the credit phenomenon as a regulatory instrument of monetary policy. The Quantity Theory of Money The foregoing analysis of prosperity and depression first by Hillel, then by R. Johanan and his successors, clearly involve an engagement in monetary (and credit) issues at the macro-economic level. Further, that engagement, with its recognition of the existence of a quantitative relationship between money supply and prices (and, between prices and incomes), suggests that the rabbis had come to appreciate the fundamentals of what was to emerge later as the quantity theory of money.34

34 In the literature of Economics, there are several variants of the quantity theory. However, each affirms that ceteris paribus an increase in the quantity of money will tend to decrease the purchasing power of the unit of currency. Cf., J.A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), p. 703. The first clear statement of that theory was made by the Spanish theologian, Martin Azplicueta


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R. Johanan, as we have seen, finds a definite, quantitative relationship between money and prices. Then, as elucidated by R. Hananel, the relationship between money and prices turns on a change in community incomes, since an increase in those incomes engenders a greater volume of currency in circulation. Such reasoning embodies the theoretical ingredients of a quantity approach. It corresponds to the simple “quantity theory of money” as expounded by Jean Bodin in the sixteenth century, advanced by Cantillon in the eighteenth century, and developed by men like Thornton, Ricardo, and Mill in the nineteenth century. Today we call it the “crude quantity theory of money.” In essence, it maintained that money stock changes lead to proportionate price-level changes. Its basic principle is that “prices vary directly with the quantity of money in circulation and inversely with the total volume of goods sold.” Whereas R. Johanan maintains that “there are times when money is cheap and commodities are dear (price inflation) and times when money is dear and commodities ‘plentiful’ (price deflation).” In principle, both ideas seem to be similar. Even further, it might be claimed that Johanan subscribed to a rather more sophisticated version of the quantity theory than that which was adopted in the orthodox political economy of the early nineteenth century. For Cantillon, David Ricardo and others, as we have seen, changes in money supply lead to proportional changes in the general price level. However, in his reflections on the depression in Tiberias (noted above), Johanan seems to envisage a disproportionate relationship between the quantity of money in circulation and market prices, where the variation in that quantity is a function of the general business conditions prevailing. Perhaps Johanan’s conception is in consonance with the post-classical rather than the classical understanding of the matter.

Navarrus in 1556 C.E. Navarrus wrote: “. . . other things being equal, in countries where there is a great scarcity of money all other saleable goods, and even the hands and labour of men, are given for less money than where it is abundant. Thus, we see by experience that in France, where money is scarcer than in Spain, bread, wine, cloth and labour are worth much less. And even in Spain, in times when money was scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver. The reason for this is that money is worth more where and when it is scarce than where and when it is abundant.” Consult, M. Grice-Hutchinson, The School of Salamanca (Oxford: Clarendon Press, 1952), p. 52 and p. 95.

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We have attempted to demonstrate that the Talmudic scholars and the commentators that succeeded them, possessed the theoretical knowledge and practical experience regarding the market phenomenon of business disturbances. They recognized the existence of a causal relationship between the physical determinants of the cycles of the weather patterns and the fortunes of the agricultural sector, a condition which affected the economy as a whole. The scholar in particular that subscribed to that sort of linkage was R. Johanan. In this regard, the talmudic tradition may be said to have anticipated an aspect of economic thought, notably that of W.S. Jevons’ sunspot theory. This linkage is particularly evident from Johanan’s analysis of Batzoret (failure of supply stemming from structural causes) and Kafna (failure of supply caused by climatic conditions) in the context of business fluctuations. In it he suggests, a.o., that there exists a strong relationship between commodity prices and incomes—a notion which corresponds to Hayek’s views. Accordingly, in both Batzoret and Kafna money plays an active role in influencing price inflation and/or depression. Moderns describe this phenomenon as the “non-neutrality of money.” These insights come close to Hawtrey’s view of the business cycle as a monetary phenomenon on one hand, and Samuelson’s discussion of “supply shook” as a result of “. . . droughts and crop failures in agriculture,” on the other. Furthermore, Johanan also recognized the existence of a quantitative relationship between money and prices and prices and incomes. This suggests that the Talmudic scholars had come to appreciate the fundamentals of what was later to emerge as the quantity theory of money.

PART THREE

MICRO-ECONOMIC ISSUES

CHAPTER FIVE

TIME DIMENSION, OPPORTUNITY COST AND MARKET BEHAVIOR Parallels between talmudic analysis and later developments in economics are not confined to insights associated with macro-economic issues. The rabbis also anticipated aspects of micro-economics, as demonstrated in the ensuing discussion, commencing with “time.” TIME is perhaps the most elusive concept in the realm of human thought. “Trying to grasp time is like trying to wrap our arms around a cloud.” Today quickly becomes yesterday’s tomorrow. Tomorrow is forever becoming today. Indeed, the time phenomenon has many facets: physical and metaphysical, theological and psychic, historical and economic. Ever since mankind has mounted the stage of history, it has been “wrestling with time,”1 trying to penetrate its mysterious nature, aiming to utilize it morally, spiritually and economically, or for some other purpose. In this section, we attempt to analyze a.o., some of the aspects of economic time as presented in biblical and apocryphal sources, and as debated in the talmudic tomes. But before we tackle our own subject, a few words about time are in order. What is time and what is its social significance? Generally, it is a concept which deals with the recurrence of events. More precisely, it is a conscious experience of events.2 However, from a socioeconomic perspective, the time phenomenon is an important economic quantity and, therefore, a vital economic resource that is subject to a “time-market.” Thus, unlike John Stuart Mill (1806–73) who suggested that time is merely an abstract word and therefore unable to add value, some distinguished economists, like Alfred Marshall (1842–1924), Boehm Bawerk (1851–1914), Frank A. Fetter (1863–1949) and Irving Fisher (1867–1947) have fostered a.o., the doctrines of “time value” and “psychic time.” Both concepts are linked to a time market as sketched below. 1 See, Martin Currie and Ian Steedman, Wrestling With Time: Problem in Economic Theory (The University of Michigan Press, Ann Arbor, 1990), pp. 2–3ff. 2 For a discussion of the meaning of time in general, see Encyclopedia Britanica (1965 edn.) Vol. 22, p. 224 and Vol. 7, pp. 774–75. On “Space Time” see Vol. 21, pp. 1037ff.

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Essentially, these principles turn on the notion of time preference which states that current consumption or income is valued more highly than those accruing in the future. Thus, according to the Austrian School of economics, time preference is the very foundation for the explanation of interest. Boehm Bawerk, for instance, called such income an Agio or premium that arose from time. And in Fetter’s view, time is the connecting link between an emerging surplus and present goods, due to the general disposition toward the present. It is the basis for the capitalization of “psychic Income” which accrues as rates of return to capital and long-run profit rates. Likewise, Irving Fisher in his Theory of Interest argues that the determination of the rate of interest is influenced a.o., by the psychological forces of time preference. And last but not least, Arthur Cecil Pigou (1877–1959) put emphasis on an individual’s time horizon and farsightedness. He referred to people who would value more highly present rather than future consumption as myopic, having a “defective telescopic faculty.”3 Historical Time In Hebrew Scriptures, Talmudic literature, and subsequent Jewish thought, the notion of time and its proper utilization is a major topic of discussion as well as of significance. There are various approaches concerning this phenomenon.4 However, it is the historical approach 3 For a fine analysis of Time Preference, see Murray N. Rothbard, The New Palgrave, a Dictionary of Economics, Vol. 4, pp. 644–646 (1987 edn.). For some principal sources on this subject, see, Eugen v. Boehm Bawerk, Capital and Interest, Vol. I and II, 4th edn., South Holland, Illinois: Libertarian Press (1959). See also M. Rothbard, Capital, Interest and Rent: Essays in the Theory of Distribution, Sheed Andrews and McMeel, Kansas City (1977); Ben B. Seligman, Main Currents in Modern Economics, The Free Press of Glencoe (1962). See in particular, pp. 294–310 and pp. 628–637; Henry W. Spiegel, The Growth of Economic Thought, (Englewood Cliffs, NJ: Prentice Hall, 1971), pp. 623–24; Irving Fischer, The Theory of Interest (New York: Macmillan & Co., 1930, reprinted in 1954), pp. 14, 25; Arthur C. Pigou, Income (1946) and The Veil of Money (1949), both published by Macmillan & Co., London. Also, Alfred Marshall, Principles of Economics (1890), who first introduced time into economic models. See also G.L. Shackle, Time in Economics, Westport, CT: Greenwood Press Publ. (1958), pp. 13–19, where he describes economic time as a “moment-in-being.” A recent volume is by D. Vickers, Economics and the Antagonism of Time, University of Michigan Press, Ann Arbor (1994). 4 For a fine discussion of the various aspects of astronomical time in the Talmud, Midrash and medieval literature, see Solomon Gandz, Studies in Hebrew Mathematics and Astronomy (New York: Ktav Publishing House, Inc., 1970), pp. 1–119ff.

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of time that has gained most credence in past and present Jewish scholarship. Thus, the distinguished Jewish philosopher, Abraham Joshua Heschel, notes that the teaching of Judaism has emphasized time rather than space, The idea of space is about the cosmos and its natural phenomena. Whereas the notion of time as presented in the Hebrew Bible is about a record of happenings in history—a history which is experienced and goal-oriented. Biblical wisdom has . . . shifted from space to time, from the realm of nature to the realm of history. The emphasis on time is a predominant feature of prophetic thinking . . .5

Thorleif Boman, a Christian biblical scholar, expresses a similar view: “The majority of Old Testament books are historical,” and “history is a movement toward a goal . . .”6 Even the book of Ecclesiastes (ca. 275–250 B.C.E.), with its universal rather than historical content, expresses timeless thoughts about goal-oriented time: “To everything there is a season and a time for every purpose under the sky . . .” (Eccl. 3:1–8). It is noteworthy that here “time” is linked to a “purpose,” where one of those worthy goals is work: “Whatever thy hand attaineth to do, do with all thy might . . .” (Eccl. 9:10). These passages are vital lessons in prudent management and utilization of time, perhaps the scarcest of all resources in human experience. As Kohelet puts it: “For man knoweth not his time . . .” (Eccl. 9:12).7

5 Abraham Joshua Heschel, The Sabbath: Its Meaning for Modern Man (Philadelphia and Cleveland, 1963), p. 79. For another point of view, see Laurence D. Loeb, “Time, Myth and History of Judaism,” Conservative Judaism, Vol. 42 (3), Spring 1990. 6 Thorleif Boman, Hebrew Thought Compared With Greek, (New York: W.W. Norton and Co., 1970). See in particular his discussion of “The Israelite Conception of Time,” pp. 129–183. See also, Douglas Vicker, Economics and the Antagonism of Time (The University of Michigan Press, 1944), pp. 1–191. He calls attention to the Greek philosopher Zeno of Elea (ca. 500 B.C.E.) who was “the earliest of the extrabiblical thinkers to elevate the concern for time,” viz., historical time. See also his penetrating analysis of “Time and the Human Condition,” pp. 1–27. 7 Robert Gordis in his Kohelet—The Man and His World (New York: The Jewish Theological Seminary of America, 1951), points out that Kohelet, like all the rest of biblical wisdom, puts the emphasis on the individual and his concerns. Hokhmah (wisdom) he defines as “a realistic approach to the problems of life, including all the practical skills and technical arts of civilization.” (pp. 16–17).

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chapter five Time, Capital and Interest

In Talmudic literature, economic matters are discussed within the purview of “time in succession” or calendar time. Even ethical maxims are often couched in economic terms within the parameters of time. A Mishnaic statement reads: R. Tarfon8 said: The day is short, and the work is great, and the labourers are sluggish, and the wages are high, and the Master is urgent. (M. Abot, 2:20).

In this ethical metaphor, time and economic activity are intertwined. Time here is linear and economically scarce. Here the worker treats his work as a disutility. But the master of the enterprise insists that in order to earn high wages, one must utilize the time productively. Moreover, even a person’s good deeds are often presented within an economic framework. They are compared to a capital investment with interest as current income, while the principal remains in perpetuity. . . . These are the things the interest of which a man enjoys in this world, whereas the principal remains thereafter . . . (M. Pexah l:1 and Talmud Sabb., 127a).

The Tosephta (Pexah 1,2) (a Tannaitic work coeval with the Mishnah, ca. 200 B.C.E.–200 C.E.) puts it more succinctly: “good deeds yield principal and bears interest,” whereas “sin creates capital but bears no interest” (ibid., 3). Notice the vocabulary. Here the images of time, capital, and interest are invoked to convey an ethical maxim. This juxtaposition of ethical precept and economic practice must have reflected the general market conditions at the time. It might have also reflected the personal experiences of the framers of these dictums. As related in the Talmud, R. Tarfon himself possessed considerable wealth (Ned. 62a) and used much of his means for charitable purposes. (Tosephta, Keth. 5:1). Furthermore, the cited passages also suggest that the talmudic scholars had a good “telescopic faculty,” to borrow a phrase from Pigou, regarding future returns from current investment. Expectation of future benefits was thus valued more highly than current satisfaction, albeit in a spiritual sense.

R. Tarfon (first/second century C.E.) was a Tannai, an outstanding scholar and a teacher at the academy of Jabneh. 8


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Be that as it may, the rich economic symbolism which permeates those ethical norms, including time, capital, interest, etc., are remarkable for their modernity. It is the noted Swedish economist, E. Lindahl, who is credited with the view that “time is intimately bound up with capital and interest,”9 a thought which well summarizes the foregoing observations. So far we have considered time, capital and interest as related figuratively to “heaven.” We will now examine time and interest as treated on earth. We shall present three aspects of economic time, as they are discussed in Talmudic sources: time preference, waiting time, and foregone opportunities. Our objective here is not halakhic (legal), but analytic. Time Preference The idea that people place a higher value on present rather than future goods (i.e., present expectation of goods becoming available in the future), has its origin in ancient literature. Biblical and Apocryphal “wisdom literature” clearly express that view: Expectation deferred maketh the heart sick; but desire fulfilled is a tree of life. (Prov. 13:12).

The above aphorism, though coached in poetic form, expresses a natural human disposition toward time preference. In it, the “impatience to consume,” to use a modern term, is viewed as a motivating force to fulfill one’s current desires, which, in effect is a psychological condition. Whereas Ben Sira’s Ecclesiasticus (ca. 200 B.C.E.) addresses this question not only directly but gives also a reason why a positive preference rate is desirable. . . . Remember that death does not tarry, nor have you been told the grave’s appointed time . . . Deprive not yourself of present good things, let no choice portion escape you. (Ecclus. 14:12–14).10

9 See Currie and Steedman, Wrestling With Time, ibid., p. 73. For a discussion on time as related to justice, see John Rawls, A Theory of Justice (Harvard University Press, 1971). See, in particular, the section, “Time Preference,” pp. 293–298. See also Robert H. Nelson, Reaching for Heaven on Earth; The Theological Meaning of Economics (Rowman & Littlefield Publ., 1991), where he argues that economics and theology go hand in hand, and upon which Donald McCloskey comments that “theology has always had its economic double,” p. XIIIff. 10 This translation is from The New American Bible (California: Benziger Publishing Co.), p. 960.

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As can be seen, here the emphasis on present as against future things is quite explicit. This admonition reminds us that it is our limited time frame that makes us hostages to temporality. The talmudic scholars, while continuing in the biblical tradition of viewing time preference as a psychological phenomenon, also treat the same within the purview of a time market. There are a number of statements to this effect. However, we shall limit ourselves to the utterances of a leading Babylonian Amora—Rav.11 Not only was he a leading scholar of the Law but also a man of requisite business knowledge (T.J., B.M. 5:1) as an Agorotnomus, or “market commissioner” superintending market prices and measures, (T.J., B.B. 5:11, 15a) in addition to being a beer manufacturer (Pes. 107a) and a possessor of land (Kid. 59a). Significantly, Rav’s views are based on the passages of Ecclesiasticus (cited earlier) which he later uses to instruct his own son. He, too, tackles the question of time preference in terms of the constraints that the temporariness of life imposes upon human kind: Said Rav to Hamnuna. My son! If you have anything—enjoy it, for there is no pleasure in the grave nor does death delay. And should you say, ‘I would leave a portion for my children,’ who will tell you in the grave? The children of men are like grasses in the field, some blossom and some fade. (Eruv. 54a).

Incidentally, seen in a historical perspective, that statement seems to be indirectly linked to Greek thought, since it is based on Ben Sira’s Ecclesiasticus that was directly influenced by Greek philosophy. For instance, there is a similar maxim by Democritus (c. 460–c. 370 B.C.E.): “The old man was once young, but it is not sure whether the young man will ever attain old age, hence, the good on hand is superior to one still to come.”12 In the following declaration, unlike in the preceding dictum, Rav reflects his own business experience and is time specific: time is applied

Juxtaposed to Rav’s statement in the Talmud, is the following epigram: “Said Shmuel to R. Judah: ‘Sharp one! Hurry and eat, hurry and drink for the world from which we depart is like a wedding (banquet)’ ” (i.e., speedily passing.) This aphorism seems to reflect epicurean notions about the natural and pleasurable life, popularly known as “an epicurean banquet.” On the Greek influence on Jewish thought, see, Encycl. Judaica, Vol. 6, p. 817; Vol. 8, p. 298; Saul Lieberman, Helenism in Jewish Palestine, The Jewish Theological Seminary of America (1950). For a more detailed biography of Rav, see Encycl. Judaica, vol. 13, pp. 1575–79. 12 See, Henry William Spiegel, The Growth of Economic Though (Prentice Hall Inc., 1971), p. 13, where he discusses this matter. 11


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specifically to current business dealings within the parameters of a time market. Said Rav to Aibo his son: . . . come I will teach you worldly matters. When the sand is still on your feet (i.e., if you have returned from a purchasing trip), should you meet a buyer, sell it at once. Sell everything even though you might subsequently regret it. . . A Kab from the ground (small measure) is better than a Kur (large measure) on the roof. (i.e., better less but certain and nearby than more but uncertain and distant) (Pes. 113a).

The first part of the epigram conveys a lesson in prudent salesmanship: sell faster even if the price has to be lowered, for the quicker one sells, the bigger the turnover, the larger the profit. The second part is a typical statement regarding time preference. There is a similar ancient Midrashic adage: “Better one bird tied up than a hundred flying” (Kohelet Rabah, 4). The latter is analogous to a Latin-Spanish saying, “A bird in the hand is better than two in a bush”—a typical example illustrating the modern meaning of time preference, in conjunction with the theory of interest, an aspect of which is explored below.13 Waiting Time—A Theory of Interest The biblical injunction against usury underwent a significant modification. It evolved from precept to concept; from Neshekh (‘biting’) to Natar (“waiting”); from time neutral to time preference. Let us see how. To begin with, the Torah (Ex. 22:24, Lev. 25:35–38 and Deut. 23:20– 21), prohibits the lending of money, produce or any other commodity for interest. It uses two terms to describe interest: Neshekh and Tarbit, where the former means “to bite” and the latter “to grow” or “to increase.” Those two expressions, though stylistically different, describe interest as having a twofold effect: it “bites” or causes suffering to the borrower, and it increases the lender’s money capital or property. Characteristically, Scriptures do not refer to any length of time of the loan, nor is the rate of interest specified. In Scriptural terms, whatever the rate, it is deemed painful, irrespective of the time element involved. Historically, the underlying reasons for those precepts were most probably economic. In biblical times, the economic conditions were such that the borrower was simply unable to repay a loan with interest.

13 See, Murray N. Rothbard, “Time Preference,” The New Palgrave—A Dictionary of Economics (Vol. IV, 1987), p. 646.

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The ancient Israeli economy was either agricultural or pastoral, and the farmer who borrowed, used the loan for consumptive purposes. The result was often disastrous, for it led to expropriation and enslavement, hence the prohibition of interest. To summarize, since by the ordinary process of reproduction the Israelite borrower was unable to pay interest, Scriptures saw no moral justification for the lender to charge interest. The agrarian economy for the most part was then static, and time was viewed as if it were neutral, or passive. The Mishnah (200 B.C.E.–200 C.E.), which is the canonical interpretation of the Hebrew Scriptures, takes up the biblical notion of usury by tackling the nature and manifestation of interest. In doing so, two components are brought into play: time and the rate of interest. This can be seen from the following:14 What is Neshekh and what is Tarbit? What is Neshekh? Someone who lends a Sela (four silver dinarim) for five dinarim, (or) two sexahs of wheat for three, (this is) forbidden because it bites. (M.B.M. IV:1).

A mere glance at the above shows that in the case of a cash loan, the interest was 25 percent, and in the case of a commodity loan, the rate was 50 percent. Historically, these examples are not hypothetical; they represent the commercial realities in second century Palestine. There is ample evidence from that era indicating similar practices. They are found in the Murabbaxat document (ca. 55–56 C.E.), the Bar Kokhba documents and in the Egyptian papyrus.15 The Murabba’at document discovered near the Dead Sea, speaks of a loan to be repaid with twenty percent interest. And according to Lieberman’s researches, the Bar Kokhba documents describe a rate of eighteen percent interest, whereas the Egyptian papyrus refers to an interest rate of 24 percent, which approximates the Mishnaic rate of five dinarim for four. As for the two Sexah of wheat in return for three, Lieberman cites relevant documents to the effect that for loans of produce, the interest was 50 percent, which corresponds to the Mishnah’s illustration. 14 These translations are from Adin Steinsaltz’s English edition of The Talmud; Tractate Bava Metzia, Part IV, (New York: Random House, 1991), pp. 3–5ff. See also his commentaries of the same ad loc. Incidentally, in the Torah edition of the Jewish Publication Society, the terms Neshekh v’Tarbit are translated as “advance or accrued interest.” 15 For the Murabbaxat document, see Milk, J., Les Grottes Murabbaxat: Discoveries in the Judean Desert II, pp. 100–104 (Oxford Clarenden Press, 1961). On the Lieberman researches, see David Rosenthal, Studies in Palestinian Talmudic Literature ( Jerusalem: Hebrew University and Magness Press, 1991), pp. 13–14. The latter is a collection of essays written in Hebrew by the late professor Saul Lieberman.


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What is particularly noteworthy is that in the first Mishnaic clause, unlike the Scriptures, the interest rate is specified, and time begins to emerge as a distinct factor, albeit indirectly. After all, it is the flow of calendar time that is instrumental in the payment of interest. But even more revealing about the time factor, is the second part of the Mishnah, although the transaction at hand is more complex. This one concerns a commodity loan: What is Tarbit? Someone who increases (his property) by means of produce. How so? He bought wheat from him for one gold dinar (i.e., 25 silver dinarim) per Kor, and this was the price. (The price) of wheat (later) stood at thirty dinarim. He (the buyer) said to him: ‘Give me my wheat, for I wish to sell it and buy wine for it.’ He (the seller) said to him: ‘Your wheat is assessed by me (Lit. ‘is made on me’) at thirty (dinarim) ‘and you have wine with me for it;’ but he has no wine. (tr. Steinsaltz ad loc.)

In the above clause, we see a series of linked transactions. Notice, if the seller had the wine in his possession, even at the latest stage, the sale would have been legitimate. For as, Steinsaltz comments, “. . . the seller was entitled to give the buyer a quantity of wine worth the thirty dinarim he owed him, and there was nothing to stop the buyer from lending the wine back to him in exchange for an identical quantity of wine to be paid for later.” Inasmuch as the seller has no wine, the entire deal turns now into a transaction in futures which, in effect, is a time deposit in kind with a quasi-interest as a return (which is rabbinically prohibited). What distinguishes the two Mishnaic closes is that in the “second” clause, unlike the first, the time factor is clear and explicit, though there is not yet a theory of interest. For that, we shall turn to the Gemara, which is the interpretation of the Mishnah. The Gemara opens with an examination of the two modes of interest: Neshekh and Tarbit and their relation to each other. In the course of doing so, the scholars explore the possibility of a lender receiving Neshekh (“biting”) without necessarily getting Tarbit (“increase”) and vice versa, with supporting examples for each case, into which we need not enter. There are also many interpretations with respect to the exact meaning of those two terms, starting with our Mishnah above, on to Maimonides (1135–1204) and beyond. We will omit the etymological discussion by various scholars involving this issue.16 Suffice it to mention that the

16 For a discussion on this subject, see Edward Neufeld, “The Prohibition Against Loans at Interest in Ancient Hebrew Law,” Hebrew Union College Annual 26 (1955) pp. 355–412. See also Nelson, Benjamin (1969), The Idea of Usury: From Tribal Brotherhood to Universal Otherhood, University of Chicago Press, Second Edition, Enlarged.

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most authoritative view in the Talmud is that of an Amora, Rava who, in principle, sees no difference between Neshekh and Tarbit (B.M. 60b). To him they are just like two sides of a coin, each complementing the other for the purpose of emphasizing the severity of the prohibition of usury, in that it “bites” the borrower and “enriches” the lender. As the discussion progresses, The Talmud explores every nook and cranny concerning various forms and manifestation of interest; their similarities and differences; the Torahitic prohibition of “fixed interest” (Ribbit Ketzutza) and the Rabbinic enactments even against “quasi-interest” (Avak Ribbit), all with their eye on their moral and ethical significance.17 A Revolutionary Doctrine of Interest Having examined the ethical dimensions of those two terms, one scholar opens a new theoretical frontier of economic significance. He introduces the time factor as the principal determinant of interest. We, therefore, wish to focus on this new dynamic approach and its profound implications. It was formulated by a Babylonian Amora, R. Nahman (d. 320 C.E.), and is known as Agar Natar (“payment for waiting”) Said R. Nahman: The general principle is: Any payment made for waiting is interest . . . (B.M. 63b).

This statement, observes Adin Steinsaltz, is treated in Talmudic literature “as a classic definition of interest.” (ad. loc.) With this formulation, a subtle but significant conceptual transformation takes place. Notice that the center of gravity now moves away from the borrower toward the lender; from Neshekh to Natar; from “biting” to “waiting”; from the theological to the economic. Thus, according to R. Nahman, interest is a case of Agar Natar Lee, a lender’s charge for “making me wait.” He puts the onus, as it were, on the borrower. It is the borrower who prevents the lender from using his money for a period df time. Clearly, here is a classical case of time preference along with implications of foregone opportunities.

17 Regretfully, we cannot here elaborate on that without being diverted from our main topic. Those interested in the Talmudic discussion on this subject will find a mine of information in “Steinsaltz Edition,” ibid. See also Barry Gordon, “Lending at Interest: Some Jewish, Greek and Christian Approaches, 800 B.C.–A.D. 100,” History of Political Economy (Vol. 14, 1982) pp. 407–415.


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This doctrine has far reaching ramifications, historical and economic. First, by describing interest as a compensation for waiting, the “sting” of Neshekh is moved to the background and the more soothing “waiting” (Natar) to the foreground. Now it is the lender’s “waiting,” in an economic sense, rather than the borrower’s “suffering,” in a theological sense, that occupies the center stage. Historically, there might have been sound economic reasons for the shift in emphasis. As stated earlier, in the biblical economy people borrowed for consumption, hence the interest they paid was indeed “biting.” But during the Talmudic period, especially at the time of the expanding Babylonian economy, loans were frequently made for productive use. As a result, the focus was on the lender’s waiting. This, in turn, necessitated certain rules to safeguard his economic interests, accompanied by requirements for his social responsibility. In the light of the foregoing analysis, it is easy to see that long before Martin de Azpilcueta Navarrus18 (1493–1586) had presented in his Commentary on Usury (1556) his concept of time preference, and much longer before Ferdinando Galliani (1728–1787) espoused in his Della Moneta19 (1751) the basics about time preference, did R. Nahman (4th cent. C.E.) posit a far more sophisticated approach toward the nature of interest by describing it as a reward for “waiting.” As is well known, the very same description was employed by Alfred Marshall sixteen hundred years later, although its talmudic source remained beneath his notice. Indeed, this talmudic insight is a short step away from the full-fledged time preference theory of interest as advanced by Boehm Bawerk.20 The Economic Consequences of the “Waiting” Theory As we have seen, R. Nahman’s theory of “waiting” had substantially changed the conceptual landscape concerning biblical usury; it transformed the cannonical “biting” into the more soothing 18 Barry Gordon, Economic Analysis Before Adam Smith: Hesiod to Lessius (New York: Barnes and Noble, 1975), p. 215. 19 See, A. Monroe (ed.) Early Economic Thought (Cambridge, MA: Harvard University Press, 1924). 20 Alfred Marshall (1840–1924), the distinguished English economist used the same Talmudic designation to mitigate the irksomeness of Senior’s abstinence theory of interest. He substituted the term “waiting” for “abstinence,” i.e., that interest is a compensation for “waiting.” For an additional bibliography on this subject, see footnote 3.

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“waiting,” thereby shifting the brunt of the burden from the lender to the borrower. This remarkable idea was both trail-blazing and instructive. It ushered in a new era of openness regarding the prohibition of interest; it lifted the weight of the biblical formulae, while “clearing a space within the stiff framework of religious authority,”—to borrow a phrase from R.H. Tawney.21 Small wonder that the Talmudic Rabbis, let alone their medieval successors, found it now possible to devise innovative forms to circumvent the biblical injunction against interest. Thus, at the time when the Persian economy required greater facilities for credit, Babylonian rabbis legalized the practice of antichretic sales which allowed the parties to evade the prohibition of usury under the guise of fictitious sales. Essentially, antichresis is an agreement whereby the creditor may use the fruits of property (land or chattel) given to him as a security for the amortization of the principal, or interest or both.22 One such innovation was the so-called TARSHA or “deaf interest,” whereby one was allowed to charge more than the proper price for a commodity in exchange for an extension of the payment date (B.M. 65a). Another method was the suran note or mortgage which allowed the debtor to mortgage his field to the creditor for a stipulated time at the end of which it reverted to the debtor without payment (B.M. 64b). Still another legal device was the mortgage with fixed annual deductions wherein the creditor took possession of the debtor’s property and deducted the usufract from the debt. The usufract was thus in lieu of interest (B.M. 67b). However, the most important legal fiction that permitted usurious loans was the so-called ISKA or COMMENDA contract. This was a partnership arrangement wherein the creditor invested his money with the borrower and agreed to share in both profits and losses (B.M. 63b.,

R.H. Tawney, Religion and the Rise of Capitalism (New York, 1963), p. 34. In Talmudic literature such an arrangement appears under various designations, such as Mashkanta (T.B. B.M. 67a,68a,110a) Nakhyata (B.M. 67b), Kizuta, while the word “antichresis” itself appears only once in the Jerusalem Talmud (B.M. 6:5). See Boaz Cohen, Antichresis in Jewish and Roman Law (New York, 1950) p. 80. Cohen proves that the institution of antichresis was known to ancient Assyrians and Babylonians, to the Egyptians, to the Romans, to the Jews, to the Persians and Syrians. This institution assumed various forms as it appeared among different peoples in the course of time. See also Encycl. Judaica, Vol. III, p. 59. 21

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64a, 70a). This and similar methods were very popular in the middle ages both among Jews and Christians. In particular, those ISKA contracts were considered legitimate business agreements in the Maimonidean age (12th cent. C.E.). With the growth of international commerce, they became of vital importance, for they enabled merchants to entrust consignments of merchandise to fellow Jews traveling to foreign lands. Usually it was the practice that after the disposal of these goods abroad, the merchant got back the invested capital plus a stipulated share of the profit.23 Obviously with such devices at hand, the prohibition of interest could easily be evaded. The upshot of this was: credit became more readily available; it facilitated venture capital; fostered trade and thus lubricated the wheels of the economy. Agar Bxtaila—The Doctrine of Lost Time In the preceding section we explored the economic significance of the concept of Agar Natar as it relates to the category of “waiting time.” We shall now turn to the doctrine of Agar Bxteilah (which is the Aramaic equivalent of the Hebrew Sxkhar Bxteilah), defined as “lost time.” Once again, our objective is analytic not halakhic (legal).24 The Law of Sxkhar Bxtailo deals with the problem of remuneration of a teacher of sacred lore (Torah), and the manner in which that problem is handled is in marked contrast with the approach suggested by the thought of Adam Smith. He was prepared to classify such teachers, togther with university lecturers like himself, as “unproductive.” Many of the most admirable persons in society, according to Smith, must be regarded as unproductive from an economist’s perspective.25 The rabbis, however, were not prepared to divorce their activities in such an uncompromising manner from the economic life of the community. They coped with the question of remuneration in Austrian, rather than Smithian terms. 23 Salo W. Baron, The Economic Views of Maimonides (New York, 1941), p. 170. See also pp. 127–264. 24 The ensuing discussion is based on this author’s original analysis of this subject in “Economic Thought in Talmudic Literature in the Light of Modern Economics,” The American Journal of Economics and Sociology, April 1968 (Vol. 27, No. 2), pp. 187–190, and subsequently in Economic Analysis in Talmudic Literature by Roman Ohrenstein and Barry Gordon, (E.J. Brill Publ., Leiden, New York, Koln, 1992), pp. 58–61. 25 A. Smith, The Wealth of Nations (1776; New York, 1937), p. 315.

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Agar Bxteilah, along with its various aspects, is the subject of discussion in various parts of the Babylonian Talmud.26 But the doctrine itself originated in the Jerusalem Talmud.27 It pertains to the problem of remuneration for an instructor in sacred lore (Torah). Ancient Jewish tradition held that a religious teacher or judge should not be compensated for work. One ought not professionalize the Torah nor derive a benefit from it. But at some point, this tradition could not be sustained. Ultimately, the compensation for specialists had to be recognized. This acknowledgment was explained in terms of Sxkhar Bxteilah, where as a point of departure from the established rule, it is stated: . . . But don’t teachers of Mishnah accept tuition? said R. Yodin (Bxrab) Yishmael (second century), ‘Sxkhar Bxteilon heim notlin.’ (i.e., they are being compensated for their lost time). (T.J. Ned. 14b).

Here the teaching professional is recognized to be foregoing opportunities for economic gain because of the time he spends in imparting the lessons of the Torah. Thus, according to this scholar, when a professional engages in the production of teaching, he is forced to forego another productive activity. Time, therefore, is an economic quantity which deserves a recompense. The Talmud also investigates specific instances as they relate to Sxkhar Bxteilah. At the same time it seeks to establish concrete monetary equivalents for foregone opportunities. One discussion revolves around an employer who after he had engaged his workers cancelled the contract. The question then arises whether or not the wage earners are entitled to compensation for their loss of time, and if so, how much are they to be rewarded for the foregone opportunities (B.M. 76b–77a). As they further pursue their pioneering investigation, the sages debate, with penetrating insight, the question of leisure-time as an economic quantity, as well as the psychologically debilitating effect that may result from enforced “idleness,” because the expected job did not eventuate—all as it pertains to the problem of “lost time.” Another example in a similar vain is the problem associated with the estimation of appropriate compensation for transitory physical injury. This kind of injury is one of the five discussed in the Talmud

See Nedarim, 37a, Kiddushin, 16b, Baba Metzia 68b and commentaries. See T.J. Ned. 14b. The commentator, R. Nissim Gerondi (1320–1380), refers to the Jerusalem Talmud as the source of that principle. 26 27


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and is called shevet (“lost time”) or “inactivity.”28 As we analyzed this issue elsewhere, “lost time” is the fourth element of indemnity related directly to the productivity-based considerations which were recognized in Exodus 21:18–19. Shevet is a classic case “of foregone opportunities resulting from involuntary unemployment of human capital because of a period of enforced convalescence.”29 On and beyond the Talmud proper, the issue of lost time is subject to further scrutiny by various commentators, especially during and after the Middle Ages. They continue to debate, define, elucidate and sharpen the argument concerning the nature and manifestation of foregone opportunities.30 The significance of the doctrine of “lost time” can be gauged by comparing it to the modern theories that deal with costs and prices. Thus, Adam Smith and his classical followers held that in a genuinely free market economy, the prices of commodities will reflect their “real” cost, namely the “toil and trouble” that it takes to produce them. In his view, those prices continually gravitate toward their “central price” which he described as the natural price.31 Even the neo-classicist Alfred Marshall adhered to this proposition. However, that theory was too restrictive for Friedrich von Wieser (1851–1926) since it failed to account for, perhaps, the most fundamental phenomenon in economics, that of opportunity cost. He, therefore, formulated a different approach. In his major work, Natural Value (1889), he was the first to explain that in a world where resources are scarce,

28 See Babyl. Talmud B.K. 83–85. The contributors to the Talmud reasoned in terms of five categories of indemnity for damaged persons. As established in the Mishnah (B.K. 83ff.) the relevant categories are: Nezek (“depreciation”); Tzar (“pain”); Repoy (“healing”); Shevet (“lost time”); and Boshet (“degradation”). 29 See Roman A. Ohrenstein and Barry Gordon, “Quantitative Dimensions of Human Capital Analysis in Talmudic Literature,” International Journal of Social Economics (Vol. 16, No. 6, 1989), pp. 8–10. See also E. Kleiman, “Opportunity Cost, Human Capital and Some Related Human Concepts in Talmudic Literature,” History of Political Economy (Vol. 19, No. 2, 1987), pp. 261–287. 30 See American Journal of Economics and Sociology, op. cit., pp. 188–189. Following the pioneering investigation on the subject of Sxkhar Bxteilah by this author in 1968, Aaron Levine discussed the same topic from the Halakhic point of view in “Opportunity Cost as Treated in Talmudic Literature,” Tradition (Vol. 15, Nos. 1–2, Spring-Summer, 1975) pp. 153–172, citing additional examples of “lost time” and an array of commentaries which further crystalize this concept and the issues involved. 31 See Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, edited by Edwin Canaan (New York: The Modern Library, Random House, Inc., 1937), p. 57.

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the opportunity cost of an action is the value of the foregone alternative action. He writes: Whenever the businessman speaks of incurring costs, he has in mind the quantity of productive means required to achieve a certain end; but the associated idea of a sacrifice which his effort demands is also aroused. In what does this sacrifice consist? . . . The sacrifice consists in the exclusion or limitation of possibilities by which the other products might have been turned out, had the material not been devoted to one particular product. Our definition in an earlier connection made clear that cost-producing-means are productive agents which are widely scattered and have manifold uses. As such, they promise a profitable yield in many directions. But the realization of one of these necessarily involves a loss of all others. It is this sacrifice that is predicated in the concept of costs; the costs of production or the quantities of cost-productive-means required for a given product and thus withheld from other uses. . .32

To put this pioneer explanation in more succinct terms, it can be said that the cost of devoting resources to one particular line of production is measured by the benefits foregone by not devoting them to an alternate use. This is a radically different understanding from that which the British tradition affirmed. However, it is an understanding that was foreshadowed by the talmudists as epitomized by the notion of lost time. Evaluation of Lost Opportunity Yet another context for the rabbinic employment of the concept of opportunity cost is provided by a controversy between R. Mana and R. Yose [both 3rd cent C.E.] as reported in the Jerusalem Talmud, Moed Kattan, II:3. There are two textual versions of this talmudic passage, as well as several different interpretations of it.33 However, it is clear that in this debate the parties are concerned with issues of microeconomic significance. In particular, they are endeavoring to establish the point at which an entrepreneur can be said to have incurred an opportunity

32 See, Friedrich von Wieser, Social Economics, a Ford Hindrichs trans. (New York, 1927) p. 128. It should be noted that it was the American theorist, H.J. Davenport (1861–1931), who, in The Economic Enterprises (New York, 1913), coined the term “opportunity cost,” to designate the best opportunity which would have to be foregone below the margin of realization. 33 For the various interpretations of this passage, see Dov Ratner, Ahavat Zion v’Yerushalaim, Moed Kattan (Vilno, 1911), p. 93.


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cost. One debater emphasizes loss of “profit.” The other emphasizes loss of “working capital” as criterion. The question here is the circumstances under which local merchants may be permitted to purchase goods from a passing caravan of traders during the intermediate days between holidays. In the discussion, it is assumed that the passing traders are willing to sell their merchandise at prices lower than those pertaining after the holidays. Hence, if the local merchants do not purchase during the intermediate period, they are foregoing a business opportunity. The passages dealing with the holidays and the caravan include the following: (II.A.) R. Jacob bar Aha in the name of Rabbis: “Since produce up for sale goes to waste, it is permitted to move it about on the intermediate days of a festival to keep it fresh).” B) R. Jacob bar Aha in the name of R.Yose: “In the case of a caravan it is permitted to buy produce from them on the intermediate days of the festival. For people know that a caravan is coming, and so the prices go down (as a consequence of the increased supply of produce that is expected).” C) Said R. Mana, “If someone knows that if he does not purchase produce from the caravan, his profit will go down, he may purchase from it. If not, he may not do so.” D) Said R. Yose b. R. Bun, “Profit and principal are one and the same. If he knows that if he does not purchase the produce, he will lose his working capital, he may purchase produce on the intermediate days of the festival, and if not, he may not purchase at that time.34 For our purpose it is C and D which are of particular interest. R. Mana is arguing that a merchant who refrains from purchasing will suffer a cut in his margin of profit, and this cut constitutes a case of foregone opportunity. A smaller profit is tantamount to a loss. The reasoning here may be illustrated as follows. Suppose that the merchant’s selling price for the goods in question after the holidays is $115, and that his purchasing price after the holidays is $110. The profit margin is $5. However, suppose further that the “caravan” purchasing price has been

34 Talmud Yerushalmi, Moed Kattan (trans. Jacob Neusner), (Chicago: University of Chicago Press, 1986) p. 164.

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$100. If the merchant had purchased during the intermediate period, his profit margin would have been $15. Hence, by refraining from trade with the caravan he lost $10. The loss of profit provides a ground for allowing merchants to buy in intermediate periods.35 R. Yose’s position is rather different, and it is somewhat more complex. He directs attention to loss of “working capital” instead of loss of profit as the basis for evaluating opportunity cost. As Yose states: “If he (the merchant) knows that if he does not purchase the produce (from the caravan) he will lose his working capital, he may purchase produce on the intermediate days of the festival. . .” What does R. Yose mean by “working capital”? A clue to his meaning is provided by his opening statement concerning “profit” and “principal.” It would seem that for this scholar, working capital comprises two components (“Agro V’Karno Keren hoo.” M.K.II:3). One of the components is “principal” in the sense of the outlay which the merchant makes on the goods in which he is trading.36 The second component is “profit.” Here, Yose appears to be employing the term “profit” in a sense which came to be distinguished in modern microeconomics as “normal profit.” This latter is regarded as part of the cost of production for the businessman. Yose’s definition of “profit,” it should be emphasized, is different from that of his opponent in debate. R. Mana’s analysis of foregone opportunity implies that all profit is a surplus over cost, where cost is understood as the merchant’s outlay on the goods in question. In contrast, Yose regards cost as including some profit margin, as well as the outlay. Yose’s approach, it can be remarked, implies that, in business there may be above-normal, or “excess,” profit, at times. Given this difference between the two scholars, it is understandable that their approaches to opportunity cost also differ. Yose’s position may be illustrated, as follows. Suppose that the merchant requires a minimum profit margin of 10% on the purchase price of goods in order to maintain his working capital. Further assume (as in the previous illustration in connection with R. Mana) that the purchasing price of goods after the holidays is $110. This means that to avoid a loss of working capital, if he buys after the holidays, Yose’s merchant must be The foregoing money sums, it should be emphasized, are purely hypothetical. The rabbis themselves do not spell out their positions by using arithmetical illustrations. 36 Cf. Marcus Jastrow, A Dictionary of the Targumim, the Talmud Babli and Yerushalmi, and the Midrashic Literature (New York: The Judaica Press, 1975), Vol. I, p. 14. Here Jastrow equates “principal” (in the context of Y.M.Kat, II, 81) with “cost-price.” 35


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able to sell those goods for $121 (i.e., $110 + 10%). However, assume also (as before) that the selling price of the goods after the holidays is only $115. In these circumstances, the merchant has suffered a loss of working capital of $6 (i.e., $121 less $115). It is the $6 which measures the extent of loss incurred by not buying during the intermediate days from the passing caravan. It can be added that should Yose’s merchant have purchased from the caravan, he would have had more than merely maintained his working capital. At the caravan purchasing price of $100, the merchant needed to be able to sell at $110 (i.e., $100 + 10%) to avoid capital loss. However, with an assumed selling price of $115 after the holidays, the merchant both maintains working capital and earns an above-normal or “excess,” profit of $5 (i.e., $115 less $110). The fact that the merchant foregoes this $5 of excess profit by not purchasing from the caravan, it should be emphasized, is not relevant to Yose’s calculation of the degree of lost opportunity. The reason for this lack of relevance is that loss of excess profit is not loss of working capital, in his view. Working capital includes normal profit only. To recapitulate, R. Mana found that it was a loss of profit of $10 (i.e., $115 less $105) which justified the merchant’s buying in the intermediate period. By contrast R. Yose finds the justification in a loss of working capital of $6 (i.e., $121 less $115). Hence, there is a clear division between the two on the question of how foregone opportunity is to be assessed. The division is a further example of the extent to which talmudic debate entered into the substance of certain modern controversies on microeconomic issues. Calculation of Merchant’s Loss at a Selling Price of $115 Purchase Price

R. Mana Profit

Loss of Profit

R. Yose Loss of Minimum Selling Working Price to Maintain Capital Working Capital*

From the caravan

$100

$15

0

$110

0

After Holidays

$110

$5

$10

$121

$6

* Assumes that maintenance of working capital requires 10% mark-up on purchasing price.

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chapter five A Subtle Distinction

Last but not least, a few comments about Agar Natar and Agar Bxteilah may be added. To be sure, both terms are conceptually related. Both are concerned with the time factor and both deal with the issue of compensation associated with it. Nevertheless, there is also a subtle yet important distinction between the two. In the case of Agar Natar (“waiting time”), the moment a loan is extended, the lender harnesses the time factor to “work” for him. As a result, the “time” element becomes distinguished from the lender. To borrow a phrase from G.L. Shackle, here time “evolves into a different self.37 On the other hand, in the case of Agar Bxteilah (“lost time”), the person and the time spent on a job are interdependent. No human can make a physical or mental effort without one’s own time in the course of doing so. And if that time is lost, it is the person’s own time that is foregone, unlike in Agar Natar, where time, in a sense, is independent. Graphically, it may be presented as follows: Agar Natar loan lender borrower

Agar Bxteilah time spent worker’s time lost time

waiting time Markets and Prices As the foregoing illustrates, the talmudic probing of the meaning of “cost” extended to extraordinary length in terms of what is known concerning analysis in other ancient analytical traditions. A similar observation is warranted with respect to the rabbis’ investigation of the workings of markets and prices.

37

Time in Economics, op. cit. note 3.


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The role that markets play in establishing a just price is subject to considerable discussion in talmudic literature. A major concern is the question: what medium can best serve the economic and social needs of the community—the market price or the administered price. As we briefly examine the Talmudic sources, views and rulings surrounding this debate, it becomes evident that we are dealing here with two opposite schools of thought concerning the workings of the market and the establishment of the price. There are scholars who favor a competitive price system as a regulatory mechanism of the market, and there are scholars who oppose it. The former is an outstanding feature of the tractate, Baba Metzia, and here the rabbis analyze the question of the competitive devices which can be used legitimately by sellers. We shall consider the following three cases which pertain to the propriety and effectiveness of the market forces as they are discussed in the Mishnah and subsequently in the Babylonian Gemara: (B.M. 60 a–b). 1. Non-price competition 2. Price competition 3. Competition by means of product differentiation Following are the two clauses of the Mishnah: a. R. Judah said: A shopkeeper must not distribute parched corn or nuts to children because he thereby makes them accustomed to come to him. The Sages permit it. b. Nor may he reduce (i.e., undercut) the price; but, the Sages say, he is to be remembered for good (i.e., for a blessing) (M.B.M. 4:12). The first clause is concerned with the device of sales promotion for the obvious purpose of attracting customers for one’s product and away from that of his competitor. R. Judah views this as unfair competition. But the Sages consider non-price competition as legitimate business practice. The second clause deals with vigorous price competition. Once again R. Judah voices his anti-market stance. The Sages, however, are not only in favor of direct price competition, but also view it as a “blessing.” Intrigued by the unconventional attitude of the Sages regarding competition, the Babylonian Talmud asks (B.M. 60a–b):

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chapter five What is the Rabbi’s reason (i.e. for favoring sales promotion)? Because (this shopkeeper) can challenge him (another shopkeeper), ‘I distribute nuts; you distribute plums.’ What is the Rabbi’s reason (for favoring price reduction)? Because he eases the market. . .

In the first case, the Sages are said to have advocated a policy of unrestrained non-price competition. In the second, they reasoned that price undercutting is instrumental in an “expansion of the market”; it is therefore healthy, even “a blessing.” Thus, the Sages’ insight into the workings of the market, as well as the efficacy of vigorous competition is unmistakenly clear. The highly acclaimed commentator Rashi (11th cent.) takes this tradition a giant step further: he sees in the Sages’ pro-market position a psychological motive. He states that the initial reduction of the price in question “will cause wholesalers to become concerned that the market price may drop even further.” This may force them to deplete their stock “with the likelihood of an additional decline in price.” He thus recognized an intangible variable as playing an important role in the formation of a market price—the psychological factor or the expectation factor. Product Differentiation As the discussion of the market phenomena continues, the Talmudic Sages add that in the course of this competitive struggle, some sellers may attempt to differentiate the product. For example, they may endeavor to attract the customer by means such as putting a gloss on fine clothes (i.e., to make them look more valuable); make-up on men (i.e., to make them look young); paint utensils, put fancy wrappings or attach adornments to products all for the purpose of improving their external appearance (T.B.B.M. 60b; T.J.B.M. pp. 18a–b). Nowadays economic text books list “Product Differentiation” as the main characteristic of “Monopolistic Competition.” In general, it is evident that the talmudists depict price formation as occurring through a competitive, communal marketing process. They are careful to emphasize full knowledge as a condition of legitimate market operation. Such knowledge was facilitated by the official exchange called Shaar, where equilibrium prices were announced for the sake of public edification (T.B.B.B. 91a). It is stated:


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No bargain may be made over produce before its market-price is known. After its market-price is known a bargain may be made, for even if one dealer has not the produce another will have it. . . A bargain may be made to pay for wares at the cheapest rate that prevails at the time of delivery. Rabbi Judah says: Even if the bargain was not made to pay for wares at the cheapest rate, he may say, ‘Give me the wares at such a price, or give me back my money.’38

At the same time, it is recognized that certain legitimate transactions can be undertaken despite the absence of full knowledge and a perfect market. These latter are wholesale purchases involving either agricultural products held in stock, e.g., olives in the vat, or products which are intended to serve towards further production. This second category includes ‘the clayballs of the potter’, ‘lime as soon as the limestone is sunk in the kiln’, and manure. Such goods, to use the terminology of the Austrian economist Eugen von Bohm-Bawerk (1851–1914), are ‘intermediate products’ or ‘social capital.’ The rabbis it is clear, are able to make firm analytical distinctions between fixed capital and other articles, between social capital and finished products, and between the competitive market conditions that can be approximated in retailing but less readily in wholesaling.39 Also notable is the firm definition of what constitutes an exchange transaction. Hence, in the passage quoted above it is the cheapest price at the time of delivery which is the relevant rate. This reflects the basic principle that: “All movable goods are legally acquired only by the act of drawing them into the purchaser’s possession.”40 In other words, the determining factor in a sale is delivery of the goods concerned to the buyer. Up to that point, any risk of loss or damage to the goods is carried by the seller.41 The Anti-Market Tradition We have shown that the majority of Talmudic scholars had a decidedly pro-market orientation. We now wish to explore some of the anti-market tendencies in the Talmud. Curiously, in the Mishnah cited above (B.M.

Mishnah, B.M. 5:7. Wholesaling and retailing are also distinguished clearly in Demai 2:4. 40 Shebiith, 10:9. 41 The Talmud also deals with sales of immovable property (Kiddushin, l:5); disputes over whether or not transfers of goods have occurred (Shebuoth, 7:6); and the relative status of buyer and seller whilst a transaction is in progress (Baba Bathra, 5:7–8). 38 39

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4:12), both R. Judah and the Sages did not provide a rationale for their respective views regarding price competition. And yet when the Amoraim searched for the “reason,” the justification for only the pro-market view was discussed. Apparently, the existence of an anti-market tradition must have been taken for granted. And to inquire about the obvious (i.e., R. Judah’s reason) must have been considered superfluous. Indeed, this anti-market attitude which favored an administered price, may be traced to a passage in Lev. 25:14 which reads: “And if thou sell ought unto thy neighbour, or buy of thy neighbour’s hand, ye shall not wrong one another.” The Talmudic Rabbis have derived from this biblical injunction the doctrine of Onaxah (“overreaching”). This doctrine seeks to establish a reference standard for overreaching in monetary matters. The Mishnah reads: Fraud is constituted by (an overcharge of ) four silver (pieces) in twentyfour shich is a sela, (sela = 4 dinarim). (Hence) a sixth of the purchase . . . (M.B.M. 4:3).

The same Mishnah states that buyers too (like sellers) have a right to claim Onaxah in the event of underpayment. Thus, Onaxah may be defined as “an act of wronging another by selling him an article for more than its real worth or by purchasing from him an article for less than its real worth.” (See Enc. Judaica, Vol. 12, p. 1331.) The above Mishnaic clause is followed by other clauses and additional statements in conjunction with the doctrine of Ona’ah. Among them are regulations to prevent fraud, misrepresentation, and misinformation with respect to various products. The same were augmented by the contemporaneous non-canonical collection of rules, Tosephta (“Additions”), and subsequently discussed and elaborated upon by the Palestinian and Babylonian Amoraim in both the Jerusalem and Babylonian Talmuds. Suffice it to mention that matters such as the right to revoke a deal with claims to redress (M.B.M. 4:4), the time limit to do so (M.B.M. 4:11–12),42 aspects of coinage depreciation of faulty minting techniques,43 questions pertaining to professional experts, and a 42 The Babylonian Talmud, B.M. 61b and the T.J., B.M. 4:7, followed by the respective Gemaras, describe various devices as illustrations of such “advertising” with differences of opinion regarding their application. The question here concerns what moderns call “truth in advertising.” 43 A pioneer on monetary matters in the Talmud was S. Ejges in his, Das Geld im Talmud (Wilna, 1930). See in particular pp. 43–54. He was followed by F.M. Heichelheim, “Roman Syria” in Tenney Frand, An Economic Survey of the Roman Empire, Vol. IV, pp. 121–257 (Baltimore, 1938, reprinted in Paterson, N.J., 1959), and by Daniel


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host of cognate issues were all examined as they pertain to the notion of Onaxah.44 To be sure, in Babylonia, around 300 C.E., the Exilarch ordered the regulation of prices as well. (T.B.B.B. 89a; T.J.B.B. 5:11, 15a). But even then there were differences of opinion among the scholars. Some were in favor of the market mechanism while others insisted on price control as a protection against “swindlers” and hoarders,45 particularly during the period of inflation that occurred at that time.46 The Role of Demand In the world of antiquity, where commodities were generally scarce, supply was considered the only active factor in the market. Demand was treated as passive. The seller was understood to be the price setter and the buyer the price taker. In such an economic environment, it was mainly supply that determined the price. Thus, before the advent of neoclassical economic thought, the role of demand in price formation was accorded little analytical regard by major economists. However, the talmudists did not fail to consider this aspect of markets. The most notable occasion for reflection on the significance of demand in the talmudic context was provided by an episode dating from the first century C.E. This episode involves the price of birds used as sacrifices in the Temple in Jerusalem. As related in tractate Keritut: It came to pass that the price of a couple of birds (frequently used in Jerusalem as the poor man’s sacrifice) rose to one gold dinar. (One gold dinar had the exchange value of 25 silver dinarim.) As a result of this prohibitive price, few people could afford such luxury. So R. Gamliel Sperber, Roman Palestine 200–400 (Bar Ilan University, 1974). See, in particular his discussion on nominal land and intrinsic value of coinage, pp. 49–50ff. See also Arye Ben-David, Talmudische Oeconomie (Georg Olms, Germany, 1974). See his section on “Muenzen” (coinage), pp. 331–334. 44 Edward M. Gershfield, “Business Regulations and Price Control in Talmudic Economics,” International Journal of Economics and Ethics, Vol. I, No. 3. See in particular pp. 47–50. See also Encyclodedia Judaica, Jerusalem (1974), pp. 1391–1395, where Onaxah is discussed in detail. There is also an array of medieval codes that further developed that concept to meet the changing market conditions. 45 Encyclopedia Judaica, Hafkaxat Shexarim (“jacking up the price”), Vol. 7, pp. 1062–1063. 46 See Medieval History, by Carl Stephonson (New York: Harper Brothers, 1951), pp. 27–31. Rome during the third century had a severe financial crisis. Bankruptcy had debased the currency, “gold coins disappeared from circulation and prices of all commodities rose to unprecedented levels” (p. 30). It seems that those inflationary shocks had a ripple effect all over. Diocletian (284–305) was then the Emperor, and one of his remedies was strict price control.

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chapter five vowed not to rest until the price of a pair would be reduced to one silver dinar, that is 1/25 of a gold dinar. In order that this come to pass, he decided to reduce the demand for that product. This was facilitated by the Talmudic Academy which ruled that one sacrifice may take the place of the usually required five. The ratio then was 5:1. As a result of this ruling, the demand actually fell, and was followed by a spectacular dip in prices. The very same evening, “a pair” could be obtained for a quarter of a silver dinar, that is 1/100 of gold dinar, by far exceeding R. Gamliel’s expectations.47

This remarkable story demonstrates that the Sages well understood the workings of the market mechanism. Here R. Simeon b. Gamliel set out to deal with a situation in which an excess demand was pressing against a relatively inelastic supply. By altering the quantity demanded at any price, he demonstrated in a spectacular fashion that demand does play an active role in price determination. It is remarkable that Simeon b. Gamliel the Patriarch rather than use his great authority to reduce the price by an act of rabbinic legislation, chose instead to activate the demand side so that the market may find its own price equilibrium. This is of particular significance. For this was far from being an anti-market intervention, but clearly a pro-market act to enable the proper functioning of the market mechanism. The talmudic scholars also considered the role of demand in their discussion of Truma (tithe).48 Only the priests were allowed to eat Truma, so the demand for the tithe (considered as a product) was relatively small and did not fluctuate to any appreciable extent. The scholars observed that the market price of Truma was considerably lower than that of the so-called “common” product consumed by the public at large. They attributed the lower price to the fact that the demand of the priests was of a different character from that of the public. Here, the talmudists appear to have approached the concept of the elasticity of demand, although they did not actually employ the term. The appreciation of the vital role of the demand is further illustrated in the Talmudic Tractate Sotah 48a. It relates that the Amora R. Huna (d. 296 C.E.) prohibited music and festive gatherings on the ground that after the destruction of the Temple in Jerusalem, one should not be too merry. The upshot of that ruling was a depression in the trade

47 Babylonian Talmud, Tractate Keritut, 1:7, freely translated by the author from the original. 48 Babylonian Talmud, Tractate Baba Mezia, p. 38a, and Rashi, San. 26a.


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sector. The price of poultry and wheat fell dramatically, so that “one hundred ducks or one hundred bales of wheat could not even be sold for one zuz (a small coin).” But R. Hisda (d. 309 C.E.), realizing the negative effect which that edict had on the economy, abrogated it. As a result, the demand for goods rose spectacularly, the economy improved and prosperity was restored. To summarize, in the foregoing section, we endeavored to demonstrate the Scriptural and Talmudic approach toward the time phenomenon and, in particular, the utilization of time as an economic vehicle with respect to “time preference”—the placing of a higher value on present rather than future goods; “waiting time”— the Talmudic theory of interest; “lost time”—the Talmudic theory of foregone opportunities or opportunity cost, the remarkable evaluation of the same, and the subtle distinction between “waiting time” and “lost time.” Further, in their explorations of the operation of free-market mechanisms, the Jewish scholars distinguished many of the phenomena that have come to be recognized as significant for an understanding of the economics of markets. Thus, they understood the difference between price and non-price competition, the role of product differentiation, and the manner in which expectations can influence price. They also considered the role of demand in price formation. As for the anti-market practices, though historically there were some manifestations of the same, the majority of the Talmudic scholars, however, were decidedly pro-market. And although R. Gamliel may have occasionally followed the anti-market tradition, this intervention was mainly to bolster the market mechanism in which the demand factor plays an active role in price determination. The doctrine of “overreaching” was merely a device against misrepresentation of the character of the product. Accordingly, “. . . The ethics of the Ona-ah rule applied not to price itself, but to withholding information about it.” Inasmuch as these economic ideas of the past share significant commonalities with those of the present, they are, indeed, theoretically insightful and economically relevant.

CHAPTER SIX

GAME THEORY—THE TALMUDIC MINIMAX The purpose of this chapter is to demonstrate that within the purview of the Talmudic dialectics, the game method was often utilized to solve intricate questions, theoretical as well as practical. This is particularly evident in Talmudic discussions of transactional issues involving conflicting business interests, where complicated decisions have to be made under conditions of uncertainty. In the course of those discussions, the scholars reason in categories which are similar to some of those employed in modern Game Theory. Games as such, whether of chance or of strategy (upon which game theory is based), have been practiced since time immemorial, including among the ancient Hebrews.1 The Talmudic scholars were familiar with their characteristics, and they also utilized games of strategy tactics both in their scholarly discourses and in their solving of transactional disputes. The historical background, methodological process, and approach to the solution of conflict situations in the Talmud combined to promote employment of game method in the quest for the solution of certain economic problems. The Minimax Principle Game theory is one of the youngest contributions to modern economic analysis. It is a theory of conflict situations that likens economic behavior to games of strategy, such as poker, chess and even war. The modern origins of the theory may be traced to the second decade of the present century, but it was only clearly established as a scientific discipline through the publication, in 1944, of the Theory of Games and Economic Behaviour by John von Neumann and Oskar Morgenstern.2 In Consult “Games,” Encyclopedia Judaica ( Jerusalem: Keter, 1971), Vol. 7, pp. 303–4, and “Gambling,” ibid., pp. 299–303. 2 J. von Neumann and O. Morgenstern, Theory of Games and Economic Behaviour (Princeton: Princeton University Press, 1944). A newly published study in Game Theory, 1

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essence, game theory is concerned with competitive economic behavior, and as in a real game, it is characterized by the presence of common factors, such as conflicting interests, incomplete information, and the interplay of rational decisions under conditions of uncertainty. This, in turn, subjects the decision maker to certain risks. Game theory may, therefore, help the risk-taker to select an optimum strategy.3 For our purpose, it will suffice to mention that the basic tool of game theory is a payoff matrix with alternative choices or strategies for parties involved in a conflict of interests, in which the actions of one party influences its rival. For example, A&B, two opponents, are pursuing their self-interest. Seen from A’s perspective, if he is to succeed, he must try to guess how his moves will be countered by his rival. To put this colloquially, “what does he think I think he will do?” A wrong guess might prove too costly. How is the game resolved? The simplest way is to list the worst possible result that an opponent could inflict, and find the strategies that realize the best outcome from the list. Thus, in a contest between A and B, A will pursue a strategy of maximizing the minimum gain, (abbr. max-min), while B will attempt to minimize his maximum loss (abbr. min-max). The optimum strategy (or mix of strategies) is then determined by the so called minimax principle. Initially, game theory was too complex for full-scale analysis of real world cases. But nowadays it is commonly employed a.o. by various industries to solve intricate transactional problems. In fact, games theory is now viewed as one of the most important developments in modern economics.

is by the Nobel Laurate Robert J. Auman and Jaques H. Dreze, The Rational Expectation in Games in The American Economic Review. [March 2008], pp. 72–86. In it, the authors state that there is a certain inadequacy in von Neumann’s Minimax Theorem which needs improvement. Thus, they reason: . . . To achieve a meaningful extension of von Neumann’s value, we must take into account the interactive nature of games: that players are rational and reason about each other . . . we should be prepared to let players expectation depend upon the context—the “situation.” [p. 73] 3 A recent discussion is Mohammed Dore et al., (eds.), John von Neumann and Modern Economics (Oxford: Clarendon, 1989), pp. 151–62. See in particular, Thinking Strategically, by Avinash Dixit and Barry Nalebuff (W.W. Norton & Co., New York-London, 1991). It is an interesting popularly written book. For an excellent review of this subject, see Andrew Schotter & Gerhard Schwodiauer, “Economics and Game Theory: A Survey,” Journal of Economic Literature ( June 1980, Vol. XVIII, No. 2), pp. 479–527. See also, Maskin, Eric, Recent Developments in Game Theory (England: Edward Elgar Publ., Inc., 1999).

game theory—the talmudic minimax

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Background to the Talmudic Game Method In order to prepare the ground for the discussion of the talmudic game method, it is relevant to note both something of the historical background and the methodological approach which characterizes the talmudic debate. Historically, games of chance were well known to the ancient world. In fact, some oriental gambling games go back as far as 2100 B.C.E. The Lydians, Herodotus relates, were adept in the invention of games. And gambling with dice was particularly fashionable at the Persian court during the reign of Cyrus the Young, at the end of the 5th century B.C.E. As for the “early tribes of Germany,” Tacitus writes, they, “make games of hazard a serious occupation even when sober . . .,” while in less sober moments they even gambled themselves into slavery.4 The ancient Hebrews, too, were acquainted with gambling. There is ample reference to guessing games in the Bible ( Judg. 14:12ff; I Kings 10:1–3). However, it was from the Mishnaic times onward that the rabbis described gambling as a form of robbery. As for the characteristics of the talmudic game method, three motifs distinguish the talmudic debate: the transactional, the strategic and the playful. The Transactional Motif Historically, the transactional motif has its origin in the early annals of Talmudic literature. Thus, in the Midrashic volume Sifrai (32:25), which dates back to ca. 200 C.E., the term Nosse V’noten (“give and take”) is used to designate scholarly controversies. And in the Talmud the two synonymous expressions Masso Umatan and Nosse V’noten are applied idiomatically to ordinary business dealings like “buying and selling.” The Aramaic equivalent for “nosse V’noten” is Shakla V’taria, meaning “give and take.”5 These terms were probably derived from the barter practice prevalent in antiquity. Characteristically, those transactional expressions were used interchangeably in Talmudic parlance, both for business dealings and scholarly discourse. Nowadays, too, we speak of “selling an idea.” And in

Encyclopedia Britannica, Vol. 9, pp. 1119–21 offers further detail. Yoma 86a, Shabbat 120a, Tossefta, Gittin V:I, Baba Kama 72a, Sotah 7b, and in many other places. 4 5

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the contemporary State of Israel, the term Masso U’matan is frequently employed to describe intricate diplomatic negotiations. In view of the common historical origin and characteristics of those terms, as well as of their frequent usage both among the ancients and moderns alike, it is evident that the transactional motif was an important feature of the talmudic analytical thought process and, as we shall show, of practical application. The Strategic Motif The strategic metaphor figures prominently in talmudic parlance. Military terms were frequently employed to describe the animated debates among the scholars. The ingenious arguments and rebuttals, the sharp moves and countermoves, the paradigms, the questions and methods, were often portrayed in the Talmud as if they took place in a war zone on the battlefield. Even before the Amoraic period (ca. 200 C.E.), the Rabbis referred to those debates in military terms. Inasmuch as sharpness, lucidity and precision were central in their discussions, the scholars used the military metaphors to highlight the virtues of the battles of the mind. They referred to them as Mil-hamtah-shell-Torah, “the war for the sake of the Torah.” It was a.o., a battle for clarity and understanding. (Sanh. 111b). Indeed, there are many references in the Talmud to this effect. Suffice it to mention that the Rabbis interpreted Biblical verses which glorify military prowess as referring to the battles of the mind. (Kidd. 30b). For example, the Biblical verse in I Samuel 16:18, in which David’s qualities are praised, is interpreted by R. Judah in the name of Rav (3rd cent. C.E.) as follows: . . . that is cunning in playing—“knowing the right questions to ask”; a mighty valiant man—“knowing the correct answers”; a man of war—“knowing how to ‘give and take’ in the battles of the Torah”; prudent in matters—knowing how to deduce one thing from another”; and comely person—“who demonstrates the proofs for his opinions”; and the Lord is with him—“the ruling is always in accordance with his views” (San. 93b).6

6 See, Louis Jacobs, The Talmudic Argument (Cambridge University Press, 1984), pp. 8–11.


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As can be seen, the leitmotif of these interpretations is that warfare and debate have strategic similarities, and that in the war of ideas “strategic depth” is the name of the game. The Playful Motif An interesting feature of this intellectual duel is that the discussions among the scholars were frequently game-like. The debaters, like seasoned players, were out looking and trying to one-up each other in a clash of wits, to test the opponent’s acumen. This game-like method was purposely cultivated in order to elicit twinkles of insight and flashes of brilliance. As the Talmud puts it: Lehaded bo et Ha-Talmidim—“to sharpen the intellect of the disciples” (Megillah 15b.) In fact, the Talmud relates on numerous occasions, that the great Masters purposely used faulty reasoning, in order to test their disciples’ keenness of mind. They wanted to know whether they would be sufficiently alert to spot mistakes.7 And since a brisk scholarly mind was called HARIF—“sharp,” they expressed their preference by quoting the following proverb: . . . “one grain of sharp (harif ) pepper is worth more than a bucket full of pumpkins . . .” (Megillah 7a). The harif was extolled because of his brilliance to resolve difficulties and his ability to solve problems. In light of these motifs, it becomes apparent how the talmudic sages came to extend this threefold method to all sorts of problem solving, especially when dealing with complicated questions of economic conflict. KUBBIYAH—A Zero-Sum Game Games of strategy as well as of chance are frequently the object of discussion in the Talmud. Among the various games mentioned by the Rabbis is a form of dice called Kubbiyah. Its name is derived from the Greek Kybeia, meaning cube. It consists of small wooden, mostly painted, cubes and used in games of dice. Inasmuch as in dice the outcome depends entirely on chance and cannot be affected by the

7

See Taan. 7a, Nazir 59b, Zev. 13a, Hulin 43b, Nidda 4b, and other places.

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cleverness of the players, it is deemed a game of pure chance. The Rabbis characterize Kubbiyah as a gambling game where one man’s loss is another’s gain. Today, such games are classified as a zero-sum game because the winnings are just offset by the losses, and like in roulette on an unbiased wheel there is no “system” for playing dice.8 Although there is no system in such games, they are not completely devoid of some strategic elements. For instance, amateurs who gamble for fun might resort to a randomized strategy. Thus, in a coin-matching play, they can agree to flip the coin X number of times for a game sequence, with each choosing heads and tails half the time. In this way, they can hope, according to the law of probability, to break even. The same goes for the roulette wheel as well as for dice. Still, here no one can individually affect the outcome of the game, unless the dice are loaded. It is interesting to note that the Talmud (Sanh. 24b–25a) makes a distinction between the social status of the “professional gambler” and of the amateur who derives his livelihood from another profession. Whereas the former is categorized as a “robber,” the latter is viewed by the Sages more benignly. The rationale for their opposition toward professional gamblers is explained in socioeconomic terms of Yishuv ha’Olam, i.e., as being detrimental to “social welfare.” Thus, if we should apply the game theory criteria to the talmudic distinction between different categories of gamblers, we may find another reason for the more lenient attitude toward amateur players than to professional gamblers. The former who mostly play for fun may randomize the game to break even, while the latter are always out to “make a killing.” However, games such as chess and poker in which the players can utilize ingenuity to affect the outcome, are in the category of strategic games. The essential difference between games of strategy and games of (pure) chance—according to McKinsey—“lies in the circumstances that intelligence and skill are useful in playing the former but not the latter.”9 Here, we shall concern ourselves with games of strategy. We shall present two typical examples—the Asmakhta, and the highly sophisticated

8 See Sanh. 24b, along with Rashi’s explanation, loc. cit. Note: in describing the various categories of games, we are concerned here only with their characteristics for purposes of illustration, and as a point of departure for further analysis. 9 J.C.C. McKinsey, Introduction to the Theory of Games (New York: McGraw-Hill, 1952), pp. 1–5ff.


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talmudic minimax, called Pesharah. They illustrate conflicting business situations in which strategic calculations are of central importance to the outcome of the business venture. Asmakhta: A Positive-Sum Game One way of understanding economic activity is to think of it as a game initially involving two single participants, like buyer and seller, producer and consumer, or lender and borrower. Such exchanges are usually termed positive-sum games, because both parties expect positive gains from a given transaction. The talmudic Asmakhta meets those criteria. What is an Asmakhta? It is a legal concept with economic ramifications. Generally, it pertains to a business deal between two parties based on a promise but lacking in complete resolve or firm commitment. For example, A pays a portion of his indebtedness to B, leaving the bill of debt with C as a security, and agreeing to pay the full amount on the bill if, at a stipulated time, he should fail to pay the balance. This transaction includes two obligations; one relating to the outstanding balance; the second, to the payment of the penalty. (B.B. 168a) Temporarily, we will ignore the legal question of whether or not such a promise constitutes a firm resolve on the part of A, and under what circumstances an Asmakhta does or does not confer title10 for our concern is mainly with the conflicting nature of the problem: its “strategic” significance and analytical relevance. Accordingly, here is a two-party bargaining situation in which both participants expect a positive gain from this transaction. The borrower expects to use the loan productively, make a profit, and repay the loan in due time. Whereas the lender, with the collateral on deposit, might calculate that in the event the borrower will not meet the deadline, he will forfeit the full amount of the bill, in addition to the portion already paid. Clearly, there are here both risks and opportunities for both of the parties involved. But that is not all. Suppose the borrower, for whatever reason, becomes destitute or ill. This might well cause additional risks and complications (see Ned. 27b), and require additional precautionary measures as well as careful strategic planning.

10 For a discussion of this subject, see B. Bathra 168a, B. Metz. 66a, Ned. 27b, along with the various commentaries and Codes.

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In this instance, we have an example of a conflict situation in which the outcome is controlled partly by one side and partly by the opposite side. It is one of many Asmakhtot discussed in the Talmud which illustrates the fact that, even in such a simple “positive-sum” game, a proper strategy must be selected for the purpose of minimizing the losses and maximizing the gains. What is the consensus of the sages concerning an Asmakhta? The consensus is that an Asmakhta does not confer title. The reasoning here is that when one of the parties binds himself to an exaggerated penalty, it indicates a lack of “perfect intention” on the part of that person. As summarized by Marcus Jastrow, “It gives the claimant no rights, because the law presumes that he who made such a promise could not have meant it seriously, but had in view only to give the transaction the character of good faith and solemnity.”11 The consensus of the Sages, it must be emphasized, cannot be construed as providing an economic solution to what was a legally defective business deal in its foundations. Further, in the above example, Asmakhta is merely illustrative of a positive-sum game, and does not enter into the technical elements of game theory. It is notable however, because of the direction it indicates. More directly relevant, in terms of game theory, is the rabbinic concern with Pesharah. The Talmudic Minimax: Pesharah In the course of daily events, people may encounter personal or business situations of a conflicting nature for which the law makes no provision. Sometimes the situation is so entangled that even the law may find it difficult to disentangle. When in such a predicament, it is prudent to resort to a compromise. The Rabbis examined such conflict situations analytically and suggested a rational strategy for their resolution by means of Pesharah. The term Pesharah, as used by the Tannaim, denotes compromise or conciliation as well as arbitration. As an illustration, they used relevant models which show that the most prudent way to resolve such conflicts is through a strategic compromise. Accordingly, the Mishnah in Ketubot X:6 discusses three typical conflict situations which necessitate a policy of strategic rationality. For a pointed example we shall select one of those models which illustrate its game-like nature and solution. 11

Dictionary of Talmudic and Midrashic Literature, p. 94.


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A Creditor’s Dilemma Creditor A has a claim of $100 on debtor B (who pledged his two fields as security for his debt). B then sells both fields consecutively, one to C for $50 and the other to D for $50. Thereupon Creditor A gives purchaser D a written declaration: ‘I waive any right or claim I have against you.’ Creditor A may then distrain upon purchaser C (because of his lien on the field), and C may now distrain on D (since there is a joint lien on both fields), and Creditor A may again distrain upon C, while D may now distrain upon A (since A waived any claim against D), and so on, ad infinitum, until they cooperatively make a Pesharah.12

The following chart illustrates one round of consecutive strategic moves in this unending game. The numbers indicate the sequence. (5)

d fi

eld

(2)

(3) ($5

B

n

so

in

ra

ist

”d

“D

0)

(6)

C

d

sol

d fiel

0)

($5

” “A

“A ”d “A ”a ist ra ga in in so dis n tra “C in ” so n “C ”

sol

“C” distrains on “D”

claims $100

D

(4)

(7)

(1)

A A close examination of this entangled transaction reveals its strategic nature and purpose. What would have happened had A not waived his claim against D? Then, A could have distrained upon D, because as the second purchaser, he is legally on the first firing-line. A could then proceed and do the same to C, and the process would have ended here and now. But this might have been “unfair” to D and C. True, they should have checked with the court registry regarding the legal status of those fields before they purchased them. This notwithstanding, they have a moral claim that their transaction was in “good faith.” Assuming that “. . . most people like to be treated fairly, and like to treat others fairly”—as Richard H. Thaler concludes13—A is faced with a 12 In this quotation the author has designated the money sums in terms of dollars for the sake of clearer explication of the dilemma. 13 Richard H. Thaler, “Anomalies—the Ultimatum Game,” The Journal of Economic Perspectives, Vol. 2 (Fall 1988), pp. 195–206.

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dilemma; he must choose between selfishness and sensible cooperation. Instead, and apparently for his own reasons, A decided to let D off the hook and embarked on the risky business of gamesmanship, resulting in a vicious cycle of musical chairs, with one player always remaining as if in suspended animation. Let us see how. As we have seen with A’s renunciation of the claim against D, A takes away the field from C. As a result D and A have each a field; C is out. Again, when C takes away the field from D, C and A have the fields and D is out. Then, when A takes away again the field from C, A has both fields and both C and D are temporarily out until D takes it back from A and C is out. At this point in the game, they are ready for a second round, and so it goes until they agree to adjust their claims by mutual concessions. Such a compromise, it can be observed, is far removed from the behavior analyzed in the standard game theoretic model, but the talmudic discussion continues beyond this. Collusion versus Collision It must be pointed out that there are still other strategic moves that can take place in this game. For example, suppose purchaser D, a seasoned player, decides to collude with C against A. Specifically, D intimates to C as follows: “If you distrain on me, A will certainly distrain on you. Therefore, let’s make a deal, I will pay you an X amount and do not touch my field,” or still better, “Sell to me the field you hold for $25 or $30 and your payoff will be more then in any eventual compromise.” Should that happen, D will now have both fields, and A, since he renounced any claim on D, will be left high and dry, without any field. (See Tosaphot RID, loc. cit.) However, chances are that D would not embark on such an “unfair” venture, if only on account of his gratitude for A’s releasing him from his obligation. A seems to have been clever enough to let D off the hook to gain his good will. And now, with neither collusion nor collision by either party, the only solution to end this vicious cycle, is to reach a Pesharah. Still two questions remain. What happened to B who is the real culprit in this affair? After all, it was he who sold the pledged fields illegally. Second, what could have been A’s motive for waiving his claim against D? Regarding B’s illegal transaction, he is deemed to be either dead, or that the debt is uncollectable. Thus, for all practical intents and pur-


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poses, B is out of the picture. As for A’s motives, in the absence of an obvious lead from the text of the Talmud, it could be assumed that A might have suspected that if he distrained on both C and D these two together might be powerful enough to retaliate and cause him other business losses. Thus, A might have won the battle but would have lost the war. Another concern of A’s might have been that C and D have some moral claim in that their transactions were made in “good faith.” Sensing trouble, and to avoid possible complications, A made a premeditated move of “good will” to oblige D in his actions. The Talmud describes a deed of this nature as Shtar Passais, a “writ of good will” (B.B. 154b). An element of “fairness,” too, might have been part of this strategy.14 Be that as it may, it was this skillful move that led in a roundabout way to an optimal solution. And now that all chips are in and all are forced into a compromise, how is this game likely to be resolved? If the solution is to be based on strategic cooperation, A would settle for 50% of the debt, and C and D will receive 25% each. Result—A will get the maximum of the minimum, and C and D will receive the minimum of the maximum. It is an equilibrium that is distinctly positive. Let us now see who gains and who loses. Offhand, it would seem that all three lose. But upon further consideration all somehow benefitted by this cooperation. A emerged practically unscathed because he had waived his claim of 50% in the first place. Thus, A has his 50% plus his desired good will from D, which, to him, might be a priceless payoff. Again, C and D could have lost everything, since they have purchased the fields upon which there was a joint lien. Their transaction was, to begin with, illegal. Now the game is resolved satisfactorily via the Talmudic minimax called Pesharah. In sum, in this intricate situation, cooperation replaces combat, “fairness” takes precedence over “gamesmanship,” and in place of either collision or collusion they become “sensible cooperators.” Here it should be noted that the classical example which proves that very point is provided by L.B. Lave in his essay on the Prisoners’ Dilemma Game.15

14 It can be added that other factors involved in “distraining” may include the transaction costs (e.g., legal fees, loss of time, and psychological stress). These, and other considerations, give the parties incentives to seek a co-operative solution. 15 L.B. Lave, “An Empirical Approach to the Prisoners’ Dilemma Game,” Quarterly Journal of Economics, Vol. 75 (August 1962), pp. 424–436.

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Without going into details, in this game two suspects are interrogated separately and faced with alternative potential sentences, depending on whether (a) one confesses, (b) neither of them confess or (c) both confess. After considering the advantages and pitfalls of various strategies, the suspects will find that confession is the dominant strategy. Although from the suspects’ point of view, by not confessing they could be made better off, this can only happen if they do so jointly, which is impossible without communication. Of course, no analogy is perfect. Nonetheless, in both scenarios, cooperation is the dominant strategy. In both, the prisoners’ and creditors’ dilemma, the subjects behaved in accordance with game theory. By exercising strategic rationality, they resolved a conflict situation through sensible cooperation. While in game theory it is the minimax, in the Talmud the name of the game is Pesharah.16 A Payoff Matrix The principle behind the creditor’s dilemma, just as the prisoner’s dilemma, illustrates the tension between a “tit for tat” strategy and collusive cooperation. Let us look at the outcome of the various strategies. 1. If A “defects” and distrains on both C and D, A gets $100 and his opponents (A and D) get 0. 2. If D and C “defect” and conspire against A, D and C together get $100 (D gets $70 and C $30) and A gets 0. 3. If A renounces his claim against D and distrains on C, a strategy of “tit for tat” emerges, where one does to his opponent what the opponent has just done to him. As a result the money will move from hand to hand in a clockwise direction in a complete circuit, with more rounds to follow. 4. If the parties agree on a cooperative strategy, all participants will benefit from this sensible course of action. The following diagram illustrates the various strategies and outcomes. The payoff matrix is presented from A’s point of view, who, as in a

16 See also T. Jerus. Kethuboth 60b, in which the advantages of Pesharah are discussed and illustrated.


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IF A cooperates

A defects

AND IF

C&D cooperate

A gets 50 opponents get 50

C&D defect

A gets 0

A gets 100 opponents get 0 50 50

D

C A

C & D get 100

50

chess or poker game, must try to guess his opponents’ moves and countermoves, bluffs and counterbluffs, as many moves ahead as possible. Explanation of the Diagram Without knowing what C and D will do, A must decide whether to “cooperate” or to “defect.” If all cooperate the combined gains are optimal (50 + 50 = 100). However, there are strong incentives to defect. If A assumes that C and D will cooperate, he would gain by defecting (distrain on both) because it will double the amount (100). If he assumes that C and D will defect, he will find that it is in his interest to absolve D of his debt because that strategy enables him to stay in the game and distrain on C instead of receiving 0. Although this strategy leads to mutual defection, he nevertheless calculates that the “merry go round” tactic must ultimately end in cooperative behavior. Some games, of course, have a structure that makes it impossible to use a payoff matrix as in a two-players’ game. Inasmuch as in this model of the “creditor’s dilemma” there are three players (A, C, and D), in the case of mutual defection, it is impossible to use a conventional payoff matrix without becoming bogged down in a swamp of mathematical complications. We have, therefore, chosen the threesector circular figure to illustrate the circuitous quality of this part of the game. The money moves clockwise.

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Although the usual payoff matrix can become complicated, other matrices can be used to help simplify matters. In the previous example, it is possible to set up a matrix as follows: The columns correspond to the players A, C and D, the rows will indicate each transaction. For example, when all cooperate, the following matrix can be used to describe this situation: A 0 50

C 50 25

D 50 25

The top row represents the beginning transaction in which C and D have fields worth 50 each. The second row shows that as a result of mutual cooperation, C and D end up with 25 each and A would end up with 50. Note also the entire process can be described by a matrix with two rows. In the case in which A defects and C and D cooperate (acquiesce), the following matrix summarizes the transactions that transpire. This matrix also has two rows. A

C

D

0

50

50

100

0

0

The simplest case to describe mathematically is when C and D defect and A cooperates (acquiesces). This matrix uses only one row. A

C

D

0

50

50

The most interesting case mathematically is the instance where A suspects that C and D will defect and therefore absolves D which results in mutual defection.

game theory—the talmudic minimax A

C

D

0

50

50

50

0

50

50

50

0

100

0

0

50

0

50

50

50

0

100

0

0

50

0

50

50

50

0

100

0

0

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This matrix continues on repeating the pattern of the second, third and fourth rows, until the strategy changes. This means the number of rows in the final matrix will be much greater than in any of the other cases. In sum, whereas in this method, the addition of two or more players, for instance, would not matter (since it would merely increase the number of columns by two), it would be impossible to do the same in a conventional payoff matrix. Instead, the several players would have to be combined to form a 2 × 2 payoff matrix, as in the case of the “creditor’s dilemma.” Summary and Conclusion We have embarked on a brief historical and analytical journey to examine the intellectual setting of the talmudic Sages in which the game method plays a pivotal part. In discussing the three kinds of motifs as well as the zero-sum game of Kubbiyah, we endeavored to show that the Rabbis were in a position to use their familiarity with the characteristics of such games, as well as with the game method, so as to extend the same to all sorts of problem solving, including questions of economic conflict situations. And by focusing on the Asmakhta phenomenon, as an example of a positive-sum game, the ground was prepared for the presentation of the sophisticated talmudic minimax, the Pesharah.

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This last, it should be emphasized, is a particularly interesting line of analysis in that it is focused on a group of individuals who exhibit complete interdependence, i.e., every (possible) action of any member affects the satisfaction of every other member. This situation may be distinguished from that of complete independence, where no (possible) action of any member of the group can influence the satisfaction of any other member, and from one-way dependence, where every (possible) action of at least one member affects the satisfaction of another member or other members but no other member can affect his satisfaction.17 In Pesharah, then, we encounter explicit emphasis on the interdependence of economic agents. Such emphasis, it is widely claimed, is a hallmark of the game theory contribution to modern economic thought. Finally, there is the issue of the convergence of economics and ethics. It is the consensus among the talmudic Sages that economic conflicts are best resolved by means of Bitzzu’a. (Bitzzu’a is a term synonymous with and equivalent to Pesharah.) They consider a friendly compromise as a “judgement of peace.” Thus, R. Joshua b. Korhah states that, “Bitzzu’a is a meritorious act.” He bases it on the Scriptural injunction: “Execute judgment of truth and peace in your gates” (Zech. 8:16), commenting, that justice which involved both peace and charity was to be found in Bitzzu’a.18 This method of settling economic conflicts is considered to be particularly advantageous because it rests on voluntariness, mutual consent and sensible cooperation. Pesharah, then, is an economic problemsolving method in which strategic rationality, prudence and ethics are remarkably intertwined.19 Thus, not only may Pesharah qualify as a classical game theory but also serve as an object lesson in matters of economics and ethics.

17 On these three group situations consult, Clem Tisdell “Some Bounds Upon the Pareto Optimality of Group Behaviour,” Kyklos, Vol. XIX (1966), pp. 81–105. Tisdell observes (p. 84) that the complete interdependence case is the most interesting, “since it more closely approximates the conditions of our own society. . . .” Authors that apply Game Theory toward solving Talmudic problems are: Rabinovitch, Nachum L. (1973), Probability and Statistical Inference in Ancient Medieval Jewish Literature, op.cit., p. 21, f.n. 34, O’Neill Barry (1982), “A Problem of Rights of Arbitration from the Talmud,” op.cit., p. 22, f.n. 35. O’Niell superimposes modern Game theory on a Talmudic arbitration problem, with which he tries to solve it. 18 Siphrei Deut. 17; Tos. Sanh. 1:2–3; Sanh. 6b; T. Jerusl. Sanh. 1:1. 19 Game theory, too, can be employed in the elucidation of ethical issues. Consult, e.g., John R. Chamberlin (1989), “Ethics and Game Theory,” Ethics and International Affairs, vol. 3, pp. 261–276.

CHAPTER SEVEN

RISK, UNCERTAINTY AND EXPECTATION In any environment which allows for individual and group enterprise, some degree of risk, as well as some elements of uncertainty and expectation, will be features of virtually every human endeavor. If these three decision-making categories are common to human effort in general, it can be observed that they possess special relevance where business enterprise is concerned. The psychological component permeates all three categories of decision-making. In business life, this component manifests itself in feelings of both faith and doubt concerning the outcome of a particular undertaking. Subjective reflection on the possibilities of the undertaking’s success or failure are constant conscious or subconscious companions to the activity of conducting a business venture. Economists have sought to establish objective analyses of the three categories, distinguishing both the qualitative features and the quantitative dimensions of risk, uncertainty and expectation. In modern economics these concepts have been subjected to rigorous theoretical scrutiny as well as empirical investigation of their incidence and relevance in economic life. These investigations have generated a substantial body of literature dealing with the issues involved.1 Analysis of risk, uncertainty and expectation is also a feature of talmudic literature, and in this chapter we explore that analysis in the light of modern economics. Each of the three categories is examined in turn, first with reference to modern understandings of what they imply, and then with reference to the talmudic treatments of the same phenomenon.

1 Recent contributions include Sean Holly and Andrew H. Hallet, Optimal Control, Expectation and Uncertainty (New York: Cambridge University Press, 1989); and Peter Diamond and Michael Rothschild, Uncertainty in Economics (San Diego: Academic Press, 1989). A pioneering study is Frank H. Knight, Risk, Uncertainty and Profit (New York: Harper and Row, 1921).

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chapter seven Risk and Probability

“Risk” is a familiar term with many meanings, connotations and functions. Among others, it implies a gamble and danger, speculation and the possibility of loss, venture and peril. Whenever one makes a decision, but is unable to anticipate the outcome with certainty, there is an element of risk. Almost every situation involves some element of chance, no matter how slight. Games of chance, for instance, provide us with prime examples of situations involving risk. A distinguishing feature of risk is its susceptibility to measurement or probability distribution. The degree of risk can be quantified and, in that sense, it is predictable. For example, a return on an investment may be said to be “risky” in that it has a one to ten chance (0.1 probability) of resulting in a loss, that it has a four to five in ten chances of attaining a particular value, or that it is subject to some other distribution. Since there is an element of predictability respecting the possibility of gain or loss, “risk” may be defined as the likelihood of an event for which a probability can be reasonably estimated. Probability, it should be added, can be viewed in either objective or subjective terms. In a game of dice, for example, the objective view holds, since the outcomes do not depend on the judgement of the players. This is not the case in the world of business, since an investment is usually motivated by some “degree of belief ” on the part of the investor. Here, probability must be viewed in subjective terms. The psychological make-up of the individual risk-taker cannot be ignored, because the attitude toward risk will vary with that make-up. The Risk Factor in the Talmud Talmudic tradition, though circumspect of excessive business activity on spiritual grounds, unlike Aristotle, did not consider money capital as “barren,” but rather as an instrument deserving a reward when used for productive purposes. The scholars likewise perceived that a competitive economy with investment possibilities in search for profit, necessarily involves business risks, and is subject to market fluctuations. In fact, they fully recognized profit as a legitimate reward for an entrepreneur’s assumption of risks. The following debate clearly illustrates that point as it considers a business investment related to risk taking: Abaye said: A man may say to his neighbour, ‘Here are four zuz for a barrel of wine; if it turns sour, it is in your ownership; but if it appreci-

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ates or depreciates (in value), it is mine.’ Said R. Sherabia to Abaye: But that is near to profit (if it appreciates) and remote from loss (since he is safeguarded if it turns sour). He replied: since he accepts the risk of depreciation, it is near to both (profit and loss). (T.B.B.M. 64 a–b).

As can be seen, in this debate both scholars agree that a business undertaking which entails a risk, warrants a profit. They differ, however, as to whether or not the transaction in question involves a real risk. Abaye holds that it does, because the purchaser has stipulated that in the event the wine depreciates in value, he will assume the liability. Whereas R. Sheravia reasons that the buyer’s “hedging” (if the wine spoils) has so mitigated the extent of the risk that in reality the deal is much closer to making a profit than to eventuate in a loss. Thus, to Sheravia, rather than a risky investment, this looks more like a loan. To which Abaye replied—not so, since this transaction is balanced enough between profit and loss, therefore the risk is real and commensurate with the expected profit. It is evident that, in the final analysis, both scholars not only recognized the existence of an interdependent relationship between the risk-profit elements and business investments, but must have realized that entrepreneurs would not risk capital if they cannot expect a reasonable profit from their risk-taking action. Nonetheless, it should be pointed out that in the above and most Talmudic debates concerning manifestations of profit and loss, the risk factor is gauged merely by inference from circumstances surrounding a given transaction. However, in one particular instance, the notion of risk is not only accentuated but also conceptualized in a special term called Zeyoona which is contained in the Tractate Kethuboth. This Tractate deals with, among other matters, the characteristics of a marriage contract called Kethubah. The framework for the debate is the content of a marriage document, but this provides an occasion for far-reaching economic analysis of risk and related issues. The Kethubah is a marriage deed in which the duties of a husband to his wife are recorded. The deed contained, in addition to a variety of other requirements, provision for a settlement of a certain sum which is due to the wife in the event that she becomes widowed or divorced. It was also the custom that a wife brought a dowry to her husband upon marriage, and during the talmudic period it became the institutionalized norm that the husband, in return for the dowry, was obliged to add a corresponding amount to his wife’s Kethubah, i.e. to the settlement she could expect if widowed or divorced.

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The actual amount which the husband must add was held to depend, in part, on the degree of liquidity of the assets which comprised the dowry. Those assets might consist of “ready money,” highly liquid gold instruments such as gold denarii, easily redeemable merchandise, or objects of “estimated value” like gold bars or utensils. The various degrees of liquidity which might be attached to different assets evoked considerable debate, and it was held that if the dowry was in the form of ready cash or highly liquid “near money,” the husband was required to augment his wife’s Kethubah to the extent of fifty percent more than the value of the dowry.2 The Jerusalem Talmud offers an explicitly economic-rational ground for this latter provision. The fifty percent more is warranted by the fact that the husband is in a position to invest the funds from the dowry and thereby derive a profit from them throughout his life.3 There are two Mishnaic passages which bear directly on the foregoing provision. The first of these reads: . . . If a woman undertook to bring to her husband (on marriage) one thousand denarii, he must assign to her (as her Kethubah) a corresponding sum of fifteen Maneh . . .” (a Maneh = 100 denarii, so fifteen Maneh = 1,500 denarii ).4

The second passage embodies the same principle, although the sums of money employed for purposes of illustration are much smaller. It reads: . . . If a woman undertook to bring to her husband (on marriage) ready money, every Sela (a Sela = 4 denarii ) of hers counts as six denarii . . .” (i.e., fifty percent is added to the amount the woman brings, as in the case of ready money in the first passage).5

When confronted with the above passages, the talmudic Rabbis were intrigued as to why it was necessary to have two Mishnaic clauses to state the same principle concerning the added fifty percent. In their discussion, the Rabbis considered the necessity of the twofold state-

2 For the discussion of the various degrees of liquidity, see Kethuboth 67a. In this discussion, the contributors develop categories which suggest analogies with those adopted in modern monetary thought (M1, M2, etc.). 3 See T. Jerusalem, Tractate Kethuboth, Chapter 6:40a. 4 Babylonian Talmud, Kethuboth, Chapter 6:66a. The citations are from the English translation of the Babylonian Talmud, Soncino Press, London. 5 Ibid., p. 66b.


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ment from the viewpoint that the capital sum might yield profit. They also considered that necessity from the viewpoint that a loss might be incurred. It is in this latter context that the factor of risk emerges explicitly as an element in their reasoning. The Profit Dimension The reason for the twofold statement is explained in the Gemara, as follows: . . . He taught first about a major transaction (1,000 denarii) and then taught about a minor transaction (in the second Mishnah). And (both rulings were) necessary. For had the major transaction only been taught, it might have been assumed (that it applied to this only) because the profit (it brings in) is large but not to a minor transaction, the profit from which is small (hence it was) necessary (to state the latter.)6

In this explanation, the case of a “major investment” of 1,000 denarii, with the probability of a “large profit,” is distinguished from that of a “minor investment” of 4 denarii, with the probability of only a “minor profit.” It is held that both Mishnayot (plural of Mishnah) were necessary to emphasize that the husband is subject to the same rule with respect to the extra sum he must add to his wife’s Kethubah regardless of the magnitudes of that sum and the profits resulting. The explanation is notable for its demonstration of the extent to which the talmudic Sages were ready to incorporate categories such as “capital investment” and “profit” in their reasoning on juridical issues. It is clear that it is precisely on account of the possibility of the emergence of profit from a capital investment that the Rabbis were constrained to impose upon the husband an additional payment to his wife’s Kethubah. The payment might be construed (to use a modern phrase) as a form of interest payment for the use of loanable funds. However, this construction is not valid.7

Ibid. See Mordekhai, The Commentary on Kethuboth, by Mordekhai ben Hillel (13th century), loc. cit. He quotes his contemporary R. Samuel b. Barukh as follows: “. . . yet this is not to be viewed as interest, since, even if the husband divorced his wife soon thereafter, he would still have to add one third (to her Kethubah). But a regular loan is (usually) extended for a lengthy period and the return therefrom is in the category of Agar Natar—a ‘compensation for waiting’.” (B. Mets 63b). 6 7

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The Talmud offers a second explanation of the need for the two Mishnayot on this subject. Instead of stressing the profit which may be associated with use of a wife’s dowry, this second explanation directs attention to the possibility of loss. The key term here is Zeyoona, a term which refers to the presence of business risk and the potential for losses in business.8 The relevance of Zeyoona is emphasized in the continuation of the Gemara cited above. This continuation considers why it was necessary for the earlier scholars to include the first Mishnah (dealing with the higher value dowry) given that the second Mishnah appears to be stating the same general rule. The continuation reads: . . . And had we have been informed of that of the minor transaction, it might have been said (to apply to this only) because the Zeyoona is small but not to a large transaction where the Zeyoona is great (hence it was) necessary (to state the former).9

Here, it is recognized that business investment is fraught with risk, and the bigger the capital investment, the bigger the potential for loss. When a huge sum, such as 1,000 denarii, is turned into risk capital the stakes are high. As Adin Steinsaltz observes, here, there are “strong possibilities of loss and great risks.”10 There is the temptation, in the face of substantial loss, to deny the wife her due Kethubah. However, the

(Freely translated by the author from the original text.) We might add that the above is not the last word in this debate. Incidentally, some 1500 years later, Alfred Marshall 1840–1924, the distinguished English economist, used the same talmudic designation in order to mitigate the irksomeness of Senior’s abstinence theory of interest. He substituted the term “waiting” for “abstinence,” i.e., that interest is a compensation for “waiting.” 8 See Alexander Kohut, Aruch Completum (in Hebrew), (Pardes Publishing House, 1955), p. 287. The author translates the term Zeyan as “losses,” citing other talmudic sources such as Menahot 77a, and Baba Bathra 90a to this effect. Kohut expressly prefers this understanding to Rashi’s description of Zeyoona as “expenditures and responsibility.” See also, in particular, Marcus Jastrow, Dictionary of Talmud Bavli (Pardes Publishing House, 1950), p. 392. Jastrow understands the term Zeyoona to mean “management, expenses, and risks of business.” It seems that the latter, together with the author who translates Zeyoona as “losses,” convey the most accurate descriptions of the term. 9 Kethuboth, ibid., 66b. 10 Consult Adin Steinsaltz, Iyunim, Kethuboth, Vol. II:66b, where he comments on the talmudic expression “Zutar Zeyoona.” Steinsaltz writes: “. . . some translate this expression as Loss. For in case of a big investment there are also bound to be big losses. And perhaps in cases such as these, there are big risks . . . (Rabbi J. Ben Minash).” (This quotation is a translation by the author).


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Talmud does not allow the unsuccessful, risk-taking husband the right to deny what is due because of his failure as an entrepreneur. Risk-taking as a category of economic activity is not entirely absent in early Jewish literature outside the Talmud. For example, it is present in the Wisdom tradition as evidenced by the Book of Ecclesiastes (Qoheleth) 11:1–6. Again, it is treated in the Parable of the Talents (Matthew 25:14–30). However, it emerges with particular clarity in talmudic concept of Zeyoona. In the treatment of the possibility of loss on investment of a wife’s dowry, the husband is clearly categorized as the risktaker. Zeyoona is applicable strictly to the activities of the entrepreneur, and since the wife is not party to the entrepreneurship, her Kethubah premium is not in question. She is not the one who invests the capital. What the wife’s dowry offers the husband, if that dowry is in suitably liquid form, is the opportunity for risk-taking in business ventures. Her “reward” for creating that opportunity is the fifty percent premium. His “reward,” if any, is a return on the assumption of business risk in the modern sense, i.e., a gamble on the possibility of gain or loss in an investment. Profit and loss are just two sides of the same coin, in that both stem from the risks that have been assumed by the entrepreneur. Such a firm appreciation of the role and incidence of risk in economic activity is rare in ancient literature. The Concept of Uncertainty Frank H. Knight (1885–1972) was the first major, modern economist to call attention to the distinction between “risk” and “uncertainty.”11 The former, he contended, is a “measurable uncertainty,” whereas the latter is an “unmeasurable uncertainty.” Uncertainty arises then, whenever a decision can lead to more than one possible consequence. The term “uncertainty” ought to be reserved for describing situations in which a reasonable estimate of the probability that some event will occur cannot be made. No one possesses knowledge of the future, so there are circumstances in which a decision-maker is either unwilling or unable to assign probability distributions of outcomes to various contemplated alternative actions. For example, if a person is seriously ill and the medical authorities are unwilling to make a reasonable

11

F.H. Knight, ibid.

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estimate of the probability of that person’s recovering, then the situation is uncertain (rather than risky) in medical terms. In such circumstances, the decision maker must often rely on intuition and judgement. Since Knight’s pioneering investigations, economists have been in the forefront of endeavors to develop more precise explanations of the ways in which uncertainty affects human behavior. Analysis has become more systematic and sophisticated.12 However, in this respect it is notable that a recent, authoritative survey of this field of research concludes with the observation that, “Uncertainty per se really introduces little that is fundamentally new into economics . . .”13 Perhaps this is the case, and the old Wisdom adage—“there is nothing new under the sun” (Ecclesiastes I:9)—holds in this instance. Certainly, as we shall show, the talmudic scholars had a strong grasp of the role of uncertainty in economic matters. Once again, the major focus of attention is debate concerning the Kethubah deed. Uncertainty and the Kethubah One of the major aspects of the marriage contract envisaged in the Talmud is that the husband is entitled to enjoy the fruits, natural or monetary, from certain properties which legally belong to his wife’s estate. This provision applies as long as she is alive. Another aspect, it should be recalled, is that the Kethubah deed involves a monetary obligation which has to be restored to the wife, either upon the dissolution of the marriage or the death of the husband. This debt obligation is of particular significance since, for all practical intents and purposes, it is in some respects akin to a marketable security. Indeed, the Kethubah may be likened to a bond. A bond will mature, and so does the Kethubah. A bond may be redeemed before maturity, so too, the Kethubah. Like a bond, the Kethubah has two prices: a par value and a market value. Like a bond, the price of the Kethubah is subject to fluctuation, depending on a number of variables of which some are measurable and some are subjective or psychological. Like a security, 12 A recent discussion is Ronald A. Heiner, “Uncertainty, Behaviour and Economic Theory,” American Economic Review (May 1985), pp. 391–402. See also, the accompanying commentary by K.D. Wilde, A.D. Le Baron and D. Israelsen, ibid., pp. 403–8. See also, Uncertainty in Economics, editied by Peter Diamond and Michael Rothschild (Harcourt Brace, Jovanovich, 1989). 13 Peter J. Hammond, “Uncertainty,” in J. Eatwell et al. (eds.), The New Palgrave: a Dictionary of Economics, Vol. 4 (New York: Macmillan, 1987), pp. 728–33.


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the deed can be an object of speculation with attendant potentials for gains or losses. With these features of the contract in mind, we can begin to examine the Mishnaic passage which deals with the question of the valuation of the Kethubah. The circumstance addressed by the passage is one in which false witnesses are intending to cause financial damage to the husband. In the interest of more lucid presentation, we employ the interpretive translation of the original text by Michael Rodkinson.14 Further, in the analysis which follows we make full use of Rashi’s extensive treatment of the passage under consideration.15 The passage is, as follows: Mishna II: We testify that so and so has divorced his wife and has not paid the amount mentioned in the marriage contract (and that testimony is false). Although they have not done any damage, as the husband has to pay the marriage contract at some time, they are nevertheless not free from the following payment—namely, it is appraised how much one would risk for her marriage contract in case she would remain a widow or divorced. However, if she died while her husband is still alive, he would inherit her (and such an amount they have to pay).16

The financial damage intended to the husband by the false witnesses was three-fold: (a) to make the husband pay the Kethubah; (b) to deprive him of the benefits he can enjoy from his wife’s estate during her lifetime; and, (c) to deprive him of the inheritance in case she dies. Given biblical injunction (Deuteronomy 19:19), the false witnesses are now to be penalized to the extent of a sum equivalent to the amount of the intended damage. The question arises, then, as to how the penalty is to be appraised. A general method of appraisement is suggested in the Mishna, but it is not specific as to the way in which the valuation is to be made. The issue is taken up in the Gemara, as follows: How should the appraisement be made? According to R. Hisda, the appraisement must be of the husband’s (claims). And according to R.

14 M.L. Rodkinson (ed., and trans.), New Edition of the Babylonian Talmud (Boston: The Talmud Society, 1918), Vol. ix, Tract Maccoth, p. 4. 15 The halakhic implications of this passage are explored in an interesting paper by Yehoshua Liebermann, “The Economics of Kethubah Valuation,” History of Political Economy, 14, 4 (1983), pp. 519–528. The author considers the interpretations of a number of commentators including Rif, Maimonides, and Rashbam. However, the contribution of Rashi, which is of special interest to the historian of economic thought, is noted only in passing (p. 527, f.n. 18). 16 M.L. Rodkinson, ibid. The original text of this Mishna is in Makhoth 3a.

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chapter seven Nathan b. Oshia, of the wife’s estate. Said R. Papa: It prevails that the appraisement should be as of the wife’s, and only to the amount mentioned in her marriage contract, without, however, touching the benefit which the husband has in the fruit of her estate while she is yet alive. (trans. M.L. Rodkinson).17

Despite the ambiguity surrounding the appraisement technique in the foregoing debate, one point which emerges with clarity is that the intended damage is to be evaluated in accordance with the Kethuba-security’s current market value. However, this leaves open the further question of from whose perspective the value of the security is to be estimated. Is it to be from the perspective of the husband, or of the wife? At this point, the factor of uncertainty enters the picture, since the alternate perspectives involve (literally) matters of life and death. As Rodkinson observes, “one can risk to buy the inheritance of a woman from her husband who would inherit her in case of her death when he is still alive; and one can also risk to buy this from the woman in case her husband dies first.”18 The purchaser of the Kethubah stands to lose his entire investment if the wife predeceases her husband, and the husband inherits her. Alternately, given that the Kethubah has been bought at some rate of discount, the purchaser may make a considerable gain by collecting the full value of the Kethubah in the event of the husband predeceasing or divorcing his wife. The potential purchaser must also reckon with other contingencies. For example, he must take into account that there are substantial differences in the amounts that he is prepared to risk. It emerges, as we will see, that he would be prepared to pay more when buying from the husband than from the wife. In this regard, the element of probability asserts itself. Uncertainty and the “Benefit of the Pleasure” The distinguished eleventh century commentator, Rashi, considers the element of uncertainty in Kethubah valuation at length. There are two parts to his argument. The first places the emphasis on the role which uncertainty plays in the scheme of evaluation. The second com-

17 18

Ibid. Ibid.


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bines uncertainty with the principle of Tovath Hanoah (“benefit of the pleasure”).19 In regard to the scheme of evaluation, Rashi observes that both husband and wife have respective vested rights in the Kethubah. However, each of those rights is beclouded by the condition of uncertainty. The situation is characterized by the facts that, as remarked above, “the wife figures that if the husband should die, she will collect the entire Kethubah, while the husband figures that if his wife should die, he will inherit her.”20 The circumstances are marked by a strong element of unpredictability. Rashi goes on to assert that if the Kethubah is to be traded under such conditions of uncertainty, the husband’s “uncertain claim” (ZxKhut Sfaiko) will command a higher price than the wife’s “uncertain claim” (ZxKhut Sfaikah). There are two reasons which tell in favor of the husband’s claim. First, as the “obligor”—as Rashi puts it—the husband is a Mukhsak Vxomed: he is in “firm control” of the situation. Second, as long as the husband lives, he (and not his wife) can enjoy the usufruct from any field which he may have mortgaged to his wife as part of her Kethubah. Hence, when the husband wishes to sell his “uncertain claim,” the discount from the face value of the Kethubah is likely to be minimal. On the other hand, when the wife wishes to sell her “uncertain claim,” the discount is likely to be much steeper, if only for the fact that her status is that of a “potential claimant,” which compounds the uncertainty. The second part of Rashi’s argument introduces the concept of the “benefit of the pleasure.” In Rashi’s view, the debaters in the Gemara who considered the case of the false witnesses (see above) were not concerned with the value of the entire Kethubah in question. Rather, they were concerned with the value of the “benefit of the pleasure” flowing from that Kethubah. The relevant question is: are the false witnesses to be penalized in terms of the wife’s “benefit of the pleasure” or of the husband’s “benefit of the pleasure”? Here, Rashi integrates the notion of “uncertain claims” with that of the “benefit of the pleasure.” The latter concept requires some elucidation. Ordinarily, the term Tovath Hanoah (“benefit of the pleasure”) refers to a feeling of satisfaction which one derives from obliging somebody. For

19 Consult Aruch Completum, Vol. IV, p. 2. See also Baba Kama 89a, and Rashi on the same. 20 See Rashi, Makhoth, 3b., loc. cit.

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example, if one bestows a material favor on another person, the gratitude that this evokes on the part of the recipient, will have a pleasing effect on the benefactor.21 However, within the context of the two states of “uncertainties” surrounding evaluation of the Kethubah, the term has a distinct meaning. Tovath Hanoah connotes the difference inherent in the two values of uncertainty, i.e., the differential in the value between his “uncertain claim” and/or in the value of her “uncertain claim.” The “benefit of the pleasure” is what one gains from selling the claim. This gain will be different as between husband and wife because of the difference in the uncertainties associated with their respective claims. As the gain is different, so there is a difference between the face value of the claim on maturity net of what the purchaser has paid, depending on whether the purchase has been from the husband or from the wife. There are definitions of Tovath Hanoah in the latter context in both the Babylonian Talmud (notably in Baba-Kama, 89a) and the Tosephta.22 However, the clearest definition is provided in the Jerusalem Talmud, namely: “how much will a purchaser be willing to risk for the Kethubah (under conditions of uncertainty) contingent on the probability that either the wife might die while he is alive, or that the husband might die and the purchaser will realize the full amount of the Kethubah.”23 What distinguishes Rashi’s interpretation, in the light of this and the other definitions, is his explicit integration of Tovath Hanoah and the idea of “uncertain claims.” Further, in so doing, he facilitated the development of a framework within which those “uncertainties” could be calculated.

21 Whether or not the benefit of putting another person under obligation can be a monetary consideration is a subject of talmudic controversy. For an extensive review of the topic “Tovath Hanoah,” see Enziklopedia Talmudit (in Hebrew), ( Jerusalem, 1989), Vol. ix, pp. 99–144. Although apparently a comprehensive treatment of this subject, it is surprising that the editors have virtually omitted the presentation of “Tovath Hanoah” in the context of the Kethubah evaluation and the different meaning that is attached to it there. 22 See, Tosephta, Makhoth, Ch. 1:4. The Tosephta (Aram. “Additions”) is a Tannaitic work which often provides variant readings of the Mishna. 23 T. Jerusalem, Makhot, lb. The quotation has been freely translated by the author.


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Computing Uncertain Values In the 1920’s, Frank H. Knight wrote that in a state of uncertainty, probabilities are not known and cannot be predicted, so in business-life the uncertain returns from an investment may be known but the probabilities of distribution will be unknown.24 Yet, some nine hundred years before this, the integration achieved by Rashi provided an instrument whereby there could be attempts at computation in objective terms of the present values of the economic uncertainties associated with the Kethubah contract. These attempts were mainly, but not exclusively, a province of the contributors to Tosaphot. The tosaphists flourished from the twelfth to the fourteenth century.25 Tosaphot adopted Rashi’s thesis that the husband, in his role of “obligor,” can be presumed to be in “firm control,” whereas his wife is only a potential claimant.26 Consequently, the husband’s “uncertain claim” will command a much higher market price than the wife’s “uncertain claim.” On this basis, and assuming that the par value of the Kethubah is 1,000 denarii, the tosaphists found that if the husband wishes to sell his claim (which claim turns on the possibility of his wife’s dying and his inheriting her) the asset will be traded at a fifty percent discount, i.e., for five hundred denarii. On the other hand, if the wife, who is in the weaker position, wishes to sell her claim (turning on the possibility of the death of her husband or on his divorcing her) it will sell at a sixty percent discount, i.e., for four hundred denarii. The Tosaphot adds that if the wife should sell her claim to her husband (or to someone else) at a discount rate of sixty percent, the holder of the asset will realize 1,000 denarii (400 plus 600) at its maturity. The foregoing numerical extensions also serve to clarify Rashi’s interpretation of the debate in the Gemara concerning the financial penalties to be imposed on the false witnesses (see above). On the calculations of the tosaphists, the wife’s “benefit of the pleasure” will be 400 denarii, leaving a remainder of 600 denarii as compared with

F.H. Knight, op. cit., pp. 232–4. Tosaphot (Heb. “additions”) are the Novellae on the Talmud and are printed in the outer column of all Talmud editions. 26 The husband’s “control,” it can be added, is partly a function of the law regarding divorce. As Y. Liebermann observes (op. cit., p. 524): “. . . according to ancient Jewish law the husband is given the power to control divorce decisions. Clearly, this means that the husband has more information than any other party as to whether and as to when he intends to divorce his wife.” 24 25

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the par value of the Kethubah. However, the husband’s “benefit of the pleasure” will be 500 denarii, leaving a remainder of 500. Are the false witnesses liable for 600 or 500 denarii by way of damages? This depends on whether the wife’s or the husband’s perspective is adopted as the base for assessment. Expectation in Contemporary Economics In an imperfect world, expectations play an important role in all areas of human endeavor. What individuals or firms believe is going to happen in the future will necessarily affect the choices they make in the present. Whenever one travels, one expects to return safely. When individuals or firms make investment decisions, they expect a profit. When governments try to control the vagaries of the business cycle, their efforts are accompanied by an aura of expectation. All these decisions are rooted in beliefs, views or guesses—educated or uneducated—out of which the matrix of expectations is formed. Reflections on the formation and consequences of expectations are common to all forms of literature, ancient and modern. Yet, during the 1970’s some economists forged an approach to expectational phenomena which represents an extension of neoclassical economic treatments. This approach is generally known as “the theory of rational expectation.”27 Before the 1970’s, the dominant hypothesis amongst economists was that of “adaptive expectation” (or error learning). The employment of this hypothesis extends back (although not in name) to Irving Fisher (1911), and its basic tenet is that people rely upon the past to predict the future. Hence, the actual happenings of the two or three years in the immediate past with respect to variables such as prices and climate will determine the expectations of people concerning the future state of those variables. It is also allowed that if forecast errors have been made in the past, e.g., individuals, firms or unions have underestimated the rate of inflation to pertain, then expectations will be adjusted accordingly.

27 The extensive economic literature which appeared during the 1970’s is reviewed in Brian Kantor, “Rational Expectation and Economic Thought,” Journal of Economic Literature, Vol. XVII (December 1979), pp. 1422–41.


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By contrast, the rational expectation hypothesis does not limit the formation of expectations to reflections on past events. It proposes that people not only learn from their mistakes but also alter their behavior as additional information becomes available. People engage in rational forecasting of what is going to happen in the future. They use the available information to manage their anticipation. In the case of a stimulus—be that stimulus policy—generated or otherwise—people will safeguard their own interests by neutralizing the effect of the stimulus where necessary.28 Rational Expectation in the Talmud One of the basic elements of the theory of rational expectation is that in decision making on economic matters, an individual will make use of all the available and relevant information for the purpose of forming a view about the future. This aspect of the theory is also given prominence in the discussion of economic issues in the Talmud. Further, the Talmud displays an appreciation of the role which the systematic gathering of information can play in enhancing one’s control over one’s economic future. An illustration of the latter appreciation is afforded by the strand of talmudic thought in which an agricultural cycle theory began to take shape (see Chapter 5, sect: “Stars, Cycles, and Harvests”). There, R. Johanan urged engagement in calculations concerning “cycles of the seasons and constellations.” This recommendation, according to later commentators, was given so that agricultural cycles, and hence fluctuations of business conditions in general, could be more accurately anticipated. These were phenomena that could be rationally expected, and which could be more readily dealt with by those who were in command of forecast data. Emphasis on the need to take account of all available information to ensure one’s economic future is illustrated by some of the contributors

28 Among the leading contributors to the development of the rational expectation theory are Robert Lucas (Chicago), and Thomas Sargent and Neil Wallace (Minnesota). A prominent economist associated with the adaptive expectations theory is Milton Friedman. On the theory of expectations in Economics, consult J. Eatwell et al. (eds) op. cit., Vol. 2, pp. 20, 79–85, and 224–9. See also Kenneth E. Boulding, Economic Analysis: Microeconomics, Vol. I (New York: Harper and Row, 1966), pp. 691–5.

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to the discussion of Kethubah. For example, R. Isaac Alfasi (1013–1103) quotes R. Hai Gaon’s comments on the Gemara debate, as follows: . . . This appears to be the case: R. Hisda maintains that the appraisement is made on the basis of the husband’s claims means, is he old which by the state of nature he is more likely to die than young men; is he ill or in good health; is he well to do so that he might be inclined to divorce his wife and pay her Kethubah; do they quarrel or not . . . and R. Nathan b. Oshia, who asserts ‘on the woman’s estate’, maintains the very opposite; is she ill or well; is she old or young . . . for when one bargains for this kind of object, one will estimate it on the basis of those variables. And R. Papa added to R. Nathan’s argument—is her estate large, so that the buyer of her Kethubah who bets on her future marital status (that she will be widowed or divorced), will be inclined to risk more of his financial capital, or does she have little where the risk is minimal . . .29

In this passage, Alfasi goes beyond the notion of the measurability of the “benefit of the pleasure” (see above) in order to predict an uncertain future. Quantification alone, he suggests, is an insufficient tool in such a complicated realm of decision-making. The careful investor also seeks out beforehand all the available information which is relevant to the outcome of the given transaction. The investor must be concerned not merely with the prediction of future occurrences but also with the way the forecast is made. Generally then, the prospective purchaser of a Kethubah, before embarking upon a course of action, and as each case may require, should gather all available information pertaining to such factors as the husband’s or wife’s physical, social and psychological status, including age, health, material well-being, and temper. Armed with this comprehensive information, the decision-maker will be able to make a more rational forecast about the future outcome of the investment. Review This chapter has been concerned, in the main, with the economic implications of the talmudic analysis of the problem of Kethubah evaluation. In the first place, we showed that the talmudic Rabbis displayed profound insight and very considerable sophistication regarding the

29 Consult Alfasi Digest, along with the commentary of RAN (Rabbenu NissimGirondi, 12th century). The translation of the above passage is by the author.


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manifestation of the “risk” factor called Zeyoona. This concept is closely interrelated with the business phenomena of “profit” and “loss.” These two are just alternate sides of the same coin, in that both stem from the risks that have been assumed by the entrepreneur. Secondly, in the rabbinic treatment of ‘uncertainty’, the contribution of Rashi, in particular, was emphasized. That contribution displays a discernible modernity in its approach to the computation of uncertainties. By employing the concept of the “benefit of the pleasure,” Rashi opened the way to reasoning in categories of measurable uncertainty that are quantifiable and objective, as against an unmeasurable uncertainty, which is intuitive and subjective. Finally, we remarked on points of contact between rational expectation theory and certain talmudic emphases in dealing with economic behavior. Those points comprised management of the future through rational forecasting, and awareness of the role of information in the formation of expectations.

PART FOUR

DISTRIBUTIONAL EQUITY

CHAPTER EIGHT

THE WELFARE DIMENSION* Introduction Up to now we dealt primarily with a number of positive socioeconomic aspects, such as macro and micro issues, as they are discussed in Talmudic sources. In this chapter we shall examine some of the normative categories—the welfare dimension—as it appears in the Hebrew Bible and as elaborated upon in Talmudic literature. It has been said that “nearly every aspect of economics has a welfare dimension.”1 By the same token, nearly every aspect of welfare has an economic dimension. In this respect the talmudic exposition of welfare is no exception. We shall attempt to show that Talmudic thought on this subject encompasses an array of economic aspects within the welfare spectrum. The very Hebrew term Tzedakah, usually translated as “charity,” as we shall see, connotes an act of justice for the sake of socio-economic equity. And if the view that history moves like a spiral holds, we may posit that the Talmudic discussions on “welfare,” may well serve as a significant component of the spiral in the annals of welfare economics.2 * This chapter—a revised section of a larger essay by this author—has been excerpted from Ancient and Medieval Economic Ideas and Concepts of Social Justice, edited by S. Todd Lowry and Barry Gordon (Brill Publishers, 1998), pp. 239–262. 1 Stanley L. Brue, The Evolution of Economic Thought 5th Ed. (The Dryden Press, Harcourt Brace College Publ., 1994), p. 415. 2 Welfare Economics dates back to classical economics of Adam Smith, Jeremy Bentham, etc. Some of the major contributors to the “new Welfare Economics” are: Vilfredo Pareto (1848–1923), Arthur C. Pigou (1877–1959), Ludwig von Mises (1881–1973). There exists a vast literature on this subject. Some of the major works on this subject are: Pareto, Vilfredo, Manual of Political Economy (New York: A.M. Kelley, originally published in 1906); Pigou, A.C., The Economics of Welfare, 4th Ed. (London: Macmillan, 1932, originally published in 1920); Arrow, Kenneth J., Social Choice and Individual Values (New Haven CT: Yale Univ. Press, 1951). Suffice it to mention that I.D.M. Little in his Critique of Welfare Economics (London, 1950, p. 9) has argued that welfare is an ethical concept, since its considerations are necessarily based on value judgements. It, therefore, belongs in the realm of normative economics. Alternatively, it has been argued that welfare should be equated with the satisfaction of individual preferences and regarded as a “technical” term.

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chapter eight Distributive Equity

The concept of distributive equity encompasses a broad spectrum of social and moral precepts. It refers to the manner in which the economy’s output is distributed among individuals. These aspects of social justice occupy a central place in Scriptural legislation and is a major topic of Talmudic discussion. It extends, inter alia, to the areas of labor issues, welfare considerations, trade, and to some aspects of property rights. We shall attempt to deal with those categories. Conceptually, the notion of social justice is contained in the biblical exhortation: Tzedeq tzedeq tirdof—“Justice, justice shall ye pursue” (Deut. 16:20). The duplication of the word “justice” serves to underscore the biblical passion for social righteousness, a theme reiterated time and time again by legions of Prophets, Psalmists, and Sages.3 Distributive equity or fairness is an essential aspect of the all-embracing concept of Tzedek (“justice”) and Tzedakah (“charity”). It embraces righteousness, justice, equity, truth and virtue (Isaiah 45:19; Psalm 103:17). Historically, the biblical doctrine of “justice” has been the spiritus movens of the socio-ethical force that powers the Judaic engine of social values institutionally as well as individually.4 As John Rawls remarks: “Justice is the first virtue of social institutions as truth is of systems of thought” (Rawls, ibid.). Labor in the Bible and Talmud In the modern world, labor is viewed as the most important factor of production in terms of income and employment. In biblical and apocryphical literature, the labor phenomenon was dealt with, not only as a life-sustaining activity, but also as an uplifting experience. 3 For an elaborate discussion about the interchangeable meaning of the terms Tzedeq and Tzedakah and their significance as an ethical-social force in Judaic thought, see Samuel S. Cohen, Judaism—A Way of Life (Cincinnati: U.A.H.C., 1948). See in particular the chapter on “Social Righteousness,” pp. 183–233. See also Justice and Judaism, by Albert Vorspan and Eugene J. Lipman (New York: U.A.H.C., 1956); Steven S. Schwarzschild, “Justice,” Encycl. Judaica, vol. 10, pp. 476–477. 4 Some examples: “Righteousness (Tzedakah) exalteth a nation” (II Samuel 7:23), upon which R. Eliezer (2nd cent.) comments: This refers to Israel . . . (BB 10b); “let justice (Mishpat) roll on like mighty waters—righteousness (Tzedakah) like never ending streams” (Amos 5:24); Ezekiel 18, 45:9–12, 46: 16–18; Zech. 8:16; Malakhi 3:15. All appeal for individual and collective application of social justice.

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It was the first time in the history of antique civilizations that, rather than considering work as degrading, it was viewed in ethical terms and treated as a worthy endeavor, as a means of self-fulfillment. Talmudic thought further developed the concept of labor by placing additional emphasis on the social value of work in human society. It is all rooted in the Scriptural epic of creation. As the story of creation unfolds, God is said to be a worker, a Creator (Gen. 1–2) and, as the Midrashic expositors saw it, also an experimenter.5 He is said to have worked for six days and rested (“ceased”) on the Sabbath—the latter being the cornerstone of biblical legislation. Mankind is to take the clue from its Creator, where both work (six days) and rest (on the seventh) are considered commandments, and thus binding (Mekhilta on Exod. 20:9–10). Accordingly, Adam is put in the proverbial Garden of Eden to work, to till the earth (Gen. 2:15). His progenitors, with God as their role model, are to imitate Him by establishing a weekly rest, to be enjoyed by the master of the house and his family, the slave, the maidservant, “the stranger in thy gates,” and even the cattle (Ex. 20:8–9). The institution of the weekend—writes Henry W. Spiegel—“was a social invention that has no parallel in the civilizations of Greece, Rome, or other ancient cultures.” Moreover, labor in the Bible as well as in the Talmud, rather than being viewed as a disutility, let alone a curse, is praised not only as an honorable preoccupation but also as a personal and social blessing. Numerous statements emphasize the dignity of labor. For example: “When thou eateth of the labor of thy hands, happy shalt thou be and it will be well with thee” (Ps. 128:2); “Sweet is the sleep of the laborer, whether he eateth little or much” (Ecc. 5:13); and “go to the ant thou sluggard” (Prov. 6:6). There are numerous such statements, all emphasizing the dignity of labor. In the Apocrypha, a similar spirit was fostered: “Hate not laborious work”—insists Ben Sira—“for it was ordained by God” (9:15). If there were some expressions to the contrary, as Ben Sira himself has highlighted them, they were the sentiments of a small aristocratic minority

5 Genesis Rabbah 9: “Said R. Abahu (quoted above): The Blessed be He created worlds and destroyed them, created worlds and destroyed them until He created the one that was pleasing to Him.” See also T.J. Hagiga:2.

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(Ecclus. 7:20; 34:22). The prevailing view, however, was that work was part of mankind’s destiny and an aspect of the cosmic order. Talmudic thought, while continually extolling the virtue of labor, also provides the raison d’etre for its significance. Suffice it to say that two principal reasons were given: economic and social. The former stressed the need for economic independence, the latter called attention to the social evil of idleness. A. Economic self reliance was considered to be so important that no matter how menial the job, it is said to give a person self esteem and dignity: “Great is labor for it lends dignity to man” (Ned. 49b). Therefore, even if you have to “flay a carcass in the street, earn a wage”—they urged—“and do not say I’m of Priestly decent; I am a great man and degrading work is not for me” (T.B.B.B. 110a; Ps. 113b). On the contrary—the sages insisted—“The man who lives from the labor of his hands, is greater than one who fears Heaven” (Ber. 8a). There were many expressions in the Talmud to this effect. B. Similar emphasis was put on the social evil of idleness. A typical Mishnaic statement reads: “Idleness leads to immorality . . . and degradation” (Keth. 5:5). These were viewed as manifestations of a socially degenerating community. Consequently, having an occupation is considered to be an important prerequisite for maintaining an orderly society: “One who does not teach his son a trade, is as though he taught him to be a robber” (T.B. Kid. 29a). Moreover, indolence may also be life threatening: “No one dies except from idleness.” (T.B. ARN 11:8). On the other hand, work is also seen as being physically and mentally therapeutic.6 Nevertheless, typical for the Talmud, there was no unanimity of views on this vital matter. Some scholars, instead of extolling physical work, stress the virtue of intellectual and spiritual pursuits. For example, Simeon b. Yohai (second cent.) argued: “if a man has to plow . . . sow . . . reap . . . thresh and winnow practically all year round, what will become

6 See end of Mishnah (Keth. 5:5) which speaks of idleness as leading to “dullness of mind.” The term used is Shiyamum which M. Jastrow, Dictionary of Talmud Bavli translates also “idiocy.” See also T.B. Gittin 67b, where the Talmudic scholars have demonstrated by precept and example the therapeutic qualities of hard labors. R. Joseph worked as a millstone grinder and R. Sheshet carried heavy logs.


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of the Torah?” (Ber. 35b), i.e., of scholarship and spirituality. And R. Nehorai (middle second century) made this point explicit by stating: “I would ignore all crafts in the world and teach Torah to my son.” It is noteworthy that R. Simeon bar Yohai had expressed a similar view after he emerged from a cave (in which he hid himself for 12 years to escape Roman persecution). But as the Talmud records (T.B., Sabb. 33a), he was rebuked by a “heavenly voice,” that with such an attitude he should “return to the cave. . . !” However, R. Gamliel (d. ca. 50 C.E.) advocated a happy medium: “Excellent is the study of Torah combined with a wordly occupation . . .” for “Torah without work is futile and is a cause of sin” (Avot 2:2). R. Meir (second century) echoes this view by suggesting that one ought to select “a clean and easy trade,” to “lessen the toil for wordly goods” so as to leave time and spare energy for the study of Torah (Avot 4:12). The Tosephta (cited above) and the Tanhuma, probably the earliest Midrashic collection, provide reasons for their differing views, and both are utilitarian. The former, which emphasizes the importance of having a trade, states: “Whosoever has a craft is like a vineyard surrounded with a protective hedge” (Tos. Kid. 1:11). To prove its practicality, the Talmud (T.B. San. 29a) relates: “There was hunger for seven years and it never crossed the threshold of the artisan . . .” The latter, however, gives priority to study, arguing that a person can be deprived of wordly goods but never of his heritage, for it stays with him forever and eventually may also earn for him an income. (Tan. Truma: 4:55). Significantly, except for one scholar who viewed work as a punishment (T.B. Kid. 4:14), the overwhelming majority of the Talmudic scholars subscribed to R. Gamliel’s ideal of study coupled with a wordly occupation. For they well realized that “Where there is no meal there is no Torah, and where there is no Torah, there is no meal” (Avot 3:2). In any case, the dignity of labor was consistently stressed in the Talmud and never considered as degrading.7

7 See Simon Federbush, The Jewish Concept of Labor (New York: Harry Gantt Publishing, 1956). See in particular the sections, “Labor, A Blessing or a curse,” pp. 16–20, and “Torah and Toil,” pp. 24–28. The Greeks and Romans held work in contempt. For example, Plato viewed labor as “mean employment” and “manual arts” as debasing and disgraceful. And Aristotle wrote, “All paid employment absorb and degrade the mind.” Those philosophers who preceded them and their Greek and Roman disciples who succeeded them, held similar views. See also, Joseph H. Heinemann, “The Status of Labourers in Jewish Law in Society in Talmudic Periods,” Hebrew Union College Manual, Cincinnati, vol. 25, (1954); Israel H. Weisfeld, Labor Legislation in the Bible and

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The Talmudic teaching about labor was not limited merely to the ethical and utilitarian aspects of life. It also extended to other directed labor, a phenomenon where the temporal and transcendental combine to foster creative human action. As discussed earlier, the emphasis here is on the maintenance of social harmony in human affairs for the economic benefit of the individual and society. (See Chapter 3, pp. 54–57.) Income Distribution via Labor One channel through which an economy’s income is distributed is labor. Labor issues occupy a central place in the annals of Hebrew Scriptures and later in Talmudic literature. Both recognized the significant role that wages play in the scheme of social justice. However, since the socio-economic conditions in the Talmudic period differed materially from those of the biblical era, the biblical legislation regarding relations between employer and employee became a matter of elaboration and modification. There exists a vast literature on the various aspects of this subject.8 Here, however, we shall limit our inquiry to some of the most salient aspects of income distribution via wages, as discussed in biblical and Talmudic literature. To begin with, the Torah is solicitous of the wage earner. Its concern with the worker’s economic plight is a recurring theme in biblical literature. Suffice it to mention that one of its cardinal injunctions is that an employer must “not oppress a hired servant, whether he be of thy brethren, or of thy stranger . . .” (Deut. 24:14). It is remarkable that Scriptures put the Hebrew and the foreign worker on an equal socio-economic scale, subject to the same moral law. The reason for this is not difficult to find. Time and again, the Bible keeps reminding the Israelites of their former taskmasters in Egyptian slavery. Human freedom was thus a high biblical priority. Consequently, when one hires himself out as a worker to another person, he (or she) surrenders some of one’s independence to another person. The employer is, therefore,

Talmud (New York: Yeshiva University Press, 1974); N. Shemen, Batziung Tzu Arbeit un Arbeter (Yiddish), Toronto, Canada (1963); H. Rosenwasser, “The Dignity of Labor” (Manuscript), Hebrew Union College, 1908. 8 See footnote 7.


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enjoined to deal kindly with the hired laborers so as to preserve his human dignity. Moreover, justice requires that the worker’s daily wage be paid even before the sun has set, for “he is poor, and setteth his heart upon it . . .” (Deut. 24:15, Lev. 19:13). By the same token Scriptures placed a limit on the length of the workday, from sunrise to sunset (Ps. 104:23). The violation of the same, places the employer in the role of an oppressor, or in the modern parlance, an exploiter. Needless to say, the prophets denounce such and similar labor-law violations in the strongest terms, as an usurpation of social justice ( Jer. 22:13, Mal. 3:5). There is no labor legislation in the Bible suggesting a legally fixed standard wage. However, some of the definitive Bible expositors, including Ibn Ezra (1092–1167) and in particular Moses ben Nahman, known as Nahmanides (1194–1270), explain that the wage indicated in Deut. 24:15, does refer to a minimum wage “with which the worker is craving to purchase his bare necessities” (ad. loc. in Mikraot Gedolot). Accordingly, it was the laborer’s and his family’s need for subsistence that formed the floor of a minimum wage.9 Both scholars seem to view the expected minimum wage in terms of the utility to be derived from the laborer’s muscular effort, whereas Rashi (1040–1105) considers the same from the point of view of the irksomeness for hazardous labor, a kind of disutility “which might endanger the worker’s very life” (ad. loc.). Most modern scholarship seems to accept the view that the above passage indicates a minimum subsistence wage (cf. Federbush, p. 54). However, to boost the worker’s real wage, the Scriptures provide for a wage earner to have the right to eat from the produce while at work. (Deut. 23:25, 26). During the biblical period, the workers consisted, in the main, of agricultural and domestic laborers. Still, biblical sources abound with references to a professional class of skilled manpower. For instance, the biblical book of Exodus 35:30–35 and II Kings describe a whole range of specialized workers: stone cutters, weavers, embroiderers, artisans, etc., a vivid display of division of labor. What about compensation? Kings XII:10–13 relates specifically to the payment for their labor. Moreover, as is shown later (see chapter on “Human Capital Issues”), the Talmudic scholars posited the existence of a linkage between

9 Weisfeld, ibid., pp. 103–107. In discussing this subject he pointedly observes that in the biblical reference to the worker as Axni—a poor man, its connotation “is rather that of ‘a poor earner’ or ‘the poor workingman.’ ”

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education, productivity and earnings. Thus, they were paid in accordance with their training, skills and ability. As John Rawls puts it: “experience and training, natural ability and special know-how tended to earn a premium.” An Amazing Labor Conflict As we move down the avenues of history, we find that first century Roman-Palestine had experienced conditions of an upswing in the economy, augmented by an expansion in international trade as well as by population growth. And along with these developments, the division of specialized labor became more pronounced and the artisans more assertive. Inasmuch as the activities of the Temple in Jerusalem continued unabated, its authorities became increasingly dependent upon craftsmen of requisite expertise. In this connection, the Talmud (Yoma 38a) records a remarkable labor dispute that took place between the powerful Temple authorities and two highly organized teams of experts; one in the production of shewbread, the other in the art of incense, both for ritual purposes. The conflict resulted in a labor strike, strike breakers and the eventual triumph of labor over management. The startling event of that labor conflict is widely recorded in the annals of Talmudic literature. First, the Mishnah (Yoma III:11) states as a matter of fact that “the house of Garmu” and “the house of Abtinas” were strongly reprimanded for having refused to teach the secrets of their trade (i.e., the making of shewbread and incense). The Tosephta, a coeval of the Mishnah relates the story in detail. Wide coverage of the same is also found in both the Babylonian and Jerusalem Talmuds. (Tosephta, Yoma and T.J. III:9). The story relates that as a result of the refusal by both “houses” to share their knowledge with others, the Sages embarked on a course of action, the consequences of which they did not foresee. They invited specialists from Alexandria, Egypt, hoping thereby to de-monopolize the two domestic industries. But their scheme boomeranged. The two guilds10 went out on strike. And as it turned out, the foreign strike-

10 The Talmud (Succah, 51a) tells of the beginning of early Jewish trade unionism. On this see Federbush, ibid., p. 60. Also Heinemann (op. cit., n. 92), p. 273. He writes, “Artisans guilds are well attested for the Jewish community of Alexandria; but they existed in Palestine too, to a considerable extent . . .”


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breakers did not possess the same artistic precision as the domestic craftsmen. Having no choice, the Sages pleaded with the strikers to return to work, but the strikers were not moved until their salaries were doubled. The Talmudic sources then add an important numerical wage detail: “(Until now) they used to get twelve Maneh per day. (From) that day twenty-four Maneh.” That little detail is of great significance, for “the normal wage of the day laborer, the Sekhir Yom, was one dinar per day” (Heinemann, p. 275). Now compare this meager wage with the salary of 24 Maneh. “During the Tannaitic and early Amoraic times,” one Maneh “meant exclusively 100 dinarii” (Sperber, p. 35). Inasmuch as the said labor dispute occurred during the first century C.E., over two centuries before the period of Diocletian’s monetary reforms (about 295–301), such discrepancy in the wage scale seems to be extraordinary. Assuming that the inflationary trend that began during the reign of Mattathias Antigonus (40–37 B.C.E.) had by that time intensified. Nevertheless, the sum of 2400 dinarii per day for specialists—even for craftsmen with extraordinary skills—is quite considerable.11 Although sometimes the wages for seasonal workers may have risen to a Sela (= 4 dinarii) per day, especially for agricultural workers during harvest time, still the discrepancy between the two categories of employees is remarkable. From the aforesaid, it is evident that the distribution of income via wage differentials was not only recognized, but also a matter of routine in Talmudic times. Interestingly, that ancient conflict between labor and management evoked considerable debate among the Talmudic scholars. For instance, R. Ishmael (first-second century) condemned the strikers posthumously for monopolizing the industries for the sheer purpose “of self aggrandizement.” On the other hand, Ben Azzai (second century) castigated those who would break the strike with the aid of foreign workers (ad loc.). Be that as it may, if we may be allowed the luxury of making an analogy, it would seem that in the ancient bargaining event between two powerful agents, we can discern the existence of a de facto quasi bilateral monopoly: with the Temple authorities as a single buyer of labor and the two well-organized guilds as single sellers of labor, with

11 For a “price list” in Roman Palestine in the early first century and beyond, see Sperber, ibid., pp. 101–111. Sperber suggests that the 2400 d. (or 4800) was for the whole family.

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both countervailing each other’s powers. Although it is tempting to draw such a conclusion, its historical significance for labor economics must not be overestimated, albeit it is worthy of notice. Wages in the Private Sector In the foregoing section, we highlighted a significant aspect of the Temple economy, in which two parties, the ecclesiastical employer and a well organized segment of labor, have engaged in a bargaining game of rough-and-tumble, with labor claiming and receiving a bigger share of the pie. It is particularly noteworthy that even when it concerned the ecclesiastical sector, the Sages did not consider using their legislative powers to prevent the worker’s strike. This, indeed, is a clear indication of the sustaining strength of the Torahitic laws which demanded for the labor class “both legal and economic equality” (Federbush, p. 2). By the same token, it demonstrates that the authorities preferred to leave wage matters to the market forces as the ultimate arbitrator. In fact, Talmudic law, just as biblical law, did not legislate a legally fixed wage. Rather, it was left to voluntary agreements between employer and employee, contingent on supply and demand. This is not to say that there were no interferences by some local authorities. Indeed, local customs sometimes played a considerable role in the determination of the average wage. And some places even enacted wage and price regulations. Thus, there is a Baraitha (i.e., Tannaitic teaching “outside” of the Mishnah) which states: “The townspeople are at liberty to fix . . . prices and wages, and to inflict penalties for the infringement of their rules” (T.B.B.B. 8b).12 But these seemed to have been the exception to the rule, necessitated by specific local circumstances. Incidentally, Federbush (pp. 60, 61) argues that the cited Baraitha refers to the prerogatives of the laborers. He maintains that this ruling actually means that the workers of a city “may set a wage scale” and “punish transgressors of their decisions.” There is evidence in support

12 See, Gershon ben Judah (c. 965–c. 1028), B.B. 8b. ad loc. He comments: “If workers are usually hired for 3 Pshita, they should be hired only for 2 Pshita.” A Pshita was ca. 2 ½ dinarii. On this, see Encyclopedia for Coins, Weights and Measures in Talmudic Literature, (Hebrew) by Haim Shaftel, (Tel-Aviv, 1968), pp. 115–117. See also Joseph Habavals comment on the same (late 14th–early 15th cent.) His is a commentary on the Alfasi, B.B., p. 6.


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of this contention, particularly if we consider the favorable status of artisan guilds in the cities. In Jerusalem, for instance, the dryers and woolworkers wielded much union power. As Heinemann writes: “They made agreements among themselves to buy jointly and share raw materials: agreements concerning average weights and prices were in force among bakers . . .” to which he adds: “The rights of the guilds to make such agreements is specifically acknowledged in the Tosephta” (p. 73). In any event, our discussion of the various dimensions of labor relations illustrates that the framers of the Mishnah, Gemara as well as the contemporary cognate literature, have generally fostered a spirit of freedom of choice in labor markets. If there were some interferences regarding the wage rate, they were primarily local measures due to special local requirements. By the same token, the Talmudic scholars introduced legal and ethical norms aimed at safeguarding justice in labor relations, to prevent improper labor practices by either the employer or employee.13 Moreover, the Talmud also reflects upon the various categories of laborers, their specific tasks, their privileges and responsibilities as well as on their respective socio-economic status. All these subjects are examined with care by Weisfeld (pp. 66–84). Special mention, however briefly, should also be made regarding the mode of renumeration. The wage earner must be paid in cash and not in goods (T.B.B.M. 118a). In ancient Rome, by contrast, except for the army which was paid in cash,14 most of the workers were compensated in kind. The reason for the Sages’ cash provision was a) to protect the wage earner from unscrupulous employers, b) to make sure he could buy food and other necessities without delay. Were he to receive goods, he might have difficulty to dispose of them.

13 On the various ramifications of those legal and ethical provisions, see Weisfeld, ibid., pp. 58–75, Heinemann, ibid., pp. 274–279, Federbush, ibid., pp. 42–53ff., and the Encyclopedia Judaica, ibid., vol. 10, pp. 1321–1323. 14 See L. Jacobs, “The Economic Conditions of the Jews in Talmudic Times Compared with Palestine.” Journal of Semitic Studies, Manchester University Press (1957), pp. 349–359. See, in particular, note 5, p. 353, in which he cites Tacitus concerning the cash paid to the Roman soldiers as well as the cash payments under Septimius Severus and Caricala, etc.

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chapter eight Income Redistribution

Another aspect of distributive justice inherent in ancient Judaic teachings is the concern for the welfare of the indigent. In antiquity, more so than today, poor people with insufficient factor endowments, such as income-producing property or labor skills, had to rely on private charity or face starvation. To achieve a modicum of the distribution of income, the Bible legislated a program of taxation, consisting of transfers in kind, (i.e., grain, food) from the haves to the have-nots. The principle behind those and similar provisions was distributive equity. The Bible views mankind’s socio-economic problem from a twofold perspective. Both are expressed in two separate statements: one is goal oriented, the other is of the grim reality. The first states the biblical paradigm that “there shall be no needy among you” (Deut. 15:4). The second is more circumspect, for realistically, “the poor shall never cease from the land” (Deut. 15:11). In view of this reality, instead of aiming at complete equality of distribution, it rather seeks to eliminate the extremities of the poor. Thus, the latter emerges ahead, but the former is not out of vision. Another point of significance is the Scriptures’ two interrelated principles concerning social equity. As stated above, in the biblical universe of discourse, Tzedeq ( justice and loving-kindness) and Herut (freedom) are inseparable entities. Thus, justice for the poor, the weak and the unfortunate is said to flow naturally from the freedom the Israelites acquired upon their deliverance from Egypt. Both are mighty social-ethical pillars upon which the Torah built its welfare legislative edifice. By comparison, for the social utopians, ancient or modern, whenever and wherever their grand design of an “ideal society” came in contact with reality, it always collided with the rights and freedoms of the individual. Though their objective may have been “justice” as they perceived it, the means of achieving it, even at best, were unjust, often resulting in “inhuman and barbaric” excesses. Plato’s “ideal state” is one of the early examples.15 The very basis of his “city-state” is the natural inequality of man.

15 See Helmut Jenkis, Socialutopien: Barbarische Glucksverheissungen? (Berlin: Duncker & Humlot, 1992). In this volume in German, Prof. Jenkis traces the various utopian movements from antiquity, including Plato’s “ideal state,” the nineteenth century utopians, scientific socialism, etc., up to National Socialism in Germany, with its especially barbaric program, methods and consequences.


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Biblical legislation, however, displays an abiding concern for the welfare of the individual, especially for the lowest ranks of the social strata. Instead of being absorbed, as was usually the case in antique civilizations, the Scriptures assert the individuality of the weak and forlorn—a justice based on the principles of social and economic equity. Accordingly, the Scriptural concern is highlighted by three focal points: provision for the helpless, obligation towards the poor, and taxation via transfers. Together, they form an aggregate of links in the chain of distributive equity. The earliest legislation in the Bible includes special provisions for the alien and the destitute (Ex. 22:20–26, 23:6–12). It is particularly noteworthy that time and again (thirty times) the Bible calls attention to the humanity of the stranger, a phenomenon unheard of in ancient times. Apparently, to “love, and not to oppress, the stranger,” was viewed in the Bible as an important litmus test for the application of the principles of justice and freedom in general. The second point focuses upon relief for the poor. According to biblical legislation, one is obliged to extend a helping hand to the needy. The following passage reads: If there be among you a needy man, one of thy brethren, within thy gates . . . thou shalt not harden thy heart, nor shut thy hand from thy needy brother; but thou shalt surely lend him sufficient for his need in that which he wanteth . . . Thou shalt surely give him, and thy heart not be grieved when thou givest unto him . . . (Deut. 15:7–10).

In addition, the celebration of festivals, various seasons of rejoicing, are considered to be special occasions for sharing God’s bounty with the stranger, the orphan, the widow, the hired laborer, and the landless Levite (Deut. 16:11). This type of giving, it may be added, is in the category of Tzedaqa, not “charity” in the usual sense, but rather a repayment of a debt to mitigate the ills that arise from social inequity and economic disparity. The third and still more advanced Holiness Code prescribed a sort of compulsory taxation, consisting of transfers in kind to the economically underprivileged. Among these are Leket (“gleanings”), Shikhah (“forgotten produce”), Pexah (“corners of the field”) and Maxaser Ani, (“tithe for the poor”). The first three were portions of the harvest which the farmer was enjoined to leave for the benefit of the poor (Lev. 19:9–10; 23:22, Deut. 24:19–21). The fourth category consisted of a special tax at the end of every three years (Deut. 14:28–29; 26:12–13).

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The economically weak were also protected by other provisions. The legislation concerning the Sabbatical and Jubilee years are outstanding examples. Regarding the Sabbatical year, the law provides that every seventh year, the land must lie fallow, and the yield from the inactive land (and trees) must be shared with all the needy (Lev. 25:3–7; Ex. 23:10–12). In addition, all debt obligations are to be released (Deut. 15:2), that is buttressed by the release of slaves, which, according to Brueggeman (p. 64), “is only an extreme form of debt cancellation . . .” (op. cit. n. 112). Concerning the Jubilee, the law additionally stipulates that land purchases must be converted into leases which cannot exceed fifty years. Thus, upon the arrival of the Jubilee, sold property has to be restored to the original owner. A major aim was to control the double wrongs: the concentration of land in the hands of the wealthy landowners and the enslavement of the poor. This return of land and the requirement to manumit the bondmen (contemporary capital), constituted a moderate form of periodic redistribution of wealth. Naturally, there was also a spiritual aspect to all this—the recognition that God is the owner of all resources, and man as the custodian, is entrusted to manage them for the benefit of all His creatures (Lev. 25:23; Ps. 24:1; I Chron. 29:11–14). In prophetic and hagiographic literature, we find many corroborating statements, stories and aphorisms in which the principles of socio-economic justice are repeatedly stressed. One familiar biblical episode (I Kings 21:1–17) concerns king Ahab and his wife, Jezebel, who conspired to deprive Naboth of his vineyard. Not even the king could escape the wrath of the Prophet Elijah. His outcry to the kings “hast thou killed and also inherited?” has reverberated throughout the ages as the biblical paradigm of equity in justice, regardless of one’s social standing. There is substantial literature extant on this subject.16 But it might be instructive to quote a few brief excerpts from Philo’s writings 16 Here is some of the literature on this subject: Neufeld, E., “Socio-economic Background of Yobel and Semitta,” Revista Degli Studi Orientali, 33 (1958), pp. 53–124; Morris Silver, Prophets and Markets (Hingham, MA: Kluwer Academic Publishers, 1982); Breuggemann, Walter, The Land (Philadelphia: Fortress, 1977); Encyclopedia Judaica, “Sabbatical Year and Jubilee,” vol. 14, 574–585; vol. v, “Charity,” pp. 338–344; Barry Gordon, “Biblical and Early Judao-Christian Thought; Genesis to Augustine,” ed. by Todd Lowry (Boston: Kluer Academic Publishers, Dortrecht, 1986), pp. 48–54; see also “Commentary” by Roman Ohrenstein, pp. 68–75. On the impact of the Law on


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(c. 25 B.C.E.–40 C.E.), in which he attempts to establish a motive for the biblical legislation. They may also be of interest because of their ethico-social economic approach. Philo’s interpretation of Leviticus is found in two of his major works, Special Laws and Virtues.17 Among some of the reasons he suggests are: . . . that no one has a right to weigh men down with grievous burdens. If a rest must be granted even to sections of land, which by their nature have no part in either pleasure or pain, how much more so to men, who have not merely feelings . . . but also the highest degree of reason . . . The promulgators of our laws proclaimed a release for the land, checking farm-work within six year periods . . . thus, impressing a noble social outlook . . . The poor at that time enjoy as their own the things that pass as other men’s property . . . thus sparing them the appearance of pauperism and the approach of mendicancy . . .

He expresses similar views regarding the legislation of the Jubilee, the social value of restoring property to the original owner, the roles of debtor and creditor, slave and master, etc., laws which he deems rational and utilitarian. Talmudic Exposition The Talmud, which is linked to the Hebrew Bible, added its own refinement and elaboration. The rabbis examined the problem of distribution from three different angles: the spiritual, psychological, and economic. They were concerned with the spirit of the giver and receiver, the mindest and sensitivities of the recipient, and the establishment of criteria, measurements, and methods in relation to various degrees of poverty. Inasmuch as our primary concern revolves around the question of redistribution, and because of the necessity of some economy, we shall limit ourselves to a few general remarks about the first two, and then proceed with a discussion of the third. a) To heighten the sense of responsibility toward the underprivileged, the Sages moved from precept to concept; from Tzedaqa (i.e., justice economic matters, see N.M. Soss, “Old Testament and Economic Society,” Journal of the History of Ideas, 34 (1973), pp. 223–44; Raymond Westbrook, “Jubilee Laws,” Israel Law Review Association, vol. 6 (1971), pp. 209–226. 17 I have abbreviated those quotations from Philo’s lengthy text, published in Robert North’s Sociology of the Biblical Jubilee, Pontifical Biblical Institute, Rome (1954), pp. 75–77.

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coupled with duty) to the concept of Gemilut-Ha-Sadim (i.e., justice interlaced with kindness). A literal translation of the latter is, “repayment of loving kindness,” a sort of noblesse oblige. It was designed to evoke a spirit of graciousness on the part of the giver while safeguarding the dignity of the receiver. Talmudic literature is replete with statements, metaphors, and aphorisms to this effect, ranging from the significant to the sublime.18 b) A corollary to the above is the socio-psychological effect on the giver, receiver and society as a whole. Not only the beneficiary, but more so the benefactor is said to derive satisfaction from assisting the poor. According to a rabbinic adage, “The poor man does more for the rich man than the rich man for the poor man” (Ruth R.v, 9 on ii, 18, f.10A).19 The rabbis seemed to have recognized the existence of a reciprocal relationship between the two social classes. While the receiver is provided with a minimum of subsistance, the giver is the recipient of psychic satisfaction from performing a good deed (Mitzvah), plus an indirect satisfaction from the resulting prevention of social discontent. Modern psychologists describe such giving as “reciprocal altruism.”20 The latter is of particular importance. This can be gauged from the following Midrashic passage. Commenting on Isaiah 27:5 . . . “Let him take hold on My strength, that he may make peace with Me,” R. Juda b. Simon observes, “The poor man complains who am I and who is he? (i.e., why am I different?). He dwells in a house and I wallow here. He sleeps in a bed and I sleep on the ground! When you stand up and help him, it is as though you made peace between him and Me” (Lev. R. 34). This statement which is couched in theological terms, speaks about the resolution of a conflict, as it were, between the poor and God. But if we put this into the modern idiom, it suggests that by helping to bridge the income gap between the rich and the poor,

18 See in particular, H.N. Bialik and I.H. Ravnicki, Book of Legends, Sefer Haggadah: Legends from the Talmud and Midrash, Dvir, Tel-Aviv (1962), p. 518 (Hebrew). See English translation of the same, Schoken, New York (1992); I. Chipkin in Finkelstein’s The Jews, op. cit., pp. 730–740; C.G. Montefiore and H. Lowe, A Rabbinic Anthology, Meridian Books (1938), pp. 412–439. 19 The Midrash Ruth Rabbah is one of the oldest Midrashim. It is written in the style of Palestinian Aggadot, which also includes Babylonian Aggadic traditions. 20 See Mathew Rabin, “Psychology and Economics,” Journal of Economic Literature, March 1998, vol. XXXVI, No. 1 (pp. 21–22). See also, Ilan Eshel, Larry Samuelson and Avner Shaked, “Altruists, Egoists and Hooligans,” The American Economic Review, March 1998, vol. 88, No. l, pp. 159–160.


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one is instrumental in defusing the tension between the social classes which is necessary to keep the social equilibrium. This satisfaction may well be within the purview of the talmudic category of Tovath Ha-Naxah,21 “the benefit of pleasure.” It means that one derives psychological satisfaction from bestowing a material favor on another person. And in the case of charity, the gratitude that one evokes on the part of the recipient, will have a pleasing effect on the benefactor. Although in matters of Tzedaqa, the Sages urged that it be imbued with a spirit of altruism and devotion to duty, they also recognized the practical benefits that accrue from such transference in terms of individual “benefit of pleasure” and the general increase of social welfare, particularly if it is done in a way to make one economically independent.22 Incidentally, this talmudic idea is well within the scope of the so-called Pareto-optimal redistribution or maximum welfare. Thus, according to Vilfredo Pareto (1848–1943), a reallocation of resources which makes at least one person better off while making no one person worse off, is a redistributional improvement. Accordingly, if one individual experiences some benefit from giving another as a result of a humanitarian sentiment, it meets that criterion. By the same token, in the talmudic exposition above, since the transfer of income or wealth from the relatively rich to the relatively poor does, indeed, increase the utility or satisfaction of both donor and recipient, it fits the notion of the “Pareto improvement.” Another, perhaps more pointed illustration of an affinity between the Talmudic felicitous attitude toward social welfare and the Pareto principle, is the Pruzbul phenomenon we discussed earlier. (See Ch. 1). The Pruzbul, as we have seen, was a device to circumvent a biblical law which mandated that with the arrival of the Sabbatical year, all outstanding loans must be forsaken. Interestingly, the very composition of that term reveals its socio-economic character. The term Pruzbul is a combination of three words: Pruz- “manifesto,” Bulli- for “the rich,” Butti- for “the poor.” It is a proclamation for the sake of both the rich 21 The subject of Tovath Ha-Naxah is explored by Ohrenstein-Gordon in “Risk, Uncertainty and Expectations,” International Journal of Social Economics (1991), 110–1l, op. cit. 22 B.T. Sab. 63a states: “He who lends is greater than he who gives alms; and he who provides capital for a useful enterprise is greatest of all.” Maimonides (12th cent.), who codified the Talmudic exhortations to charity into “Eight Degrees,” puts the one which helps a person to become self-supporting on the highest scale.

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and the poor: the poor can now obtain the desirable loan without causing a loss to the lender. The Talmud (T.B.B.K. 20b) pointedly describes such an “optimum” as, Ze Neheneh V’ze Lo Khasair (“one benefits while the other does not lose”). Thus, the similarity between the nature of the Pruzbul and the Pareto optimum is apparent. Like in the “Pareto improvement” the Pruzbul is instrumental in making at least one person better off without making no one worse off: the poor borrower gets the utility from the loan and the lender gets “the benefit of the pleasure” from extending it to another person. The affinity between the two ideas is, therefore, palatable. c) Along with various interpretations and refinements, the Talmudic scholars also developed criteria for measuring the threshold of poverty (i.e., income level) as well as standards for interpersonal transfers to the needy via Tzedaqa. We shall briefly examine the principal elements of the Talmudic welfare matrix, in particular the provider, the recipient along with the mechanism of distribution. Let it first be said that the Sages well realized that poverty cannot be viewed in absolute but rather in relative terms: as a subjective condition, differing from person to person. By the same token, as heirs to the biblical tradition, they seem to have understood the biblical verse: “The poor shall never cease from thy land” (op. cit.) in relative terms, for as such, poverty will always exist, but it can and must be reduced. Who is obliged to contribute to Tzedaqa? It is the Sages’ dictum that everyone, even welfare clients are not exempt from this obligation (T.B., Gittin 7a). The purpose, of course, was to sensitize even the economically underprivileged to the possibility that someone else may still be worse off. Naturally, the scholars recognized that the wealthier the person, the heavier ought to be the burden. Although the Tzedaqa requirement was not a compulsory tax, the Talmudic scholars deemed it an obligatory tax. The distinction is obvious. Whereas the former is exogenously imposed, the latter is elicited by means of moral suasion and inner promptings. Still, in practice, it was not entirely free from an element of coercion. Thus, with respect to a compulsory tax, Plato, for instance, envisaged in his “Republic,” that “where there is an income tax, the just man will pay more and the unjust less on the same income.” His, of course, was a vision of an ideal world, as he saw it. In reality, when it comes to taxes, most people do not behave in this manner. Rather, the scheme is much closer to the view of the seventeenth century finance minister,


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Jean Baptiste Cobert who urged to “pluck the goose so as to obtain the largest amount of feathers with the least amount of hissing.” The rabbis, however, while avoiding those two opposites of the spectrum, treated the Tzedaqa phenomenon like a tax obligation, based on a sort of “ability to pay” principle. In practice, it was a scheme in which idealism and realism were closely intertwined. When it concerned the Tzedaqa obligation, they applied the popular criterion, “according to the camel should be the burden” (T.B., Keth. 67a). Please note that in using this adage, they seemed to have viewed Tzedaqa as a tax incidence which ought to fall heavier on the wealthy. In fact, the above is an observation made by the Sages about the first century wealthy financier, Nikodemos23 who apparently did not contribute to Tzedaqa according to his means. (Keth., ibid.) In line with this practice, the scholars occasionally harnessed the court mechanism to assess and collect Tzedaqa contributions. Thus, the Amora Rava (4th cent.) who became the undisputed Talmudic authority in Babylonia, actually compelled his contemporary, R. Nathan bar Ami “to pay 400 zuz to Tzedaqa” (Keth. 49a), upon which Adin Steinsaltz comments (loc. cit.), “Even though in matters where the obligation is not an absolute requirement, the court may coerce the affluent to contribute according to their means.”24 Inasmuch as Tzedaqa as a duty was subject to an assessment, whether by oneself or by the authorities, what amount was considered as being fair? This question is debated in the Talmud.25 The figures they suggested were later codified by Maimonides (12th cent.) in the form of three steps: five percent (or less), ten percent, and twenty percent (Yad, “Charity” 7:5). The Jerusalem Talmud (Pexah 7,5) puts the threshold as low as two percent, similar to the biblical tithe, Terumah, which consisted of 1/50th. This low minimum may have been due to the dire economic conditions of the Palestinian Jews that resulted from what is known as the Hadrianic persecution.

23 This Nikodemus may have been the Nikodemus of John III, 1–21; VII, 50:XIX, 39. See on this G.G. Montefiore, p. 687, op. cit. 24 See Steinsaltz edition, Kethuboth, vol. II, p. 298. The quote is freely translated by the author. 25 See, in particular, T.B. Keth. 50a and T.J. Pexah, 2b.

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Of particular significance is the concern shown by the scholars that the assessment not exceed the highest rate, since the now affluent might become impoverished and dependent on welfare. In modern parlance, an increase in the marginal welfare tax beyond the cutoff level will shrink the social pie, impair its efficient use and eventually reduce the welfare of both donor and recipient. With that in mind, the Sanhedrin of Usha legislated an upper limit of twenty percent. Still, the questions remained—twenty percent of what, from the assets, or from the profit? After debating the issue, they arrived at the consensus that only in the first year it should be a fifth of the assets, but thereafter it is to be twenty percent from the profits only (T.J. Pexah 2b). d) The preceding discussion dealt with one side of the Talmudic redistribution program—the giver. The other side concerns the receiver. What yardstick is to be applied to the recipient? Two methods are advanced: one, represented by the Tosephta, promotes “need” as the mode for welfare distribution; the other, Mishnaic, is based on exact measurements. The first is relative and subjective; the second is objective. Both of the respective texts are Tannaitic and coeval. The scholars who advanced need as a basis, seem to have viewed the matter of distribution in idealistic terms, as a logical fulfillment of the biblically value-laden Tzedaqa precepts and, therefore, just and necessary. On the other hand, those who instituted a minimum standard for poverty seemed to have reasoned in fiscal categories. The latter is not surprising, for historically the matter of Tzedaqa was by then institutionally managed. To a large extent, it became a communal, rather than just an individual responsibility. As a result, the scarce public funds had to be handled prudently and efficiently. Hence, the establishment of objective criteria by the Mishnah. We shall briefly consider the two different viewpoints respectively. What reason is given for the position that help to the disadvantaged be distributed according to need? The rationale offered in the Tosephta (Pexah 4:10) is based on the biblical statement “. . . thou shalt surely open thy hand unto him, and shalt surely lend him sufficient for his need in that he wanteth” (Deut. 15:17–8). Accordingly, it is the general term “need” (specified “in that which he wanteth”) that is to serve as the criterion for welfare aid. Although “need” is a category that is relative and psychological, still, in the view of those scholars, it can be estimated on the basis of the person’s social status, or on one’s accustomed standard of living.


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In delineating that yardstick and to illustrate the extent to which the principle of need ought to be applied, the scholars counseled that in case of an impoverished ben-tovim (i.e., a person of noble descent), if he asks, should be “given a horse” (for riding) and “a slave to run before him” (Pexah, ibid.). To those Sages unmet “need” was considered an assault on the biblical foundation of human dignity. Having been used to those conveniences entitles him to the support that meets his needs. Incidentally, this provision seems to be akin to Thomas Aquinas’ views concerning distributive justice, in that peoples’ income be in accordance with the station they occupy in society. As an example, the Tosephta (another tannaitic source) relates an incident about Hillel who gave such a man “a horse,” and when he could not find a slave “he himself ran before him three miles.” There are many narratives to this effect. Suffice it to cite one more typical statement along these lines: “Thou shalt surely open thy hand to thy brother (Deut. 15;11). To him for whom bread is suitable, give bread; to him who needs dough, give dough; to him for whom money is required, give money . . .” (Siphrei, Rexeh 118 f.98b.). Here the virtue of providing the poor according to individual needs is made clear and specific. In sum, since the very concept of Tzedaqa was treated as part of a fiduciary notion—an obligation to share with the needy, it ought to be done so as to preserve the recipient’s dignity, which, to the Sages, meant that the giving be generous, egalitarian, and inconspicuous, and be viewed as a matter of right. The Mishnaic Approach We shall now consider the Mishnaic method in establishing criteria for poverty. Although it is generally agreed that, ideally, acts of “loving kindeness” with respect to the needy ought to have “no fixed measure” (M. Pexah 1:1), common sense and fiscal prudence must have dictated a more pragmatic approach, particularly when it concerned able-bodied people. Appealing to their self-esteem, the physically and mentally fit were urged to accept any type of work, even “to skin a carcass in the street, instead of resorting to welfare” (op. cit.). As for those who are legitimately disadvantaged, the question remains, what exactly is meant by “poverty”? Curiously, even today modern economists ask the very same question. To quote Paul Samuelson

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and William Nordhous (Economics, 1989, p. 805): “As is well known, the word ‘poverty’ means different things to different people. While everybody agrees that poverty occurs when people have inadequate incomes, nonetheless, the exact line between the poor and non-poor is hard to draw . . .” The Mishnaic “economists” have, therefore, devised certain criteria which provide the official definition of “poverty.” They established a poverty threshold of 200 zuz (Roman dinarius). The value of a zuz was equivalent to 96 barley grains, of a mixture of 7/8 bronze and 1/8 silver.26 Post-Talmudic scholars, in finding an economic basis for that amount, cite Kethuboth 64b, where it is calculated that when a man separates from his wife, he must pay her 100 zuz. That amount is said to be sufficient to sustain his wife with food, clothing and other basic necessities for an entire year. By the same token, the amount of 200 zuz applies to a man and his wife.27 Thus, according to the Mishnah: “He who has in his possession 200 zuz, may no longer partake in the gleaning, the forgotten sheaf, the corners of the field or the poor man’s tithe” (M. Pexah 8:8). The scholars then add an important caveat, namely, that the 200 zuz level applies only in the event the money is not used in trade or commerce. On the other hand, when one has only 50 zuz, and the capital is invested in business, such a welfare client will forsake eligibility to relief, since it is estimated that with that investment, one can earn an annual income of 200 zuz. In the words of the Jerusalem Talmud: “. . . 50 zuz that are working are better than 200 that are not working” (T.J. Pexah 8:5). Aharon Shapiro, in his learned article, undertook to compute the purchasing power of 200 zuz in current U.S. dollars. As a point of departure, he first cites the statement of R. Johanan ben Beruka, that with one Dupondium (Roman coin), a poor man can purchase a loaf of bread from a baker, made from one-fourth of a Kab (i.e., a Kab is 1.2 liters) of wheat (Pexah 8:7). The calculation then is as follows: A zuz is worth twelve Dupondiums, while one-fourth of a Kab is a dry measure of volume of 549 cubic centimeters. One Dupondium would purchase a loaf of modern type white bread weighing 0.347 lb. or ancient type of wholeweat bread at 0.482 lb. It follows that 200 zuz could purchase 2,400 loaves of white bread at 0.347 lb. each for a total of 832.8 lb. At 26 Encyclodedia Judaica, vol. 5, p. 341. For a detailed description of “Zuz,” see, Encyclopedia for Coins Weights and Measures in Talmudic Literature (Hebrew) pp. 51–53, op. cit. 27 See Commentator, R. Shimon Meshantz (12th cent.). Loc. cit.


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1984 prices of 80 cents per pound, we arrive at the conclusion that the impoverished family was guaranteed a threshold of $666 of purchasing power.28

Accordingly, any amount below the cash balance of $666 entitles the poor person to the additional assistance. The author also observes that since even nowadays the per capita income in some Middle Eastern countries hovers around $400, the sum of $666 is very impressive. Moreover, as stated in the Mishnah, one does not have to sell a house, land or other property (except for gold or silver objects), in order to qualify for welfare. This, then, may well boost the recipient’s real income if only because a house owner does not pay rent. Last but not least, on what grounds did the Mishnah formulate its objective criteria for welfare distribution? This question is relevant because, unlike the subjectivists who based their attitude on the biblical precept “. . . sufficient for his need . . .” and who viewed “need” in psychological terms, as discussed earlier, no rationale is offered by the objectivists. However, if we take into consideration that there is also another interpretation of the term “need,” namely, “you are required to maintain him, but not to enrich him” (Keth. 67b), then “need” connotes a minimum subsistence. Inasmuch as the latter interpretation also appears in the Tannaitic Midrash, Siphrei,29 (Rexeh, paragr. 136), that approach must have also been common knowledge, which begs the question, if so, what is a minimum standard of poverty? We, therefore, surmise that this rationale about need may have served as the basis for the objective criteria for distributive justice.

28 Aharon Shapiro, “The Treatment of Poverty in the Talmud,” International Review of Economics and Ethics, vol. 1, No. 2 (1986), p. 56. 29 Some important scholars, like D. Hoffman in his Zur Einleitung in die Halachischen Midrashim (1888) and H. Albeck in Untersuchungen uber die Halachischen Midrashim (1927) consider the Sifrei (i.e., “books”) of tannaitic origin. It is written in pure mishnaic Hebrew with an admixture of Greek words. There are also other theories. For a more detailed description of the Sifrei, see Enc. Judaica, vol. 14, pp. 1519–1521. For a comprehensive discussion of this subject, see A. Weis, Dor, Dor v’Dorshov, vol. II (Hebrew) (New York, Berlin: Plat-Minkus Publ., 1924), pp. 225–239.

PART FIVE

THE VALUE OF PERSONS

CHAPTER NINE

CATEGORIES OF VALUE As the late Joan Robinson observed: “One Of the greatest metaphysical ideas in economics is expressed in the word ‘value’.”1 Hence, historians of economic thought have been obliged to pay special attention to the ongoing metaphysical discourse surrounding that idea, from the ancient Greek philosophers through to the marginal utility theorists and beyond. Despite the continuing concern of those historians, however, the wideranging treatments of the problem of value in Talmudic literature have been given scant attention by them. The dialectics of the Rabbinic scholars were meticulously coordinated by a complex system of value concepts, rooted in concrete human experience.2 In this chapter, we wish to draw attention to the manner in which the Rabbis dealt with the subjective-objective dichotomy in the concept of value. Also, we show how they came to formulate a unique value category which can be termed price-less value, or, even more paradoxically, valueless value. Subjective and Objective Value The Talmudic treatment of the dichotomy relating to value is bound up with the investigation of “human life value,” as conceptualized in the terms erekh nephashot.3 This investigation had a biblical base in the practice of “consecration of the value of human life to the Lord” (see Leviticus 27:1–8). The practice, it can be observed, brings together three distinct entities: value; human life; and, Deity. The first of these entities is subjective, the second combines both the subjective and objective, whilst the third is objective. J. Robinson, Economic Philosophy (1964), p. 26. See M. Kadushin, The Rabbinic Mind (New York: Jewish Theological Seminary of America, 1952), pp. 97 ff. Consult also, A. Lelyveld, “A Distinctive Value,” Journal of Reform Judaism (Fall, 1978), pp. 3 ff. 3 Literally, this means the “value” or “valuation of human life.” This theme is taken up, at length, in Chapter Ten. 1 2

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The biblical term for value is erekh, and since value is a category of human experience that motivates action, it must necessarily be subjective. However, human life is a composite of a subjective-objective phenomenon. The thought underlying this latter is best appreciated by reflection on the anthropological meaning of the early biblical term nephesh, which noun appears in the Bible on 754 occasions.4 According to Daniel Lys’s investigation, nephesh “has several meanings: life, what lives and dies, desire and pleasure, the feeling . . . the breath: the animate living being and the self I.”5 Here, there is no Platonic dualism which views the “soul” as distinct from the “body.” Rather, the biblical nephesh embraces the totality of life, body and soul, vitality and potentiality.6 Human life is thus a composite embracing both the subjective and the objective. The third entity is the Deity which, for the biblical writers and the talmudists alike, represents the absolute, the abstract, the spiritual, a distinct objective experience. In their reflections on the practice which brought together these three diverse categories, the Rabbis found it necessary to introduce a fourth. There was a need to find a common denominator, and to concretize the valuation process. For these purposes the yardstick of money was employed. This introduction of money, however, gave rise to a further problem. The Talmudic doctors, who functioned within a religious universe of discourse, were confronted with a major question: how to reconcile the spiritual with the mundane—how to reconcile the celestial purpose of human valuation with the terrestrial practice of monetary quantification. As they worked toward a reconciliation, the talmudists sometimes expressed sharply opposing views, without compromising the spirit of the texts with which they were engaged. One school of thought emphasized the spiritual dimensions of the problem. The other school was more impressed by the mundane, and hence, the economic aspects of

4 In the Septuagint, the earliest Greek version of the Bible (composed c. 270 B.C.), the noun nephesh is translated on about 680 occasions as “psyche.” This latter is more akin to the Hebrew term ruakh, or spirit. 5 Consult D. Lys, “The Israelite Soul According to the LXX,” Vetus Testamentum, Vol. XVI, No. I ( January 1965), pp. 183–228. 6 It is noteworthy that in Leviticus the term nephesh is also used in reference to a “dead body.” On the other hand, the same term is also used as a synonym for “soul.” Further, Saadia Gaon (882–942), for example, employs this term in a purely metaphysical sense. He writes, “Who verifies to man with certainty the existence of their soul (naphshotom).” Emunot V’deot, p. 4.

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the debate in hand. Together, these schools achieved a balance between the abstract and the concrete, between objectivity and subjectivity. Neither fully embraced one or other of the extreme poles of the subjectobject value matrix. Rather, together they objectivized the subjective elements and subjectivized the objective. The manner in which they achieved a symbiosis is explored in the sections which follow. Objectifying the Subjective Strand Over the course of the rabbinic debate, some of the sages tended to spiritualize the entire conception of the scriptural valuation. In other words, they found it possible to treat not only the Deity, but also value, human life, and even money in objective terms. They emphasized one side of the value spectrum through objectifying the subjective. Scriptural valuation was spiritualized partly by means of the attribution of a special quality to the word erekh. The term was taken to stand for the expression of an ideal value. Although this value may be derived basically from the economic utility of the person, nonetheless it is also independent of economic considerations. Hence, men, women, slaves and children, depending on their age, are thought to have a fixed value. Such value is objective in character and discrete in application. To reinforce this thesis, the Talmudic writers used an analytical refinement to support the definition of the biblical erekh in objective terms. With Leviticus 27:1–8 as a point of departure, the Mishna-Arakhin commences with the following clause: ALL (persons) ‘ma-arikhin’—are fit to evaluate ‘v’ ne-arakhin’—or are to be made subject of evaluation, ‘nodrin’—are fit to vow (another’s worth), ‘v’ nidrin’—or have their worth vowed.7

Here, the Talmud is distinguishing between two terms—erekh and neder, i.e., between valuation and vow. The former is said to be a sacred mode of expression. However, the latter is considered a secular designation, and hence is subject to the operation of the market forces relevant to the person vowed.8 In other words, the expression neder is synonymous

7 This quote, and subsequent quotations, are taken largely from the Babylonian Talmud Arakhin, Soncino Press, tr. Leo Jung, with minor renditions by the present author. 8 See Rashi, Arakhin, 2a, op. cit., also, Tossaphot, ibid. (Tossaphot is a composite commentary by the disciples of Rashi (d. 1105), supplementing that of their master).

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with a “monetary” vow (d’mai). Consequently, the subject vowed is to be evaluated in subjective terms, i.e., in terms of what the market will fetch. By contrast, erekh is deemed to be “a consecration” where the valuation terms are fixed and, therefore, is categorized as an ideal, or objective, value. The latter valuation, it is clear, is considered to be super-mundane. Hence, it is independent of the person’s physical or mental condition. To underline this last point, the Talmud deduces that even an utterly disfigured person, whose market value is zero, is still subject to scriptural valuation norms.9 In general then, erekh has been objectified by means of Talmudic deduction, and this despite the fact that erekh is an act of valuation which is clearly derived from the economic utility of the subject. Objectification of Nephesh Spiritualization of the conception of scriptural valuation did not turn merely on the objectification of erekh. It also involved objectification of the term nephesh, which, as was remarked above, is an early scriptural noun describing a combination of subjective and objective attributes inherent within a person. Moreover, in later Talmudic and Aggadic literature, the same term was sometimes applied to a dead person. Given these usages of the term, both early and late, it might be supposed that nephesh could not be objectified. How could the spiritual component be singled out for special treatment? That component must be kept part of, and yet apart from, the physical component, if it is to be evaluated independently and in monetary terms. Yet, the sages achieved an objectification by distinguishing between the person per se and his or her personality. It is the personality that is subject to valuation, not the person. The Talmudic scholars attained the foregoing distinction partly by strongly emphasizing the divine spark in man. Furthermore, they made a distinction between the relative term nephesh and the absolute term neshamah, i.e. “soul” in a metaphysical sense.10 That is particu-

9 This deduction involves some significant issues which are considered in the concluding section of this chapter. 10 See Talmud, Ber. 10a, where neshamah is subtly but deliberately substituted for nephesh. The Talmud and the Midrash frequently compared the relation of the soul to the body to the relation of God to the world. For example, “As God is pure so also

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larly evident from the Maharsha’s commentary concerning the prayer cited in Tractate Brakhot 60b: “My God, the soul Thou hast planted it within me is pure; Thou hast created it; Thou hast formed it; Thou hast breathed into me.” Upon which the Maharsha comments that those three modes of the description of the soul, correspond to the three stages in which the biblical Adam was created. [Gen. II:7]. Thus, the term “created” refers to the physical body [nephesh tivyi]. And the term “formed” refers to the living breath [ruakh ha-khayoni], whereas the term “breathed into me” refers to the Neshamah, the intellect and/or the metaphysical soul. The Maharsha based his ranking, as he states, on “the teaching of the Kabalists and philosophers”. He, thus, views the Neshamah as a spiritual phenomenon and Nephesh as a physical entity, where one is transcendental and the other is transient. [See Maharsha, loc. cit.] Another example is located in Tractate Arakhin 4b. Here the question is raised; “what if one dedicates [to the Lord] just the head of a person—how much is to be paid?” The consensus is: the head and the entire person because “the Neshamah is dependent upon it” [davar she-haneshamah tluyah bo]. The subtle change of the terms here is notable. Now, the abstract Neshamah takes the place of the anthropological Nephesh, since, as the Talmud states: “man must be valued in accordance with his highest dignity” [B’ khvodo], where Rashi explains it as “L’ fee khvodo”]11 Objectification of Money Having objectified both value and human life, the Rabbis still faced the problem of objectifying money. The currency unit of the time was the shekel, and since this was a silver coin, its metallic content might

the soul is pure. As God dwells in the inmost part of the universe, so also the soul dwells in the inmost part of the body.” Although in both Talmudim the term neshamah is sometimes used simply to indicate human or even animal life (T. Yerusl. B. Kama, VII, end, 6a), its predominant usage is in a spiritual sense. Most symptomatic is Rabbi Simai’s statement (c. 200 C.E.), ‘. . . of all earthly creatures their bodies and souls are earthly except man’s, for his body is earthly, but his soul is divine.” (Sifrei, Deut., Hazinu, parg. 306, f., 132a). There are many more references in Midrashic, and especially in cabalistic literature, which view neshamah in transcendental terms. 11 In approximately the same period when the Talmud was compiled, St. Augustine also ascribes to man a “nature of the highest dignity,” which appellation is used frequently in the Talmud. See Augustine’s The City of God, Book XI:16. This work was written between 413–426 C.E.

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be thought to give it an intrinsic value, which renders it objective. However, such an understanding would be obliged to ignore fluctuations in the price of silver, rendering it subjective, i.e., influenced by the market mechanism. However, since the valuation with which they were concerned was to be consummated in “holy currency” [be-Shekel ha-Kodesh], such is but an accidental aspect of the process, since the “Holy shekel” was thought to be inherently perfect, and thus objective. [See, RAMBAN in Mikraot Gedolot, loc. cit.] In sum: even though values are subjective, they are by no means devoid of objectivity. To put this in economic terms, the value of a dollar is a dollar worth of goods and services. But the paper of the bill is not worth a dollar and therefore must contain an element of objectivity. The objectivists then maintained their position by focusing on the nominal character of a given standard of value. The device of the objectivist school involved the establishment of a value category which is institutional in form and discrete in application. Much the same device, it can be remarked, was employed by the early Schoolmen, including Thomas Aquinas, in their approach to the question of usury.12 Further, it can be remarked that the objectified version of biblical evaluation was adopted subsequently in varying degrees by many exegetes and commentators in the talmudic tradition up to modern times. Among the more modern commentators to espouse the objective approach in a doctrinaire fashion was the German-Jewish biblical commentator, Samson R. Hirsch (1808–1888). For Hirsch, Torah is an objective reality, and given this understanding he writes: Erekh, and especially Erkheha is an expression of an ideal, imaginary value . . . a person has to God and his Sanctuary. This value is given as a fixed one. It has absolutely nothing to do with physical, spiritual, intellectual, moral or social qualities. It rises and falls purely according to sex and age. This universal equality is already expressed in the term erkheha nephashot. It is only nephashot as such which are to be considered, and every living person is a nephesh.13

This statement by Hirsch presents one of the ancient approaches to the problem of valuation. However, as a position on that problem it is suspect on etymological grounds. In particular, his assertion that, On this, see B. Gordon, Economic Analysis Before Adam Smith (London: Macmillan, 1975), pp. 163–165. 13 S.R. Hirsch, The Pentateuch, Vol. III, Leviticus (Part 11), translated by Isaac Levy (London, 1958), p. 812. 12

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“every living person is a nephesh” is not accord with the application of nephesh to a dead body by the ancients. For example, in Leviticus 21:1, the word nephesh means “a dead body.” Again, Leviticus 21:11 states explicitly, “v’al kol naphshot met . . .”, which precisely means “a dead body.” The identical understanding is expressed in the Talmudic tractate, Nazir 49 a–b. Subjectifying the Objective Strand As the stance of Samson Hirsch illustrates, the objective approach to the establishment of value has continued on well into the modern era of talmudic commentary. Nevertheless, there is a tradition which supports an alternate, subjective approach. This tradition surfaces most clearly in the writings of the outstanding R. Judah Loew b. Bezalel, who was known as the Maharal of Prague (c. 1525–1609). However, the Maharal’s contributions look back to those of some earlier scholars. Among the ancients, the third-century Palestinian, Hezekiah, might be cited as an anticipator since he emphasized the different working capacities of men and women in conjunction with the question of dedication of human life value. For example, he referred to the propensity of women as compared with men, for health and longevity. Hezekiah was by no means oblivious to the spiritual aspect of the practice of dedication, but he also seemed to have been aware that this act of religious proclivity is intimately related to the issue of economic utility. He seems to have retained in his thought the original meaning of nephesh, a meaning which referred to a person whose worth was contingent on his or her working powers within the framework of a specific life cycle.14 In Talmud Arakhin, 19a, the following question is asked: why is it that when a man reaches the age 60, his value diminishes by more than one-third (i.e., from 50 to 15 shekels), whereas the value of a female declines only to one-third (i.e., from 30 to 10 shekels)? Responding to this question, Hezekiah offers an economic answer: “People say, an old man in the house is a liability in the house, while an old woman in the house is an asset in the house.” The inference from Hezekiah’s statement is clear. At various stages of the life cycle, people are endowed with various working and/or earning capacities, hence the highest

14

Arakhin, 19a.

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ratings are for persons in their prime (20–60). However, women, in contrast to men at the age of sixty and beyond, generally enjoy better health and are therefore able to perform useful work for a longer period of time. It follows from this that in the case of women, the rate of depreciation is less. Another anticipator of the Maharal’s analysis was the eleventhcentury master, Rashi. Commenting on the relevant passages of Leviticus concerning dedication, he explains the valuation in spiritual terms when he addresses the third verse of the biblical text. However, this is not the case when he considers the seventh verse. Here, he interprets the lifecycle in Hezekiah’s utilitarian terms. Rashi, it would appear, intended that both the spiritual and the utilitarian must be equally represented. There is both an abstract, or objective, value, and a utilitarian or subjective, value present. He implies that there is a functional relationship between the two. Rashi sought to integrate objective and subjective value elements, and to demonstrate that precepts derived from ethics can be harmonized with economic practice.15 This dualistic approach was adopted later in the commentary on Leviticus by Abrabanel, which was published in Venice in 1579. Isaac b. Juda Abrabanel (1437–1508) was a Lisbon-born biblical exegete, philosopher, statesman and financier who was familiar with the writings of leading Christian theologians, and was influenced by the currents of humanism abroad in the Renaissance. His interpretations and investigations reflect the medieval spirit of scholasticism as well as the social structure of the European society of the day. Abrabanel placed “the way of the Torah” side by side with “the scientific” and “the analytic.” Hence, in his treatment of dedication in Leviticus, he gives first priority to the spiritual version of the biblical valuation schema, although his argument is couched in humanistic terms. However, he then proceeds to interpret “valuation” from a biological point of view. Not only does he point to physical and mental differences between men and women, but, most remarkably, he puts special emphasis on the female’s reproductive capacity. Abrabanel writes: Actually, the highest physical and mental vigour of a male is between 20–60. His worth is therefore estimated 50 shekels. Inasmuch as it takes two women to do the heavy work of a single strong, muscular man, a female should have an estimated value half that of a male, i.e., 25 See Rashi, loc. cit., 19a. This issue is also discussed in the commentary on the Torah by Elijah Mizrachi (d. 1540). 15

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shekels. However, since a female in her primary years has the capacity to conceive and to give birth, the Torah has given her a premium of 5 shekels. Thus, her estimated total worth is 30 shekels.16

This emphasis on the reproductive capacity of a woman, and the agio which Abrabanel was prepared to attribute to it, may reflect prevailing mercantilist ideas regarding the importance of an expanding population to ensure economic growth. A woman who gives birth can be regarded as a productive agent whose productivity warrants a return. The same writer goes on to discuss the various attributes and shortcomings of both males and females, given various phases of their life-cycles. In this, he is following in the footsteps of both Hezekiah and Rashi. There is the same concern to integrate the logical and the theological. However, Abrabanel may be accounted innovative, not only in what he said but how he said it. Certainly, he was orthodox in belief, but he was heterodox by way of method. An even more striking innovation on the question of valuation was undertaken by the Maharal of Prague. Writing in the sixteenth century, this lone but prolific scholar developed his own philosophy as well as a new method of presentation. A radically new approach to the Leviticus verses flowed from these. Unlike all the interpreters who preceded him, the Maharal ventured to explain Scripture’s valuation in psychological terms. In so doing he put forward an explicitly subjective theory of value. This was achieved by placing emphasis on the subjective valuation of the priest, which valuation figures prominently in the biblical text. Maharal’s position is summarized in the following: Scripture’s repeated emphasis on the pronoun ‘thy valuation’ strongly suggests a value judgement which is necessarily relative and subjective. The process of valuation of persons according to their age and sex does not at all contradict this view, for it simply implies ‘a judgemental valuation of man’s worth which in this case is fixed’. The fact that in the subsequent cases of dedication of fields, houses and other objects, the stress is repeatedly put on the pronoun ‘thy valuation’ and ‘as the priest shall value it, so shall it stand’ only confirms this thesis that valuation in general is contingent on the “psychological” factor which is inherently subjective.17

16 Abrabanel, Commentary on Leviticus XXVII ( Jerusalem, 1924), p. 176. This extract is freely translated by the author. 17 Judah Loew, or Maharal, Gur Aryeh (“Yehadut” edition, Israel, 1972), Vol. III, p. 196. The first edition was published as a commentary on Rashi in 1578. The quoted

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The novelty of this approach is its emphasis on the crucial role which the “individual” plays in the valuation scheme. Accordingly, it is the principle of individual valuation which is the most important factor in the decision-making process. As Maharal states: In truth, any (economic) valuation is performed by individuals. Now, sometimes one person may estimate an object for so much, while another person may estimate the very same object for a different amount . . . Since valuation is subject to the feelings of individuals, it is inevitably subjective and ‘psychological’.18

This understanding of the foundations of value, it can be remarked, has much in common with that of the marginal utility school which emerged in Economics in the latter part of the nineteenth century. Like Maharal, members of that school stressed the subjective and individualistic in the formation of value. For example, Friedrich von Wieser (1851–1926) wrote: To tell the truth, there is no ‘objective’ exchange value . . . The classical school gave no further attention to the ‘subjective’ value . . . only objective exchange value was considered worthy of scientific investigation . . . The individualistic school reduced everything in the social economy to individual effort . . . yet it failed to realise that economic action is a confluence of individual valuations.19

For both the Austrian, von Wieser, and the fifteenth-century Talmudic scholar, value is rooted in the subjective. The estimation of value is essentially a matter of individual decision-making. The Doctrine of a Valueless Value A particularly striking aspect of the talmudic debate on the consecration of human life is the emergence within it of the idea of a “valueless value.” To appreciate the background for this idea it is necessary to recall the first clause of Arakhin, which was discussed above. There, the

extract is translated by the author from the Hebrew text with minor renditions. It should be noted that the term “psychological” is not used by the Maharal. Nevertheless, it is a term which best expresses the sense of his analysis. 18 Op. cit., cf. p. 196. The quoted extract is freely translated from the Hebrew original. 19 F. von Wieser, Social Economics translated by A. Ford Hinricks (New York: Kelley, 1967), p. 235.

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rabbis distinguished between erekh, “valuation,” and neder, “vow,” and hence, between an ideal value and a market value. In their reasoning, erekh is analogous to “objective value” in an ethical sense, whereas neder is akin to “subjective value” is an economic sense. The first clause of Arakin states that ALL persons may be evaluated, and this statement is taken up for closer inspection. A questioner asks: What does ALL (Persons) are fit to be made subject to valuation mean to include? It is meant to include a person disfigured or one afflicted with boils. For one might have assumed that since Scripture says: “A vow . . . according to ‘thy valuation’, that only such persons that are fit to be made subject of a vow (as regards their worth) are fit to be made subjects of valuation, and persons that are unfit to be made subjects of a vow (as regards to their worth) are also unfit to be made subjects of valuation, hence Scripture informs us “of persons,” i.e. no matter who they are.20

The principal issue here is the dichotomy represented by an economic variable, i.e., “vow,” as against an ethical constant, i.e., “valuation.” The passage points out that in view of the scriptural juxtaposition of these two contradictory terms, one might be led to the notion that ethical qualification depends on economic quantification. Since a “person disfigured or one affected with boils” has absolutely no “market” value, he or she is, therefore, unfit to be made subject of valuation (to the sanctuary). However, this is said to be erroneous. The adjective ALL is seen as forestalling such a mistaken inference by stipulating that even a person without a market price is endowed with certain attributes and, therefore, is subject to valuation. The ethical connotation of this analysis is explicit. In the realm of ultimate values there is to be no distinction between the physically fit and the “disfigured,” between the healthy and the handicapped. Nor does such valuation distinguish between saint and sinner, learned and simple, or any such contrasting categories of persons, for their value

20 See Arakhin, 2a and 4b; also Rosh Hashana 5b; Hulin 2a, upon which Rashi comments, “They (the disfigured . . .) are fit to vow (another’s worth) but are not fit to have their own worth vowed since they are worthless.” Similar explanations are given by Rashi in the Tractates. Tossaphot likewise explains it in the same vein, and Gershon b. Judah, surnamed Meor ha-Golah (ca. 965–1028), amplifies “. . . because no one wants to buy them.” Many of the latter’s explanations are embedded in Rashi’s commentary on the Talmud. Compare Maimonides, Hilkhot Arakhin V’kharamim, chapters 1, 8 and 9. Also his commentary on the Mishna Arakhin, chapter I, p. 5.

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is fixed according to their “highest dignity.” Ultimate, or ideal, value should not be confused with market value. Much the same differentiation between types of value may be found in the Scholastic tradition. For example, in his observations on Aristotle’s Ethics, Thomas Aquinas states (Book V, Lect. 9) that the rank-order of values in nature and creation can be very different from the order derived from human calculations concerning the utility of goods. The latter order ranks a pearl ahead of a mouse, but a mouse is superior in terms of nature and creation. A similar comment on value occurs in the Summa Theologica by way of a reference to The City of God by Augustine of Hippo. Aquinas notes that a human slave is a superior being to a horse. However, in some circumstances, a horse may have a greater market value than that of a slave, since the horse is regarded as more useful.21 Elsewhere, Aquinas distinguishes between “human goods” and “goods of soul” (Summa, 1–11, q. 4a, 7).22 This too is a form of differentiation which corresponds to that of the talmudic scholars. While the parallels between the talmudic and scholastic traditions on value are evident, it may be claimed that in their debates, the talmudists took a step which was beyond those of any of the Schoolmen. They endeavored to forge a link between ethical value and economic value by applying a money sum to the former. The talmudists assigned a monetary value to the “disfigured” who, for all practical intents and purposes, did not possess any market value whatsoever. This meant that something which is economically valueless may still command economic value. In this respect the Talmudic doctors opened up a route to thought on the economic status of the disadvantaged which the Schoolmen did not explore. The Schoolmen had ready at hand the long-standing imperatives concerning selfless Charity derived from the teachings of Jesus. Those imperatives could be invoked as offering the groundwork for a solution to the problems of the disadvantaged, despite the logic of market evaluation. Talmudic scholars however, looked to a much more integral solution which combined both economic rationality and regard for those for whom the strict application of economic rationality 21 Thomas Aquinas, Summa Theologica, II, qu. 77, art. 2, ad. 3. For Augustine, see The City of God, XI, 16. 22 For discussion, consult, S.T. Worland, Scholasticism and Welfare Economics (Notre Dame, 1967), pp. 27–34 ff.

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would consign to the status of non-persons. The Talmudic scholars, it can be claimed, looked forward to the advent of Welfare Economics in its modern form. In their deliberations on the consecration of human life, the talmudists endeavored to account for both objective and subjective evaluation, and to bring these into meaningful relationship. They endeavored to combine both the normative and the positive in arriving at a coherent response to what Scripture seemed to demand with respect to the custom involved. This attempt to bring together normative and positive is also characteristic of the modern economist who wishes to unite his or her research on subjectively based economic behavior with a regard for objective criteria. As S.T. Worland explains, welfare economics adds another dimension of evaluation to that of Economics in the conventional, modern sense. He writes: What distinguishes welfare economics from the rest of economic theory is its specific and characteristic concern, not with scientific explanation or description, but with normative appraisal or evaluation. Whereas pure theory tries merely to explain and predict, welfare economics intends to evaluate—to determine which economic phenomena, relationships, and practices deserve to be considered ‘economically good’ and desirable.23

It may also be contended that the Talmudic tradition, with its doctrine of a “valueless value,” not only comprehends but also goes beyond the framework of Welfare Economics as it is understood today. Modern welfare theory is devoted to the question of how best to maximize social welfare. However, the theory is formulated in terms of considerations concerning positive economic value. Can such considerations encompass “valueless value”? The problem here may be summarized, as follows. Economically, the valuation of totally incapacitated persons in terms of a positive sum actually amounts to a quantification of a negative value. Yet, the Talmudic novelty is vested in the notion that even such a value has psycho-economic characteristics. It might be argued that the value is analogous to that which underlies the modern idea of a negative income tax. However, whereas the latter line of thought is usually associated with policy stances that blend social concern with the provision of

23

Op. cit., p. 4.

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incentives to work, no such stance is implied by the talmudists. Rather, they have established a distinct category in which the valueless subject is given a positive numerical value in economic terms. The category seems to have no counterpart in other pre-modern economic thought, nor in modern welfare economics.

CHAPTER TEN

HUMAN CAPITAL ISSUES Since the 1960’s, the concept of “human capital” has become an increasingly familiar idea for modern economists. Analysis related to this concept has had significant applications with respect to issues concerning the supply of labor and its remuneration. The applications have also gone further afield within contemporary thought.1 Historians of Economics have been quick to point out that despite the absence of reference to human capital considerations in neoclassical economics, some earlier economists were alive to the possibilities of this line of investigation.2 Among the Mercantilists there was considerable emphasis on “art and ingenuity,” i.e., the resource of skilled manpower, as a factor in national economic growth. Characteristically, Sir William Petty (1632–87) went so far as to attempt to develop measures of this resource. In fact, reflection on the phenomenon of human capital formation and its implications extends back much further than the mercantilist era. There is little of relevance in this respect to be found in the writings of the Schoolmen of the Middle Ages and the Renaissance, since the focus of the bulk of their economic analyses was the question of justice in exchange transactions between individuals. However, contemporary, and earlier, writers in the Jewish tradition were obliged to adopt a broader focus, and it is to these that the pioneering efforts concerning the economics of human capital must be ascribed. The only other group which might be considered in this regard is that comprising the jurists of ancient Rome. However, the insights of the jurists were confined to the context of discussion of damages with respect to sales of slave-capital.3 The Rabbis, by contrast, ranged 1 For a survey of research to the late 1960’s, see Mark Blaug (ed.), Economics and Education (Baltimore, MD: Penguin, 1968). Consult also, R. Wykstra (ed.), Education and the Economics of Human Capital (New York: Free Press, 1971). 2 See, e.g., B.F. Kiker, “The Historical Roots of the Concept of Human Capital,” Journal of Political Economy (October 1966), pp. 481–99. 3 Consult Barry Gordon, Economic Analysis Before Adam Smith: Hesiod to Lessius (New York: Barnes and Noble, 1975), pp. 137–139.

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beyond the question of damages. Further, they employed human capital concepts in the examination of issues relating to free persons as well as slaves. There were three main points of departure for Talmudic debate in the field of human capital analysis. One of these was the biblical account, in the Book of Exodus, of the construction of the Tabernacle. Another was the problem of estimation of appropriate compensation in cases of physical and psychological injury. A third, involved attempts at the valuation of human life, which attempts were evoked by the section of the Book of Leviticus which deals with the dedication of persons to the sanctuary. A Point of Departure The term “human capital” refers to the bundle of skills and abilities that an individual brings into a labor market. The contents of the bundle can include such items as native talent, general educational attainment, and specialized vocational skills. The creation and/or development of human capital are supposed to derive from education and training, in the main.4 Talmudic scholars were led to enter into consideration of such issues by virtue of the need to reflect on a particular passage of the biblical Book of Exodus. The passage concerned is part of the surviving heritage of ancient Jewish literature, and it pertains to the construction of the Tabernacle (Ex. 35:30–35). It reads: . . . Then Moses said unto the children of Israel: See God hath called by name Bezalel . . . And He has filled him with the spirit of God, with wisdom, with insight and with knowledge and with all manner of workmanship. And to combine ideas to work them in gold and silver and cop-

4 As a concept, “human capital” is sometimes distinguished from that of “human resources.” The latter refers to the size and ability of the population available to a society to further that society’s goals. It includes elements such as productive capacity, adaptability and reasoning power. Further, there is a noteworthy difference between the commodity approach to “human capital” and the “human resources” approach. Proponents of the former maintain that people work simply because they have to make a living. They consider work a disutility. Whereas, followers of the latter assert that man also derives satisfaction from work in that it is a social function with a multiplicity of goals which contains a measure of utility. Concerning the foregoing, see Eli Ginsberg, The Human Economy (New York: McGraw Hill, 1976), pp. VII–XIII, and 3–30.

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per, and in cutting stones for setting, and in carving wood, in making all kinds of designed work. And also the gift of teaching hath He put in his heart; both he and Ahaliab . . . both He filled with wisdom of heart to do all manner of work of the artist-engraver, of weaver and embroiderer in sky-blue and purple wool, in scarlet-wool and in fine linen, and in general weaving, executing all manner of work and combining ideas.5

Although Christian commentators generally passed over this passage as mere narrative, talmudists were disposed to be far more attentive. Detail relating to the Temple was a matter for ongoing research and debate among the latter. Consideration of the implications of the construction of the Tabernacle posed issues about the acquisition of skill, its application in the form of “productive” work, and its remuneration. Here was a point of departure for a line of analysis of phenomena which most of the literate ancients found beneath notice. Productive Work From Exodus, the obvious focus for labor input in the Tabernacle episode is the master-craftsman, Bezalel. According to the analyses of the talmudic scholars, Bezalel was endowed with three attributes: Hokhma, Tevunah and Daat, “wisdom,” “insight,” and “knowledge,” which he combined “with all manner of workmanship.” The Talmud (B’rakhot 55a) in commenting upon Bezalel’s exceptional qualities, makes a very unusual observation: “. . . God does not provide wisdom except to those who already possess it for it is stated ‘He gives wisdom to the wise and understanding to those who understand . . .’ ” (Daniel 2:20). And to augment this, the Talmud continues to show that the same biblical narrative which tells about Bezalel’s artistic abilities and his Divine calling make this very point: “. . . In the heart of all that are wisehearted, I have put wisdom” (Exodus 31:6). Thus, wisdom and understanding require qualities of knowledge and intellectual development, of character and of intelligence. Here, there is the strong suggestion that in order to become the recipient of Divine inspiration, one has first to acquire wisdom by one’s own efforts. This appears to have been the case with Bezalel.

5 The Pentateuch, translated into German by Samson Raphael Hirsch (1867–78) Vol. II Exod., and rendered into English by Isaac Levy, (London 1956).

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How does one acquire such characteristics in the first place? According to Rashi,6 wisdom is acquired through “learning from others, through study.” Insight is the “intelligence to deduce independent ideas from what one has learned.” And knowledge “comes from Divine inspiration,” which according to biblical teaching is the ultimate resource in that the human imagination is linked to the human spirit. The question addressed by Rashi is taken up at a later date by the outstanding 17th century exegete-philosopher, R. Moshe Gentili-Hefez (1663–1711). In his view, learning requires assiduous human effort, whereas the acquisition of knowledge is a product of intellectual growth. Gentili writes: True, every human endeavour requires Divine assistance. Still, it is incumbent upon man to cleave to scholars to learn. Indeed, without diligence knowledge will not drop from heaven. For how can one become wise without assiduous effort. Moreover, there are two kinds of skills: one is imitative, the other educative. In the event of the former, one just uses ingenuity to execute his work. The former’s work is necessarily imperfect, whereas the latter’s is artistic. Bezalel, on account of his educational background, possessed the qualities of the latter. He was steeped in theory and practice, which along with Divine assistance, he implemented creatively and productively.7

Gentili entitled his homiletical-philosophical work “Melekhet Mahashevet,” i.e., “work resulting from thought.” This phrase is taken from the Book of Exodus (35:33), and it is related directly to a variety of passages in cognate literature. For example, the Talmud 8 in seeking to identify the various kinds of work forbidden on the Sabbath, deduces analogically that all “work of thought” which took place at the construction of the Tabernacle is in the category of “Melekhet Mahashevet,” meaning “work resulting from thought.” In the view of R. Yehoshua (T. Keritut 19b), such work requires both Mahashovah and Kavanah, “planning” and “designing,” which Rashi interprets to mean “work of thought purposefully executed.” Modern Biblical scholars too have defined its meaning in a similar fashion. Thus, Cassuto9 defines Melekhet Mahashevet

6 See Rashi’s explanation on Ex. 31:3. Rashi (1040–1105) is considered the foremost interpreter of the Hebrew Bible and the Talmud. 7 See R. Moshe Gentili-Hefez, Melekhet Mahashevet (Venice, 1710) p. 105. These extracts were freely translated from Hebrew into English. 8 See Babyl, Talmud, Baitza 13b, Haigiga, 10b, Baba Kama 26b, Sanh, 62b and other Tractates, notably Tractate Sabbath, along with Rashi’s explanation. See also, Eglei Tal (1905) by Abraham Bornstein. It is a study of the laws of the Sabbath. 9 Cassuto, M.D., Commentary on Exodus (Hebrew University of Jerusalem, 1951), p. 321.


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as “work of thought planned and calculated in advance,” and Ch. D. Rabinovitz10 describes it as “planned work originating in theory and ending in practical application.” In either case, the productive element as a result of applied knowledge is evident. Return on Investment While the verses of Exodus encouraged the talmudic scholars to consider productivity as the outcome of investment in human resources, the biblical narrative offered no obvious lead concerning the manner in which “melekhet mahashevet” was to be compensated. Exodus omits any reference to compensation for the artistic and skillful work rendered by Bezalel and his compatriots in the building of the Tabernacle. Despite this omission, the talmudists felt obliged to fill the gap by recourse to other sections of the Scriptures. According to talmudic tradition, the artisans were paid from a special fund of accumulated capital. The fund was termed bedek-habayit, and specifically designated for the repairing of the Temple.11 The pecuniary award from the bedek-habayit fund, was derived by the talmudic scholars inferentially from a verse in Exodus XXV:18, thus linking the terms of payment at the construction of the Temple in Jerusalem to those of the Tabernacle in the wilderness following the Exodus.12 The rendition was not done arbitrarily, for there is in fact a corroborating passage in II Kings XII:10–13, which records how Yehoiada the priest took a chest and bore a hole in the lid of it, and all the money that was donated to the Temple was put into it. With those funds they paid the workmen, the carpenters and the builders “who worked upon the house of the Lord,” the masons, and the stonecutters.13 Thus, the artisans were paid their salaries in money, but if they desired, they could be paid in goods. However, since the gifts in kind (or assessments) to the bedek-habayit fund were deemed “consecrated,” they had first to be secularized before they could be used as a form of Ch. D. Rabinovitz, Daat Sophrim on Exodus ( Jerusalem, 1963) p. 276. See Shekalim, Ch. V, Mishnah 6. There was a special chamber in the Temple called “the chamber of bedek-habayit” where all the “consecrated” gifts were put. 12 Tractate Temurah 31b: “. . . We infer that we pay from the dedications for the repair of the Temple. [Whence do we derive this?] Said R. Abbahu: since scripture says ‘And let them make Me [a Sanctuary],’ intimating from what is Mine, i.e. that monies dedicated for “bedek-habayit” were set aside for the building and repairing of the Temple” (Transl. The Soncino Press). 13 See II Kings XII:10–13. 10 11

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payment. The process of secularization involved the Temple authorities in a set of transactions. According to the Tosefta (edited ca. 200 C.E.), a worker (in the sanctuary) cannot say, ‘I would like to be paid with a cow or with a garment . . .’, for anything consecrated cannot be turned into a means of payment for work.14 Only money may be paid. How then was he compensated? First, an equivalent sum of his salary was set aside. The object in question was subsequently monetized and thereby rendered secular. As a result, the artisan could then receive that good in lieu of his contractually agreed upon compensation. Now, with the money originally set aside, a similar good was purchased from the “chamber of general gifts” and transferred to the chamber of bedek-habavit. What is perhaps most characteristic in this instance, is the complicated procedure of monetization and market transfer that was used in order to facilitate a commensurate compensation to the artisans for the productive work they carried out at the building and/or repairing of the sanctuary. Hence the Talmudic statement: Notnim Me’hen Le’Umanim Be’skharon (Temurah 31b), “the artisans were paid commensurate salaries from the originally consecrated goods.” With respect to payments, there was also a distinction between ordinary workers and skilled tradesmen. If one was a poel, a hired worker for a specific time period, he was paid the going wage rate from the bedek-habayit fund in currency. If one was an Uman, a craftsman contracting his job, he was paid from the same fund the contractually agreed upon sum for his specialized work. Ability and Income What transpires from the foregoing analysis is essentially an evolutionary process, beginning with education and training whereby wisdom and understanding is acquired. Thereupon, God bestows wisdom to the wise, thus building wisdom upon wisdom resulting in knowledge. All this leads to Melekhet Mahashevet, or productive work, from which given earnings are derived either in form of wages or agreed upon compensation for a specific task by an expert craftsman. Diagrammatically it may be presented as follows: 14 See Tosefta, Meilah, Ch. 1:12. Tosefta (Lit., “Additions”) is the name of a collection of Talmudic “Baraitot” which treat the subject of traditional laws in a more complete form than does the Mishna. See also, Maimonides (12th cent.), Avoda, Meilah, Ch. 8:3–4. The extracts were freely translated by the author.

human capital issues A

Education & training (wisdom and understanding) K

191 B Corresponding earnings

for Melekhet Mahashevet ds n (prod. work) fu yit ed ge ted aba a C secr k-h e n co bed

no wl

God

The explicit theological dimensions of the above are foreign to contemporary, positivistic economic analysis. However, the Talmudic schema, as it developed, embodied the fundamental functional relationships which are affirmed in the human capital literature of current Economics. The talmudic writers posited the existence of strong linkages between education, productivity, and earnings. The Quantification of Human Life The preceding chapter focused chiefly on the various categories of value, notably the subjective-objective dichotomy and the manner in which the sages hammered out a synthesis between the two. This section, though related in theme, is concerned primarily with the quantification of human capital. Concern with human capital issues was evoked also by the talmudic investigation of the value of human life. Here, the foundation is the Book of Leviticus which dates from at least the ninth century B.C.E. and is part of the “priestly” contribution to the Hebrew scriptures. The most relevant passage reads, as follows (Lv. 27:1–8): Yahweh spoke to Moses; he said: Speak to the sons of Israel and tell them: If anyone vows the value of a person to Yahweh and wishes to discharge the vow: a man between twenty and sixty years of age shall be valued at fifty silver shekels—the sanctuary shekel; a woman shall be valued at thirty shekels; between five and twenty years, a boy shall be valued at twenty shekels, a girl at ten shekels; between one month and five years, a boy shall be valued at five silver shekels, a girl at three silver shekels; at sixty years and over, a man shall be valued at fifteen shekels and a woman at ten shekels. If the person who made the vow cannot meet this valuation, he must present the person concerned to the priest, and the priest shall set a value proportionate to the resources of the person who made the vow.

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Here, it is clear, persons are classified into four categories by age: from one month to five years; from five to twenty years; from twenty to sixty years; and, from sixty years upward. Then, money values are assigned to each category of person, by sex. The highest values are set on those aged between twenty and sixty. Younger persons are given lower values, as are older persons. The schema of valuation is displayed in the following table: Age I. II. III. IV.

Assessed Valuation Male Female One month to five years Five to twenty years Twenty to sixty years Sixty and upward

5 20 50 15

shekels shekels shekels shekels

3 10 30 10

shekels shekels shekels shekels

What is the rationale of this pattern of valuation? Leviticus offers no direct answer to this question, but there are other sections of the Hebrew scriptures which suggest that the rationale was variation in market value of a person, as if that person were a slave, i.e., a human capital object. Among the scriptural passages which bear upon the quantifications of Leviticus is that relating to the sale of Joseph into slavery by his brothers. Genesis states: Now some Midianite merchants were passing, and they drew Joseph up out of the well. They sold Joseph to the Ishmaelites for twenty silver pieces, and these men took Joseph to Egypt. (Gen. 37:38).

Joseph, at this time, was clearly older than five and was almost certainly younger than twenty. His price, as a slave, is in direct accord with the Leviticus scale. Further confirmation of the market-slave basis of the Leviticus scale for the value of human life is afforded by the episode concerning the prophet Hosea and his adulterous, prostitute wife Gomer. At one point (Ho. 3:2) the prophet buys his wife back, “for fifteen silver shekels and a bushel-and-a-half of barley,” and here, the Interpreter’s Bible comments: Gomer was now a slave to the master she served . . . The total price which Hosea paid for Gomer must have been according to this calculation—thirty shekels. And since Exodus 21:32 gives that as the amount


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of compensation to be paid to the owner for the killing of a slave, it has been calculated that such an amount was a slave’s market value and that was the price which Hosea paid.

Thirty shekels (or, fifteen shekels plus the value of the barley) corresponds to the present value of a woman aged between twenty and sixty, according to Leviticus. Given that market value was established in this early literature as the touchstone for setting the price on a person, the Talmudic writers followed up with a variety of refinements on the basic theme. For example, the Rabbis pondered the fact that, in the Leviticus scale, when a man reached the age of sixty his value diminished by more than onethird, i.e., from fifty to fifteen shekels. However, the value of a woman declined to one-third only, i.e., from thirty to ten shekels (Arakhin 19a). In the opinion of Hezekiah (third century C.E.), the difference is due to the contrast in the productivities of aged persons. Hezekiah states: People say, an old man in the house is a liability in the house, while an old woman in the house is an asset in the house.

Later, Rashi comments that a woman over sixty is still likely to be able to engage in productive work, whereas a man can be effective no longer because of his “shever,” i.e., his poorer health.15 The Talmudic tradition is also concerned to stress the need for personal viability if any money sum is to be assigned to human worth. In Arakhin 6b, it is stated that: “One who is at the point of death or about to be executed cannot have his worth vowed nor be subject to valuation.” With respect to the person about to be executed, Rashi observes that, “since no one will purchase a condemned man, he possesses no market value.” As for the dying person, Maimonides (1135–1204) reasons that, “one who is at the point of death is just as being dead, and a dead person has neither an estimated nor a market value.”16 Quantification of the value of life, then, is contingent on the object’s possession of legal and physical identity as well as on existing market conditions.

15 Rashi, Arakhin 19a. On this issue, Chaim Rabinovitz observes: “Ordinarily the value of a man is higher than that of a woman. But at old age the opposite is true, for then a man’s value continually declines.” Daat Sophrim, Erz. edition, Jerusalem (New York, 1962), p. 307. 16 Maimonides, Arakhin u’ Kharamin, Ch. l:13.

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chapter ten Compensation for Injury

Yet another point of departure for Talmudic concern with human capital issues is provided by the debates on questions regarding compensation for injury. The relevant discussion, which is located mainly in the section called Nezikin (Damages), has a consistently quantitative dimension in that it attempts to assign monetary forms of compensation. Market evaluations are employed to help establish the economic worth of the human capital involved. As with the debates stemming from the dedication of persons to the sanctuary, the prices of slaves are prominent points of reference. Again, this area of discussion has its roots in biblical prescriptions concerning damages. From the viewpoint of the modern economist, two of the most striking features of the biblical law codes are the roles assigned to monetary recompense and to productivity potential when questions of damages are addressed. The role of money is exemplified in the following: When a man leaves a pit uncovered, or when he digs one but does not cover it, should an ox, or donkey, fall into it, then the owner of the pit shall make up for the loss: he must pay its owner money, and the dead animal shall be his own (Ex. 21:33–34).

Sums of money are also crucial in the case of the violation of a virgin. The relevant passage reads: “If a man seduces a virgin who is not bethrothed and sleeps with her, he must pay her price (i.e., the brideprice, or mohar) and make her his wife. If her father absolutely refused to let him have her, the seducer must pay a sum of money equal to the price fixed for a virgin” (Ex. 22:15–17). Other examples can be cited, and, as various biblical scholars have shown, similar provisions of assessing fines for damages or rape existed among the advanced Semitic nations in the Near East. The Code of Hammurabi, the Hittite and the Assyrian laws, as well as the Pentateuchal civil laws, reveal a remarkable similarity, sometimes even in their very phrasing of those laws. Thus, in the Assyrian law, “rape was treated precisely in the same way, except that the price was three times the normal marriage price” (Interpreter’s Bible, p. 1006). The same holds true of the Babylonia principle of making restitution for damages. And the same custom prevailed anciently with respect to the Mohar (Driver, p. 229).17 17 See, J.H. Herz, The Pentateuch (London, 1958), Exod., pp. 312, 403, Deut. 843; Interpreter’s Bible (Nashville: Abingdon Press, 1956), p. 1006; S.R. Driver, op. cit., p. 229.


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The role of productivity emerges strongly on a number of occasions, and, most notably, where damages to land are involved. Hence, the Code of the Covenant affirms: When a man puts his animals out to graze in another’s field, he must make restitution for the part of the field that has been grazed in proportion to its yields. But if he has let the whole field be grazed, he must make restitution in proportion to the best crop recorded in the injured party’s field or vineyard. (Ex. 22:4–5)

Further, loss of productivity by persons due to “enforced inactivity” is also envisaged as ground for compensation. The relevant passage reads: If men quarrel and one strikes the other a blow with stone or fist so that the man though he does not die, must keep his bed, the one who struck the blow shall not be liable provided the other gets up and can go about, even with a stick. He must compensate him, however, for his enforced inactivity, and care for him until he is completely cured. (Ex. 21:18–19).

Informed with these insights on the significance of productivity and on the social role of money, the contributors to the Talmud reasoned in terms of five categories of indemnity for damaged free persons. As established in the Mishna (B.K. 83b–85ff.) the relevant categories are: Nezek (“depreciation”); Tzar (“pain”); Repoi (“healing”); Shevet (“loss of time”); and, Boshet (“degradation”). Considered together, the categories offer a basis for a comprehensive approach to indemnification which takes account of such factors as the health, age, mental capacity, and type of productive employment of the person concerned. Evaluation requires the application of a variety of criteria. In a recent analysis of the Talmud’s treatment of compensation for personal injury, the author has observed that economic reasoning is not employed consistently to establish the grounds for damages in all five categories. This is most evident in the case of “degradation,” which may also be translated as “indignity,” “insult” or “humiliation.” Here, market values are not invoked, but rather the social standing of the offender and the aggrieved.18 As the Talmud puts it: ha-kol l’fee hamebayesh v’hamitvayesh (i.e., “all according to the social position of the insulter and the insulted.” Baba Kama. 83b).

18 E. Kleiman, “Opportunity Cost, Human Capital, and some Related Economic Concepts in Talmudic Literature,” History of Political Economy, 19:2 (1987), pp. 263– 285.

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Accordingly, it is in the instance of physical damage—an eye, an arm, a leg—where there is a monetary loss (“hissaron—kis”)—that recourse is had to a person’s loss of market value. Where “psychic” damage, such as humiliation is involved, the analogy breaks down and is not pursued. However, as has been pointed out, the reason for this is, “because of the difficulty in measuring boshet in monetary terms . . .” (Encycl. Judaica, 1972).19 Though there is no obvious lead in the Talmud as to why “degradation” is not assessed in the same manner as the other four items, the reason for this distinction is well grounded in the very characteristics of this item. Alternately, “depreciation,” “healing” and “loss of time,” are categories which readily lend themselves to market evaluations. Even “pain,” which is an “invisible” injury, because of its physical dimension can be subject to a sort of “pain-pleasure calculus,” albeit in a theoretical market. Not so “shame,” which is indicative of an emotional state of mind. It must have been obvious to the Talmudic master logicians, that for psychic feelings of hurt, not even a hypothetical market can be postulated. To put it in the modern idiom: no “utility index” can be projected for moods. Hence, their non-pursual of the market analogy, which would have been pointless.20 “Healing” (or, “doctor’s bills”) is an element of compensation which poses fewer analytical problems than the foregoing, although the Rabbis perceive that the financial obligation on the offender to meet the medical expenses of the injured party can be complicated by stratagems which either may adopt. The fourth element, “loss of time” or “inactivity,” is related directly to the productivity-based consideration which was recognized in Exodus 21:18–19 (quoted above). The idea is that there are foregone opportunities resulting from involuntary unemployment of human capital because of a period of enforced convalescence.21 Payment for the loss of opportunities is due in the form of a fixed sum levy. See, Encyclopedia Judaica, “Damages” (Keter Publ., 1972) p. 1234. The fact that the Mishnah established “pain” and “shame” as two distinct categories (even though pain can also be mental) is a clear indication that its authors viewed these two items from two different perspectives, the physical and the emotional, with the application of economic values to the former and social values to the latter. For comparison, see Anastasios D. Karayiannis’ interesting article, “Democritus on Ethics and Economics,” Rivista Internazionale Di Scienze Economiche e Commerciali, Vol. XXXV, No. 4–5, Milano, Italy, (April–May 1988), pp. 379–80, about Democritus’ notion concerning the measurability of psychic feelings of pleasure and pain. 21 The role of foregone opportunities in talmudic thought was first discussed in an article by R.A. Ohrenstein, “Economic Thought in Talmudic Literature in the Light of Modern Economics,” American Journal of Economics and Sociology, 27 (1968), pp. 187–90. 19 20


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Finally, there is “depreciation” (or, “damage”). This element represents recognition that a particular physical injury may not result merely in a period of temporary involuntary unemployment. The injury may also involve a permanent loss of human capital, and hence, a continuing short-fall in future earnings as compared with those that could have been anticipated before the injury. Quantification of this aspect of compensation by the Talmud’s contributors and by later commentators is of special interest in terms of subsequent economic thought. Rashi, Rosh and Depreciation The basic text in the Mishna concerning depreciation (or, damage) reads, as follows: If he put out his eye, cut off his arm or broke his leg, the injured person is considered as if he were a slave being sold in the market place, and an evaluation is made as to how much he was worth (previously) and as to how much he is worth (now). (B.K. 83b).

Immediately, it is apparent that here the labor of a free man is to be equated with that of a slave, for the purpose of the exercise in hand. This type of equation, it can be noted, is entirely in accord with the traditional Jewish treatment of the value of human life (as noted above). Money sums applied to persons whose values were vowed to God are in direct correspondence with traditional evaluation of classes of slaves, by age and sex. Further, the equation finds support in some of the economic thought of much later centuries. For example, in his An Outline of the Science of Political Economy (1836), the first Drummond Professor of Political Economy at Oxford University wrote: The only differences . . . between a freeman and a slave are, first that the freeman sells himself, and only for a period, and to a certain extent the slave may be sold by others, and absolutely; and, secondly, that the personal qualities of the slave are a portion of the wealth of his master; those of the freeman, so far as they can be made the subject of exchange, are a part of his own wealth.22

In addition to the slave-freeman equation, the Mishanic text indicates that for the early Rabbis it was reasonable, for some purposes, to argue in terms of an analogous relationship between human capital and

22 Nassau W. Senior, An Outline of the Science of Political Economy (1836) (New York: Kelley, 1965), p. 10.

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physical capital in as much as both may be subject to depreciation.23 The Mishanic text also suggests that justice requires an estimation of the present market value of a person’s future expected earnings.24 On and beyond the Talmud proper there is the work of definitive commentators including Rashi (1040–1105) and R. Asher b. Yehiel, who is known as Rosh (1250–1327). With these medieval scholars, the anticipation of the modern capitalized-earning procedure for the determination of the value of human capital emerges with greater clarity. Controversy concerning which kind of slave provided the relevant market criterion for evaluation offers a basis for appreciation of the modernity of the Talmudic tradition with respect to this aspect of economic analysis. According to Rashi, evaluation of indemnity for human depreciation should be based on the market value of a Hebrew slave. Rosh disagrees with this. The assessment should be calculated in terms of the market value of a non-Hebrew slave. Such a dispute, it can be appreciated, is a quite radical one if the profound difference between the two categories of slave in terms of Scriptural legislation is also appreciated. Both Exodus and Deuteronomy require the release of Hebrew slaves from bondage after six years of service (Ex. 21:1–2; Dt. 15:12–13). No such requirement applies to non-Hebrew human capital. In fact, the latter, “shall be your property and you may leave them as an inheritance to your sons after you, to hold in perpetual possession. These you may have for slaves; but to your brothers, the sons of Israel, you must not be hard masters” (Lv. 25:45–46). The character of the dispute between Rashi and Rosh provides the strongest type of confirmation that in the Talmudic tradition the pres23 The analogy is also employed in the modern literature dealing with life insurance. See, e.g., S.S. Huebner, The Economics of Life Insurance (3rd ed.) (New York: AppletonCentury Crofts, 1955), pp. 21–22. 24 Although this principle is presented in general terms, its economic dimensions are elaborated upon in the Amoraic discussions (Talmud proper), or by successive generations of commentators. One such discourse, though in a different context, will illustrate the point. It pertains to a biblical passage in Leviticus 25:47–53. To avoid the intricacies of the debate and for the sake of brevity, it will suffice to point out that the question revolves around the method of calculating the value of a Hebrew slave in the event of his redemption before the conclusion of his term of service. Specifically, is the amount to be refunded to the purchaser based merely on the slave’s original price, (i.e., his purchasing price minus the time period he already served), or is the calculation based on his current market value, and, therefore, subject to changing market conditions of “ups” and “downs,” his “state of health and strength” and on variations in his productive capacity; “improved” or “deteriorating” performance (Kidd. 20a–b, Arakh. 30b).


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ent economic value of a person was regarded as a variable dependent upon expectation of the future stream of labor services which was likely to be forthcoming. Otherwise, why dispute whether or not a Hebrew or non-Hebrew slave should be the point of market reference? Clearly, the non-Hebrew slave criterion (given equality of age, health, and sex) yielded a much more generous award for “damage” than its alternate, since the flow of labor services would be untrammeled by sabbatical (or, it can be added, Jubilee) considerations. This notion was crystallized even further by R. Nathan Spira (16th cent.) in a gloss on R. Isaac Alfasi, known as RIF (1013–1103). He writes that even according to Rashi the same method of capitalization of expected earnings can also be applied to a Hebrew slave, simply by calculating his anticipated productive employment throughout his lifetime by means of six-year units: “You assess the Hebrew slave’s value as if he initially sells himself for six years. Upon completion of his first term, he sells himself for another six years. Thereupon, he repeats the same for another six years, until his death, according to the life expectancy of a person” (Alfasi, B.K. p. 30a). Conclusion As the foregoing analysis illustrates, the Rabbinic discussion of compensation for injury, like the examination of the worth of human life, evoked attention to the concept of the present value of a person and to the problem of measuring that value.25 Writers in the Talmudic tradition looked to calculations regarding expected income flow from the labor of the valuee as the best approach to measurement. Further, these writers were keenly aware that the idea of the existence of capital in persons implied the notion of a process of investment in those persons. With respect to this latter, it is entirely in character that the Talmud Jerulsalem relates the following exchange between two distinguished scholars. When R. Hama b. Hanina visited the Assembly Houses in Lod (Palestine) he was moved to exclaim: “Look, how much

25 The Rabbinic treatment of the value of human life also relates to economic issues beyond the bounds of human capital theory. On those issues, see Roman A. Ohrenstein, “Value Analysis in Talmudic Literature in the Light of Modern Economics,” International Journal of Social Economics, Vol. 13, No. 3 (1986), incorporating the International Review of Economics and Ethics, Vol. 1, No. 1 (1986), pp. 34–53.

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money my ancestors have invested here!” However, R. Hoshiah the Great retorted: “Say, how much money have your ancestors invested in people? Were not there many people who needed an education (in the Torah)?” (Sh’kalim, V:15a–b.)

PART SIX

IMPACT ON WESTERN ECONOMICS

CHAPTER ELEVEN

JEWS IN THE EUROPEAN ECONOMY In the foregoing chapters we have demonstrated a great deal of the rich array of talmudic concepts and lines of analysis which were to re-emerge in the development of modern economic thought. However the explorations in chapters three to ten were mainly retrospective. They did not address the issue of whether or not aspects of talmudic thought may have had an impact in Europe such that the seeds were sown to bear fruit later as European Economics began to emerge as a distinctive discipline. And if so, who, or which institution served as the channel of communication between ancient talmudic thought and the purveyors of modern economic ideas. The latter issue is a vast one which has been little considered by historian of economic ideas. Nevertheless, there are strong grounds for pursuing the issue, and some of those grounds are considered in this concluding chapter. Accordingly, we shall discuss three historical phases: 1. The historical background of the Jews in the European diaspora. 2. Capitalism and the Jews 3. Talmudic impact on modern Economic thought: the Spanish connection. Historical Background Until the thirteenth century, most Jewish people lived in regions where Islamic culture was predominant. Thereafter, Jews became increasingly prominent in areas of Europe, at first in the South and later in the North. In some of those areas, and for lengthy periods, Jewish communities experienced a good measure of toleration. Salo Baron writes: Not only orally but often in widely circulating pamphlets and treatises, the Jews were in a position to discuss frankly the differences between their own and the Christian attitude to life. In few modern countries . . . would men be allowed to speak their minds so freely and in a way so clearly

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By the time of the Crusades, this situation had altered in many regions. However, given the periods of dialogue, and given the prominent role of Jews in trade and finance, it seems most probable that European economic thought and practice came to be influenced by Jewish understanding and custom. Usury and the Jews History suggests that none but the most rudimentary economic system can endure for any length of time under conditions in which a price for the use of money is inhibited. Where, for example, the taking of interest is outlawed, a price for money emerges in other forms. This is illustrated by recent developments in certain Islamic nations. Timur Kuran observes: As in the past, it is proving difficult to implement some of Islam’s perceived economic requirements. A case in point is the ban on interest, which constitutes the raison d’etre of the Islamic banks that have mushroomed throughout North Africa, the Middle East, South Asia, and elsewhere. The banks have eliminated interest only in name: they use a panoply of practices that can only be characterized as interest in Islamic garb. Although the matter is shrouded in controversy, a number of Islamic economists have sought to legitimize these practices.2

An analogous ban pertained in most parts of Europe during the early and high middle ages. Roman law tradition allowed for interest payment in two types of real contract. One of these contracts was depositum irregulare. The other was mutuum, a loan for consumption, if the mutuum was linked to a second, verbal contract known as stipulatio.3 The Justinian Code set a maximum interest rate of 12.5 per cent per annum for most loans. In the case of loans to farmers, the maximum allowable was 4.5 per cent. On the other hand, the Canon law tradition forbade interest-taking, and this ban was extended into civil law by the Emperor

1 S.W. Baron, Ancient and Medieval Jewish History (New Brunswick, NJ: Rutgers University Press, 1972), p. 266. 2 S. Todd Lowry (ed.), Pre-Classical Economic Thought (Boston: Kluwer, 1987), p. 111. 3 For detail, see B. Gordon, Economic Analysis Before Adam Smith (London: Macmillan, 1975), pp. 135–9.

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Charlemagne (C.E. 742–814). The very general condemnation of interest-taking in law at this time constituted the cornerstone of subsequent medieval usury legislation.4 Such legislation became more severe and prohibitive over the next five hundred years. Only in late medieval and Renaissance Europe were theologians and jurists to establish legitimate grounds for the receipt of interest. With Christians under strong moral and legal pressure to deny themselves income by way of interest, there was an understandable restriction in the supply of loanable funds. Hence, it proved convenient on economic grounds to tolerate, and even encourage, the presence of a group in the community which could undertake certain of the financial functions denied the majority. Jews were able to fulfil the role required in clear conscience because of the different legal tradition to which they were heirs. The outcomes of long talmudic debate, based on the realities of Eastern economies, allowed observant Jewish businessmen a scope which Canon law edicts, based on the less sophisticated economies of the Western Roman Empire in decline, could not comprehend.5 The legal tradition of the Jews on usury was grounded in the original biblical injunctions which prohibited interest-taking only on loans amongst Jews. Interest could be demanded of foreigners. The reason for this was that the foreigner in mind was usually a businessman who borrowed money for commercial purposes in the expectation of profit. The Jew in mind was a farmer (the economy of ancient Israel was agricultural and pastoral) who borrowed for purposes of consumption. Such borrowing by agriculturalists often led to disastrous consequences, including expropriation of assets and enslavement. Another consideration was that, whereas Israelites were in no position to forbid foreigners to demand interest on loans, it would have been an affront to national solidarity for a Jew to grant a foreigner a cheap loan which he in turn could re-lend at profit to another Jew. As the economic circumstances of the Jewish people altered, particularly the circumstances of those who prospered by exile in Babylon, so the law regarding usury changed. Talmudic scholars made a clear distinction between loans for consumption, on the one hand, and the

4 Cf., J.T. Noonan, The Scholastic Analysis of Usury (Cambridge, Mass.: Harvard University Press, 1957), p. 15. 5 The regression of the Roman economy from c. 193 (during the reign of the preChristian Emperor Septimus Severus) is discussed in B. Gordon, The Economic Problem in Biblical and Patristic Thought (Leiden and New York: E.J. Brill, 1989), pp. 92–7.

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granting of credit for productive purposes. The rabbis prohibited all money lending at interest both to Jew and Gentile alike when the loan was intended to meet consumption needs.6 However, when credit was extended for reasons of productive gain, the talmudists began to find means whereby there could be a return to the lender in excess of the principal of the loan. As elaborated upon in Ch. 4, the talmudic theory of interest as a reward for the creditor’s “waiting-time” began a process of conceptual transformation regarding the nature and function of interest, a process which ultimately led to the liberalization of the biblical usury laws. How? Once the brunt of the burden shifted from the lender toward the borrower for depriving the lender of another opportunity, the talmudic scholars found it necessary to fashion new rules to protect the rights of the creditor. This change in venue enabled the scholars to devise new ways concerning the payment for the use of loanable funds. As a consequence, when the economic conditions required greater facilities for credit, Babylonian rabbis legalized the practice of antichretic transactions.7 Concerning this innovation, Salo Baron comments, that “since Jews were in front rank of merchants and bankers in a generally backward empire, it would seem that it was they who set the pace in developing such new commercial policies.”8 Among the new developments which made it easy to circumvent the usury laws were the “deaf interest,”9 the suran note,10 a mortgage which deducted the usufract for the debt11 and the legal fiction of the ISKA or commenda contract.12 (For a more detailed description of these devices, see Ch. 4). Such innovative activity, it can be remarked, was the harbinger of Jewish commercial initiative in medieval Europe. The commenda contract’s use became well entrenched in medieval international trade. Christian merchants followed their Jewish counterparts in adopting the device. As such, it is one of the most prominent,

6 Baba Metzia 69a. Babylonian tradition was opposed to lending at interest to a Gentile. See, Babylonian Talmud, B.M. 70b, San. 25b, Mak. 24a. 7 Consult Boaz Cohen, Antichresis in Jewish and Roman Law (New York, 1950), pp. 179–202. See also, Talmud Ketubot 86a, and Kiddushin 47. 8 S.W. Baron, A Social and Religious History of the Jews, Vol. I (New York, 1952), p. 414. 9 B.M., 65a. 10 B.M., 64b. 11 B.M., 67b. 12 B.M., 63b, 64a, 70a.


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but by no means unique, examples of the manner in which talmudic commercial law provided a model for orderly economic intercourse which a blanket prohibition of usury would seem to forbid.13 Innovation and High Finance The Hebrew Bible, in addition to being regarded as the “immutable word of God,” was also understood by Jews as the ancient history of their people—spiritual, political, and economic. Since it had always been considered as “The Law of Life,” as life’s conditions changed the original injunctions of the Bible became subject to interpretation and reinterpretation. The reason for such subjection is grounded in the Jewish understanding of the Law itself. As expounded in the Talmud, and in subsequent medieval Jewish literature, the Law is called “Halakha,” the root of which is Ha-Lokh meaning “to walk,” to be in motion, like a river in constant flow (cf. Chapter One). In short, the Law is a complex system of both tradition and change. This elastic attitude equipped the Jews with a strong sense of history. Eventually, they became the embodiments of a symbiosis. The latter consisted of a highly developed historical consciousness, intellectual flexibility and physical mobility which, together with “mother necessity,” gave them a certain advantage in responding to new economic complexities. It might also be contended that the flexibility was in part due to the fact that Jews were often obliged to live on the margin of societies in which they found themselves. Hence, they were not tied down to the old habits of thought and customary practices of contemporary milieu. In consequence, Jews were often freer and braver in discarding accepted notions and in adopting newer and revolutionary concepts. This predisposition may, on occasions, have led to social and scientific breakthroughs.14 After an initial period of toleration, Jews in medieval Europe were increasingly marginalized, from about the time of the First Crusade. Their economic freedoms became more and more circumscribed.

13 S.W. Baron, The Economic Views of Maimonides (New York, 1941), p. 170. See also, ibid., pp. 127–264. Another relevant discussion is Jacob Katz, Tradition and Crisis. ( Jerusalem, 1958). 14 Thorstein Veblen, among others, has argued for this latter contention, most notably in his essay, “Intellectual Pre-eminence of Jews in Modern Europe.” See The Portable Veblen, ed. Max Lerner (New York, 1950), pp. 467–79.

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Whereas they had been able to own land and farm it, this avenue of economic activity was increasingly denied them. In addition, they came to be excluded from a variety of commercial endeavors, with Christian merchants moving in to fill the vacuum, and, it should be noted, adopting many of the practices based on the talmudic guidelines of their predecessors. The marginalization of European Jewry, as Max Weber and others have pointed out, was not exclusive to Jews in recent centuries. Christian minorities including the Huguenots in France, the Quakers in England, and the Poles in Russia came to be subject to similar pressure. As with the Jews, it would appear that such minorities were driven with peculiar force into economic activity.15 Probably, marginalization of medieval Jews was often more radical than analogous undertakings, in that attempts were made to deny them public office; invalidate marriages between Christians and Jews; establish ghettos; and, demand that Jews groom and dress themselves in distinctive fashion.16 If intensity of engagement in economic pursuits is a function of degree of marginalization, then Jews had very strong grounds for single-minded concentration on commercial success. For some, success was forthcoming, but many of the most prominent medieval Jewish businessmen found themselves placed in the position of obtaining the official protection of the politically powerful at the price of public detestation. Jews were used as convenient tools to effect the processes which the authorities recognized privately as legitimate, but were unprepared to sanction publicly. Popes, bishops, kings and princes readily availed themselves of the services of Jewish financiers. These were engaged to bolster the economies involved. They were also engaged as agents who could undertake activities which would condemn their principals to hell-fire and damnation if those principals were personally involved in the mechanics of the activities. An example of the way in which Jewish businessmen could be exploited by the powerful in the high middle ages is afforded by the case of the British financier, Aaron of Lincoln (C.E. 1125–1186). Aaron’s career, “illustrates the manner in which the medieval Jewish communities could be organised into a banking association reaching throughout Consult M. Weber, General Economic History (Glencoe, Illinois, 1955), pp. 358–60. See also, Cecil Roth, Short History of the Jewish People (London, 1953), pp. 204–5. 16 Consult, e.g., Kazimierz Kowalski, The Jewish Question in the Middle Ages According to St. Thomas Aguinas (Warsaw, 1938), pp. 12–25. 15


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an entire country, while the ultimate fate of the wealth thus acquired (Henry II seized his property) shows that in the last resort the state was the arch-usurer and obtained the chief benefit from Jewish usury.”17 Expulsion of Jewish bankers, once they had served their purpose in financing the powerful, was not confined to England.18 In such climates of uncertainty, Jews were obliged to be in constant readiness to pick themselves up and look for alternate “hosts” and/or “benefactors.” One of the effects of the enforced mobility was to encourage a cosmopolitan outlook which helped place some Jews at the centre of international economic activity. In addition, the very dangers which Jews sensed and encountered forced them to mobilize all their capacities to see and say, to dream and plan, to organize and implement, in new ways. As a result, they contributed to the growth and sophistication of international business dealings, and to an increased appreciation of the workings of interactive markets. Capitalism and the Jews The origins and causes of modern European capitalism have been much debated by historians, and some of these have proposed links between developments in organized religion and the emergence of capitalist phenomena on a large scale. The best-known thesis in this respect is that expounded by Max Weber who argued that Protestantism, especially in its Puritan form, had a decisive influence in shaping the “spirit of capitalism,” and therefore, on the formation of capitalism itself. According to this view, there is a definite cause and effect relationship between the Protestant Reformation and modern capitalism.19 Weber’s argument has been the subject of considerable controversy over the years.20 However, it is not our intention here to survey the many ramifications of that controversy. Rather, we wish to remark on

The Jewish Encyclopedia, Vol. 1, pp. 16–17. Cf. Gilbert S. Rosenthal, Banking and Finance Among Jews in Renaissance Italy (New York, 1962), pp. 5–7. 19 Weber’s thesis was presented in two papers, “Die protestantische Ethic und der Geist der Kapitalismus,” which appeared in the Archiv fuer Socialwissenschaft und Socialpolitik in 1904–5. 20 On Weber and his critics, see Roman A. Ohrenstein, “Economic Aspects of Organized Religion: Perspective and Analysis of the Modern Phase,” Nassau Review, Vol. 2 (Spring 1971), pp. 37–61. 17 18

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the fact that in the course of the debate some of the contributors, in contrast to Weber, have sought to emphasize the role of Jews in the emergence of capitalism. One of the most notable historians to stress the Jewish factor was Werner Sombart who was particularly impressed by the sophisticated character of the economic analysis of the Talmud. Sombart wrote that “some rabbis speak as though they had mastered Ricardo and Marx, or to say the least, they had been brokers on the Stock Exchange or counsel in many an important money-lending case.”21 He went on to claim that what is called “Puritan” by Weber, and others, in the underlying ethos of capitalism is, in reality, “Judaism.” Sombart, like Weber, held that modern capitalism is indeed the product of a specific “Capitalist Spirit”—a condition which did not exist in the Middle Ages. Sombart believed that modern capitalism had a “spirit” of its own which was new in history. That spirit involved unshackled amassing of assets, and profit-seeking which paid scant regard to social consequences or interpersonal relations.22 In the medieval scheme of things, he argued, economic activity was based on the pursuit of the satisfaction of consumer need, whereas modern capitalistic life is impelled by the pursuit of gain (Bedarfsdeckung versus Erwerbsprinzip).23 At the basis of this pursuit of gain there is an ethic that is more properly designated as Judaic than Puritan.24 This thesis concerning the Judaic foundations of European capitalism is extended subsequently to include America. Of the United States, Sombart wrote, “. . . as the golden thread in the tapestry, so are the Jews interwoven as a distinct thread throughout the fabric of American economic history; through the intricacy of their fantastic design it received from the very beginning a pattern all its own.”25 A number of Jewish scholars have attacked Sombart’s thesis.26 Salo Baron, for one, finds the thesis “brilliant” but “undisciplined.” According to Baron, the identification of modern capitalism with “the spirit W. Sombart, The Jews and Modern Capitalism (London, 1913), pp. 313–4. W. Sombart, The Quintessence of Capitalism (New York, 1915), pp. 236–62. 23 W. Sombart, Der Modernen Kapitalismus (Leipzig, 1902). 24 The Jews and Modern Capitalism, p. 41. 25 Ibid., pp. 191–2. Cf., Nathan Glazer, The Characteristics of American Jews (New York, 1965), p. 42. 26 See, e.g., Nathan Reich, “Capitalism and the Jews,” The Menorah Journal, XIII ( January, 1930). 21 22


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of Judaism” is “false and profoundly misleading.”27 Further, Sombart himself diminished the creditability of his argument in his later writings. Jacob Oser comments: It is interesting to note that Sombart assigned to the Jews a decisive role not only in the development of capitalism, but also in socialism. Early in his life, when he leaned towards Marxism and was critical of capitalism, Sombart emphasized the role of Jews in the development of capitalism. After World War I when he developed a strong antipathy toward Marxian Socialism, he found that socialism was strongly influenced by Jewish thought.28

Undoubtedly, Jews in Europe contributed a good deal to the transition from medieval feudalism to nationalistic mercantilism. This latter involved expansion of the power of central state authority at the expense of more localized rule, and Jews facilitated this trend by loans (sometimes enforced) to central authorities as well as by direct taxation payments which swelled kingly coffers.29 Secondly, Jews helped weaken the economic dominance of the monopolistic feudal guild structures from which they were excluded. Thirdly, Jews introduced an element of economic liberalism into the “contained” economies of medieval Europe. That liberalism stemmed partly from the necessities of their struggle for economic survival. However, it was also due to their adherence to the Talmud and its laws concerning economic behavior. Those laws had been “basically formulated under the semicapitalist civilization of the Hellenistic and early Roman Empires.”30 The liberal orientation which this initial economic background provided was retained in the talmudic tradition over the centuries. Given that mercantilist doctrine and practice represents the economics of early capitalism, considerations such as the above suggest that Weber underestimated the role of Jews in the rise of the new economic order. As Gerhard Lenski writes: Whether one accepts or rejects Weber’s view that Judaism was incapable of generating the modern capitalist system, it seems clear that the Jewish

27 S.W. Baron, “Capitalism and the Jewish Fate,” The Menorah Journal, XXX ( July– September, 1942), pp. 120, 137. 28 J. Oser, The Evolution of Economic Thought (New York, 1963), pp. 161–2. 29 Cf. S.W. Baron, Ancient and Medieval Jewish History, p. 251. 30 Ibid., p. 252.

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On the other hand, it would seem that Sombart overstated the case. Modern capitalism cannot be designated as simply Jewish in inspiration. Jews were capitalism’s “putty as well as its moulders.” They, “helped to shape the destiny of capitalism, but capitalism also shaped the destiny of Jews.”32 The Spanish Connection Their Impact on the Development of Western Economic Thought The preceding sections of this chapter offer considerable evidence that Jews in Europe were in a position to make an impact on the course of the development of Western economic thought. Talmudic law permitted Jews to engage in financial activities which challenged traditional Christian understandings of what was legitimate in this sphere. Again, Jewish appreciation of the character of the Scriptures, plus the social discrimination experienced by Jews, encouraged them to be flexible and cosmopolitan with respect to business practice. They were obliged to be innovatory; at times, on an international scale. In addition they played a significant role in the process of transition from medievalism to modern capitalism. Despite the above, there has been little systematic investigation by historians of ideas regarding the aspects of talmudic economic thought which may have entered the Western mainstream. Neither, has there been any great progress in identifying the times, places and personalities which may have been involved. It is the purpose of this section to suggest that attention to currents of thought in medieval and Renaissance Spain might yield dividends in terms of research on the transmission of economic ideas from Jews to the wider European community. In medieval Spain, Jews lived under both Christian and Moslem rule. Despite occasional persecutions, many Jews prospered, occupied positions of power, and were widely accepted in secular professional ranks. As early as 948 C.E., a rabbinical school was established at Cordova, G. Lenski, The Religious Factor (Garden City, New York, 1963), p. 114. H.M. Sachar, The Course of Modern Jewish History (Cleveland and New York, 1958), pp. 39ff. 31 32


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and there were notable developments subsequently. From 1104, the academy at Lucena was directed by the celebrated Alfasi (Isaac ben Jacob, of Fez), and later by Joseph ben Migash. Even more celebrated are the contributions of the Cordovan-born scholar Maimonides (1135–1204).33 Later talmudic authorities to work in Spain included Asher ben Yehiel of Cologne (1250–1327); Jacob ben Asher (d. 1340); and, Solomon ben Abraham ben Adret (d. 1310). Prominent in the output of these scholars were collections of responsa, i.e., answers to queries on doubtful points of Jewish law, including law relating to economic behavior. After the expulsion of the Jews from Spain in 1492, much of this material was summarized by R. Jose Caro of Toledo (1481–1575) in his Shulhan’ Aruk which became a standard textbook.34 Given this distinguished intellectual tradition, the prominence of many Jews in a variety of walks of life, and the opportunities for cultural interpenetration over long periods, it would be surprising if Jewish economic thought and practice failed to have an impact on society at large. One illustration of that impact is provided in the writings on usury of the Catalonian, Saint Raymond of Penafort (1175–1275) who became general of the Dominican Order in 1238. Saint Raymond spent most of his life in Barcelona, a bustling port-city which was a centre of Jewish culture, and when he analyses usurious practices among Christians, he rehearses the very same grounds that were entirely familiar to Spanish rabbis of much earlier days.35 Subsequently, cultural interpenetration in Spain was intensified by the increasing persecution which led many Spanish Jews to convert (at least, nominally) to Christianity. These converts, many of whom were engaged in finance and commerce, remained in their existing avocations and continued to observe the long-standing guidelines for commercial intercourse which the Spanish talmudic tradition had established. Hence, traditional talmudic understanding of economic practice persisted in Spain after the expulsion of the Jews, and into the mercantilist era. It is noteworthy too that some of the descendants of the Jewish converts became prominent Christian churchmen and intellectuals. Another 33 Maimonides was the greatest Jewish medieval jurist and philosopher. He wrote extensively on economic subjects. For a survey of his economic thought, see S.W. Baron, op. cit., pp. 149–235. 34 The above is from M. Grice-Hutchinson, Early Economic Thought in Spain, 1177–1704 (London: Allen and Unwin, 1978), pp. 18–9. 35 Ibid., pp. 33–6.

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element in the cultural inter-mix of Spain, by the fifteenth century, was the long-standing Islamic influence in certain regions. Probably, certain of the conventions concerning trade and commerce in some of those regions still owed more to the Koran than they did to the Talmud or the Christian developments of Roman and Canon law. At the very point historically at which the Iberian Peninsula encapsulated a probably unique blend of traditions of economic thought— Jewish, Islamic, and Christian—Spain was subject to an economic revolution, the dimensions of which had no parallel in the West and irrevocably changed the course of economic history. Spain penetrated South America and raped it of those minerals that were regarded as “precious.” The resulting inflow of metal, given the monetary conventions which had persisted from antiquity, led to unprecedented inflationary pressures in Spain and an economic decline which challenged all the age-old ideas concerning the means whereby a state could aggrandize itself. The ferment which these events created led Spanish Christian intellectuals to devote much of their attention to a set of economic circumstances which was quite unlike those of medieval Europe. Among the leading figures in the new lines of economic enquiry were: Francisco de Vitoria (1480–1546); Domingo de Soto (1494–1560); Martin Azplicueta Navarrus (1493–1586); Diego De Covarrubias Y Levia (1512–1577); Luis Molina (1536–1600); Domingo de Banez (1528–1604); and Juan de Lugo (1583–1623).36 Each of these were scholastics, and the outward forms of their treatises are in the conventional mould. However, their economic analyses are highly innovative when compared with those of St. Thomas Aquinas and other theologians and jurists of the high Middle Ages.37 What were the bases for this innovative economic analysis? Undoubtedly, one basis was the novelty of the macro-economic circumstances of their era. However, it is also clear that when the Spanish doctors came to address the workings of the contemporary Spanish economy in the face of change, they were obliged to penetrate the micro-economics of a variety of business dealings which centuries of Jewish and Moslem practice had normalized in that country. A pioneering investigation of the thought of these and some of their contemporaries is M. Grice-Hutchinson, The School of Salamanca: Readings in Spanish Monetary Theory, 1544–1605 (Oxford: Clarendon Press, 1952). 37 For detail, see B. Gordon, op. cit., pp. 212–7; 236–43. 36


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For example, the Scholastic moralists were obliged to investigate “dry exchange,” a contract which disguised lending at interest by means of an international exchange-deal. Another device which required attention was the mohatra, or double-contract. A third instance was census, a contract which obliges payment of an annual return from fruitful property. As a result of investigation of these and other arrangements prevalent in a Spanish economy in revolution, the Schoolmen revamped the tradition of Christian economic thought to which they were heirs. Yet, as Grice-Hutchinson points out, in Spain, “we find discussed among Christians, as late as the seventeenth century, typically scholastic problems that had been thrashed out among Jews and Moslems long before.”38 In fact, Jewish presence in Spain has a long history. According to Roth’s Short History of the Jewish People (pp. 194–198), as early as the fourth century, the number of Jews in Spain was so considerable as to justify special mention in legislation. The constant wars, accompanied by a process of commerce, tended to bring Jewish settlers to Europe, including Spain which eventually became a center of Jewish culture. As we move down the avenues of history, we find that by the eleventh century Spanish Jewry had reached the peak of its humanistic tradition with Juda Halevi (1075–1145). During the “golden age” of Jewish life in Spain, the Jews experienced a period of Christian tolerance which compared favorably with Almohadan fanaticism. In this connection, it is particularly noteworthy that in 1085 Alfonso VI of Castile captured Toledo. During his reign, according to Roth, Jews of Christian Spain reached the zenith of prosperity. That conquest made him master of one of the oldest and most flourishing Spanish provinces. From this time on, Toledo was the capital of Castile and the center of Jewish life for the whole of Spain. Small wonder that such a favorable climate of tolerance created a fertile ground for cultural interpenetration between Christians and Spanish Jewry in general and, as will be shown hereinafter, the converted Jews, in particular.

38

M. Crice-Hutchinson, Early Economic Thought in Spain, p. 14.

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chapter eleven The Cultural Interpenetration Illustrated

In the preceding section we described a broad spectrum of innovative commercial practices in Christian Spain, due in significant measure, to the cultural interpenetration between the Christians and Spanish Jewry. We shall now examine the extent of that process which occurred between the Jewish religious civilization and Christian scholarship. The point has been made in the section—“The Spanish Connection”—that as the conversion of Jews to Christianity accelerated, the cultural interpenetration intensified. There were a number of factors that contributed to this development. To begin with, many of the “Conversos” or “New Christians” who, heretofore, occupied positions in finance and commerce, remained on their post, and continued to follow the Talmudic tradition concerning commercial transactions. Thus, de facto, there was little or no change in this sphere of endeavor. Moreover, in the course of time, those Conversos and their progeny acquired positions in Cathedrals, government and in the halls of learning. In fact, the writers and the intellectual elite who set the tone in 15th century Christian Spain were predominantly Marranos and Conversos.39 All that activity created a fertile ground for intercultural diffusion. There were many such cases to this effect, too many to enumerate. Inasmuch as the number of Jewish converts had reportedly reached into the hundreds of thousands, a process of cultural interpenetration was a foregone conclusion.40 However, to highlight the magnitude of that condition, it may be useful to cite a few outstanding examples. One such instance concerns the role Pablo de Santa Maria (1350–1435), originally Solomon ha-Levi and one-time rabbi. He converted to Christianity in 1391 and subsequently rose to the dignity of Archbishop of Burgos. As an author of many books and polemical firebrand, he wielded considerable influence in his religio-cultural environment. His son Alonso de Cartagera, (born 1385), who converted together with his father, was famous as a jurist, historian, philosopher-theologian, diplomat and Church leader. Educated at the University of Salamanca,

See Encyclopedia Judaica (1972), Vol. 15, pp. 241–252. Cecil Roth, History of the Marranos (1947). (Philadelphia: The Jewish Publ. Society of America), p. 17. 39 40


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erudite and articulate, Don Alonso rose to the rank of auditor of King Juan II and to the deanship of Compostela. Thereafter, he succeeded his father as Bishop of Burgos. Nevertheless, his real distinction was in the political sphere, where economic matters could not have remained beneath his notice. What is particularly noteworthy about Don Alonso is the fact that his views and attitudes contained elements of Jewish thought, symptomatic of the continuing process of cultural interpenetration.41 The same was the case with Pablo’s brother, Gonzalo and several other members of his family who attained eminence in the Church, politics and literature. Another outstanding example is the religious metamorphosis of the Chief Rabbi of Castile, Abraham Senior. During the expulsion of the Jews from Spain, while subjected to pressure and persuasion, he abandoned Judaism together with his son-in-law and his family. Until then, he was chief judge of Jews of Castile and a prominent courtier in Spain. Since 1476 he also served as treasurer of the Hermadad—an important military organization. But upon his conversion, Senior was appointed regidor of the royal council and chief financial administrator of the crown prince. Nevertheless, as a man of great learning, steeped in the talmudic dialectics in general and in its economic and financial teachings in particular, it stands to reason that with his reach, role and influence, he must have contributed significantly to the fermenting cultural trend. But even more impressive are the accomplishments of the family Santagnel. The career of Luis de Santagnel (d. 1498) was marked by feats of historical significance. He was the son of Solomon who was the governor of Saragosa. But he himself was named after the first Luis de Santagnel who was a Converso. Among many of his achievements that stand out, was the holding of the office of finance minister to King Ferdinand, and foremost, his saving of Columbus’ enterprise for Spain which resulted in the discovery of America. He supported that undertaking both morally and financially. Needless to say, the Santagnels played a pivotal role in this process of intercultural diffusion. This can be readily gauged from the 1998 international Symposium on this subject which took place at the Dominican University, Forest River, Illinois. The Symposium bore the title: 41 See B. Natanyahu’s magnum opus (1995), The Origins of the Inquisition in Fifteenth Century Spain (New York: Random House), pp. 517–518.

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“Santagnel 98, The Life and Times of Luis de Santagnel—The Contributions and heritage of Spanish Jews, Conversos and Sephardim.” The cultural event featured a.o., a prominent rabbi-historian as the keynote speaker, followed by an array of scholars from Spain, Israel and America. In describing Luis de Santagnels’ Jewish identity, it focused on the “extraordinary contributions” made by the Jews, Conversos and their descendants. In addition, the Symposium consisted of a number of panel discussions exploring the lives of other Conversos in Spain’s royal court along with their socio-economic legacy. In sum, the Symposium highlighted the immense creativity and the cultural interpenetration that took place in Spain and which spilled over beyond its boundaries. Suffice it to mention, the very appointment of Fray Alonso de Spina, who was of Jewish origin,42 to the post of Rector of the University of Salamanca, is ample proof of the degree of the cultural diffusion that might well have affected the very citadel of the school of Salamanca. From Theology to Political Economy As we attempt to advance the hypothesis regarding the existence of a linkage between Talmudic and modern economic ideas, I wish to discuss another contributing factor toward this trend—the scholarly dimension. History records that during the Middle Ages, many Christian theologians were increasingly engaged in the study of Jewish texts. The Spanish Dominican friar, Raymond Martini (1220–1285) is a prime example. Raymond was able to read Hebrew rabbinical writings with ease. His book Fugio Fidei,43 which contained extracts from the Talmud, the Midrash and later rabbinical writings, was widely circulated among Christian scholars in Europe. Although Raymond Martini, Pablo de Santa Maria and others, were avowed Jewish antagonists, their biased works, however, had also challenged the minds of more fair-minded Christian scholars to delve more objectively into the original Jewish sources. One such scholar was Joseph Justus Scaliger (1540–1609). In fact, it was Scaliger who brought to light Raymond’s Fugio Fidei, later published in Paris in 1651.

42 43

Roth, Cecil, ibid., p. 34. Enc. Judaica (1972), Vol. 11, pp. 1065–66.


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Scaliger was recognized perhaps as the greatest Western orientalist of the age to the point of being able to debate with learned Jews in fluent Hebrew in Avignon and Rome. He argued, among others, that Christians had totally failed to grasp the significance of post-biblical Jewish literature. As a consequence, they had been and are still unable to confront Judaism intellectually: “il faut le convainare a lire le Talmud.” Scalinger, therefore, urged that Jews be allowed to resettle in the West not just because “they bring wealth,” but because “we need to learn from them.”44 Saliger’s reputation as a Hebraic scholar had attracted a wide following. His profound insight regarding traditional scholarship was emulated by many Christian scholars. In Holland, for instance, there were Hebraists of note such as Darius, Calddeus and Raphellengius as well as Ferdinandus who adopted his method of inquiry. And in France another brilliant Hebraist, Jean Mercier ( Joannes Mercerusi, d. 1570) became a Professor of Hebrew at the College Royal in Paris in 1546. He wrote and translated many works in Hebrew, Aramaic, as well as in Latin. One of his best known books is Libellus de abbreviato Hebraorum tam, Talmudicorum quam et alorium rabbinorum (Paris, 1561).45 To be sure, Scaliger and Mercier were essentially humanists, not economists. But it would be surprising that, as scholars of Hebrew culture plus their familiarity with its multifarious literature, they could have failed to appreciate, let alone absorb, some of the economic notions which permeate Talmudic and Rabbinic literature. This is particularly evident in the case of the noted French scholar, Jean Bodin (1530–96). He was both a humanist and an economist, jurist, philosopher of history and political science, and an avid student of ancient Jewish culture. The latter is manifested in his new approach to state and society. Thus, as a religious nonconformist, he postulated the Mosaic Law as the best foundation for defining and perceiving the natural right of people and individuals.46 Moreover, Bodin who was a paragon of learning and prolific writer, inspired some famous scholars, among them Justus Lipsium and Hugo

44 Jonathan L. Israel, European Jewry in the Age of Mercantilism 1550–1750 (1985) (Oxford: Clarendeon Press), pp. 54–55. See also Reinach S. (1929) Joseph Scaliger et les Juifs, REJ. LXXXVIII. 45 See Encyl. Judaica (1972), Vol. 11, p. 1381. 46 Israel, Jonathan, European Jewry in the Age of Mercantilism—1450–1750, ibid., pp. 53–55.

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Grotius (1583–1645), to consider new ways to study new literary sources, so as to think in new terms in matters concerning state and society. At any rate, the study of other languages and cultures, including Hebrew, became a subject of major interest among prominent Christian scholars. Accordingly, there was also a marked resurgence in studies of Hebrew and Aramaic and a systematic exploration of the Talmud and rabbinic literature. It is particularly significant that Jean Bodin’s theories, notably his secularized version of the Mosaic lessons about man’s natural rights, have attained definitive expression in the works of Hugo Grotius (1583– 1645), the founder of international law, and in the works of Pufendorf (a Protestant, 1632–94), which was continued in England by Francis Hutcheson (1694–1746), the revered teacher of the founder of modern economics, Adam Smith.47 Indeed, those notions regarding the natural law occupy a central place in the works of the Physiocrats, notably in Francois Quesnay’s Tableau Economique. The Physiocrats postulated a providential order of the world: harmonious, immutable and beneficial. It is interesting that their emphasis on the “natura law of harmony,” which Adam Smith adopted, is precisely the leitmotiff of the Hebrew Psalmist. Musing over the wondrous, law-ordered cosmos, the Psalmist exclaims: The heavens declare the glory of God; the heavens proclaim His handiwork. Day after day the work goes forth; night after night the story is told. Soundless the speech, voiceless the talk, yet the story is echoed throughout the world. The sun, from its tent in the heavens, comes out like a bridegroom from his chamber exalting and eager as a champion to run his course. From the rim of the east it rises, to sweep in majesty upward, westward warming all on earth as it passes . . . (Psalm 19).

The above is only one of the many passages concerning the natural phenomena that are highlighted in Hebrew-biblical literature. In sum, the above examination of the various levels of the cultural interpenetration in Spain lead us to the following preliminary conclusions: a) A substantial element of Jewish thought had entered into the intellectual arena of Christian scholarship in Spain. b) The effect of this cultural interpenetration had been felt at the highest levels, including the school of Salamanca. 47 See, Spiegel, H.W., (1971), The Growth of Economic Thought (Englewood Cliffs, New Jersey: Prentice Hall), pp. 99, 135, 164, 232.


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c) Jean Bodin’s teachings about the natural law as being based on the Mosaic Law, may have influenced, though indirectly, his countryman, Fancois Quesnay, the Englishman Francis Hutchison and, through him, the Scottish Adam Smith, in advancing their theory of the natural law of harmony. Who First Stated the Quantity Theory? Earlier, the point has been made that the economic deliberations by the scholastic doctors had been familiar stuff to the contemporary rabbis. Indeed, while reading Hutchison’s translations of the Texts—the scholastic writings dealing with questions like the just price, usury, or the Aristotilian notions regarding the functions of money, followed by responsa literature in Appendix I (The School of Salamanca, ibid., pp. 79–119)—one is struck by the similarity of issues that had already been hammered out throughout the ages by generations of Talmudic and Rabbinic scholars, and, at that, on a higher level. As stated by Schumpeter: The Spanish scholastics devoted much of their effort to examining commercial questions . . . that had for long centuries been carried on between rabbis . . . since the days of the Babylonian rabbis.48

Hence, there is no need here to belabor these points. However, since the idea concerning the quantitative relationship between money and prices has been highlighted by historians as a major achievement of the School of Salamanca, it may be of historical significance to tackle briefly the genesis of this theory. Specifically, who was the first to state the quantity theory of money? Most historians of economic ideas have credited Jean Bodin with having first formulated the quantity theory: The principal reason which raises the price of everything wherever one may be, is the abundance of [the item] which governs the appraisal and prices of things.49

48 Schumpeter, J.A. (1954). History of Economic Analysis (New York), p. 165. On monetary theory in the Talmud, see Lieberman, Yehoshua, “Elements of Talmudic Monetary Thought,” History of Political Economy, 11, (1979), pp. 254–70, and Ejges, E. Das Geld im Talmud (Vilna, 1930). 49 Monroe, A.E. (1930). Early Economic Thought (Cambridge, Massachusetts: Harvard University Press), p. 127.

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However, Grice-Hutchison disagrees. She adduces much evidence to the effect that it was Dr. Navarro Azpilcueta (1493–1586) who preceded Bodin by 12 years. She quotes Navarro as having stated, among others: . . . in times when money is scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver.50

According to H.W. Spiegel, “whether Bodin was influenced by Navarrus or Navarrus by Bodin is an open question.” However, what seems to be beneath the knowledge of those historians is that it was actually the third century talmudic sage, R. Johanan, who recognized the existence of a quantitative relationship between money and prices, that preceded both Azpilcueta and Bodin, not by twelve years but by twelve centuries. Said R. Johanan there are times when money is cheap (i.e., due to its abundance) and commodities are dear (i.e. due to rising prices), and times when money is dear (i.e., because of its scarcity) and commodities are cheap (i.e. due to the falling prices.) (Babyl. Talm. Taanit 19b)

Whether or not there was some sort of linkage between Johanan’s quantitative thesis and those of the Schoolmen, is a question I am attempting to investigate. Although, as for now, there seems to be no clear evidence of such a connection, there is circumstantial evidence that such a diffusion of ideas might have occurred. Thus, the legacy of Jewish learning, which the New Christians, some of them former rabbis, brought along with them, could not have remained impermeable in their high governmental and economic positions. The Schoolmen themselves were no strangers to Jewish lore and law, and the “quantitative” idea was already in the air. Ideas have wings: if blocked by physical or mental barriers, they travel through the air. It took only to relate the prevailing inflation to the influx of precious metals from the Indies to Spain. The Marrano Economists in Portugal As we have seen, there was no stratum of society in Spain to which the Conversos did not penetrate. Yet, this was even more the case in Portugal. In fact, the New Christians in Portugal were found in every 50

Grice-Hutchison, The School of Salamanca, ibid. See, pp. 104, 105, 106.


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walk of life, especially in commerce, banking and as financial experts. As stated by Cecil Roth, “they almost monopolized commerce and within a few years of the General Conversion, “the Mendes family” established the greatest banking houses in Europe.51 The export trade, too, was largely in Marrano hands. Small wonder that they provided politics and economics with leading figures. Suffice it to mention, one of those notables was the Marrano economist, Duarte Gomez Solis. He was the financial authority for the Portuguese crown during the early 16th century. His Discourses on the Commerce of the Two Indies (Lisbon, 1622), in which he projected a scheme for the development of the territorial lands, “gives him a place as one of the foremost economists of his age” (Roth, ibid.). The volume Memoires Inedis (ed. by Leon Bourdon, Lisbon, 1955), contains Gomez de Solis’ economic report to the crown in 1621. In sum, the cultural interpenetration was prevalent everywhere on the Iberian Peninsula, including the halls of the University of Salamanca. And if there is insufficient evidence about the impact of Jewish scholarship on members of the School of Salamanca, it does not invalidate our hypothesis. Thus, Grice-Hutchison, as she ponders the philosophers’ lack of recognition of the Schoolmen’s contribution to modern economic thought, remarks with irony: “as eighteenth century philosophers, they might have felt reluctant to acknowledge their debt to casuists . . .”52 Perhaps the same may also be said about the Schoolmen: as Christian ecclesiasts in the age of the Inquisition “they might have felt reluctant to acknowledge their debt” to their talmudic and rabbinic precursors in the realm of economic ideas . . . Conclusion It may be that in the evolution of Spanish economic thought we will find one of the main conduits through which Talmudic economic thought flowed on into the West. Certainly, aspects of the economic thought of the Spanish jurists flowed into the Protestant natural law tradition which eventually influenced Adam Smith, and the ideas of

51 Cecil Roth, A History of the Marranos, ibid., pp. 76–77. See also Encyclopedia Judaica ( Jerusalem, 1971), Vol. 15, p. 94. 52 Grice-Hutchison, The School of Salamanca, ibid., p. 104.

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chapter eleven

some Continental economists may have been even more directly linked to those of these Renaissance schoolmen.53 Inasmuch as it was Jean Bodin, the eminent economist who viewed the Mosaic Law as the best foundation of man’s “natural right,” it is plausible to assume that this and similar Hebraic ideas may have been adapted by contemporary schoolmen. Still, the linkages back in time to the talmudists remain uncertain. One of the reasons for this uncertainty is an unfortunate gap in scholarship. Decades ago, Salo Baron regretted that “modern historigraphy has been dominated by two independent lines of investigation, cultivated by medieval historians on the one hand, and by students of Hebrew literature on the other, and even now the intermingling of the two streams is but in its incipient stages.”54 It is only by the intermingling to which Baron looked forward that some answers to the queries posed in this chapter can begin to emerge. Still, it is noteworthy that one of the most prominent authorities in the history of economic thought, Professor S. Todd Lowry of Washington and Lee University stated in this connection: “. . . Ohrenstein provides a provocative and enlightening documentation of the vivid faced of the Hebraic intellectual tradition that was at the elbow of enlightenment scholarship.” [Review of the second edition of the book, Journal of the History of Economic Thought, 2005] (pp. 353–354)

53 54

On these themes, see, e.g., ibid., pp. 107–115. S.W. Baron, op. cit., p. 241.

NAME INDEX

Aaron of Lincoln, 208 Abaye, 126, 127 Abba, R., 5 Abbahu, R., 189 f.n. 12 Abrabanel, Isaac ben Juda, 178, 179, 179 f.n. 16 Abraham, 63 Adam, 17, 18 147 175 Ahab, King, 158 Alexander the Great, 6 Alfasi, Isaac, 140, 140 fn 29, 154 fn 12, 199, 213 Alfonso VI, 215 Alstat, Philip, xiv Antigone, 5, 5 f.n. 5 Antigonus, 47, 48, 48 fn 3 Aquinas, Thomas, 165 176 182, 182 fn 21, 214 Arie Ben David, 105 f.n. 43 (Arye) Aristotle, 5, 8, 21 fn 32, 63 fn 6, 76, 126, 149 fn 7 182 Arrow, Kenneth J., 145 f.n. 2 Asher, b. Yehiel, 198 Augustine, 175 fn 11, 182 Bar Kapara, R., 66 f.n. 13 Barham, Francis, 5 f.n. 6 Bar-Kokhba, 88 (no hyphen) Baron, Salo W., 93 fn 23, 203, 204 fn 1, 206, 206 fn 8, 207 fn 13, 210, 211 fn 27, 211 fn 29, 213 fn 33, 224, 224 fn 54 Beekmann, Peter, 21 f.n. 33 Ben Azzai, R., 153, 154 Ben David, A., 105 f.n. 43 Ben Pazzai, R. Ben Sira, 26, 85, 86, 147 Bentham, Jeremy, 145 f.n. 2 Bezalel, 177, 186, 187, 188, 189 Bialik & Ravnicki, 160 f.n. 18 Bick, Etta, 16 f.n. 28 Blaug, Mark, 185 f.n. 1 Bodin, Jean, 77, 219, 220, 221, 222, 224 Bohm-Bawerk, ix, 81, 82, 82 fn 3, 91, 103 Boman, T., 83, 83 fn 6

Borenstein, Abraham, 188 f.n. 8 (Bornstein) Boulding, Kenneth, 139 f.n. 28 Bourdon, Leon, 223 Breuggeman, Walter, 35 fn 19, 158, 158 f.n. 16 (with one or 2 n?) Briaune, 64 Broad, William, 67 Brue, Stanley L., 145 f.n. 1 Buber, S., 50 fn 11, 55 fn 27 Burns, Arthur F., xiii Cantillon, 77 Caro, Jose R., also Karo, Joseph, 213 Cassuto, M. D., 188, 188 fn 9 Chamberlain, Edward, 124 f.n. 19 (Should be Chamberlin) Charlemagne, 205 Chipkin, I., 160 f.n. 18 Cicero, 5, 5 f.n. 6 Cohen, Boaz, 8, 8 f.n. 10, 92 f.n. 22, 206 f.n. 7 Cohen, Samuel, 146 n. 3 Cobert, Jean Babtiste, 163 Columbus, Christopher, 217 Creon, King, 5 Currie, Martin and Steedman, Jean, 87 fn 1, 85 fn 9 Cyrus the Young, 111 Dane, Perry, 13, 13 f.n. 23 Davenport, H. J., 96 f.n. 32 David, King, 112 De Banez, Domingo, 214 De Covarrubias, Diego, 214 De Leon, Moses, 51 f.n. 15 De Lugo, Juan, 214 Democritus, 86, 196 f.n. 20 De Solis, Gomez, 223 De Sotto, Domingo, 214 (should be spelled Soto) De Vitoria, Francisco, 214 Diamond, Peter and Rothschild, Michael, 125 f.n. 1, 132 f.n. 12 Dixit, Avinash, 121 f.n. 3 Don Alonso de Cartagera, 213 Dore, Mohammed, 110 f.n. 3 Driver, S. R., 194, 194 f.n. 17

226

name index

Eatwell, J., 132 f.n. 13 Ejges, S., 104 f.n. 43, 221 f.n. 48 Eleazar, Hisma, 23, 66, 66 fn 13, 70 Eliezer, R, 12, 13, 13 fn 24, 146 f.n. 4 Elijah the Prophet, 158 Ellenson, David, 10 f.n. 19 Elon, Menachem, 16, 11 f.n. 20 Epstein, Isadore, 3 f.n. 1, 12 f.n. 22, 69 f.n. 19 Esau, 50 fn 8 Eshel, Ilan, Samelson, L. and Shaked A., 160 f.n. 20 Eve, 17, 18 Exilarch, 105 Ezra, 6 Fagles, Robert, 5 f.n. 5 Federbush, Simon, 149 f.n. 7, 151, 152 fn 10, 154, 155 fn 13 Ferdinand, King, 217 Fetter, Frank, 81, 82 Finkelstein, Louis, 7 f.n. 8, 47 f.n. 2 Fisher, Irving, ix, 75, 81, 82, 138 Frankel, David, 104 f.n. 32 Frankel, Z., 48 f.n. 3 Friedman, Milton, 139 f.n. 28 Galliani, Ferdinand, 91 Gamliel, Simeon R., 105, 106, 107, 149 Gandz, Solomon, 21, 21 f.n. 33, 82 f.n. 4 Gentili-Hefez, Moshe R., 187, 188, 188 f.n. 7 Gershfield, Edward M., 105 f.n. 44 Gershon ben Judah, 154 f.n. 12, 181 f.n. 20 Gide, Charles, 54, 54 fn 26 Ginsberg, Ely, 186 f.n. 4 (Should be Eli) Ginsburg, Yekuthiel, 22 f.n. 35 (Should be Jejutiel) Glazer, Nathan, 210 f.n. 25 Gomer, 192 Gordis, David, 11 f.n. 21 Gordis, Robert, 83 f.n. 7 Gordon, Barry, vii, xii, 18 fn 29, 29 fn 11, 39 fn 26, 44 fn 33, 70 fn 22, 90 fn 17, 91 fn 18, 93 fn 25, 95 fn 29, 145 fn, 158 fn 16, 161 fn 21, 176 fn 12, 185 fn 3, 204 fn 3, 205 fn 5, 214 fn 37 Gordon, R. A., 61 f.n. 1

Grice-Hutchinson, 77 f.n. 34, 213 fn 34, 214 fn 36, 215, 222, 222 fn 50, 223 Grotius, Hugo, 220 Habaval, Joseph, 154 f.n. 12 Haberler, G. von, 61 f.n. 1 Hadrian, 56 f.n. 29 Hai-Gaon, 140 Hait, Paul, xiv Halevy, Y.I., 13 fn 24, 48 fn 3 Hama b. Hanina, R., 199 Hammond, Peter J., 132 f.n. 13 Hamnuna, R., 86 Hammurabi, 76 Hananel, R., 74, 77 Hancock, K., 28 f.n. 8 Hanina, R., 73, 74 Hawtry, Sir Ralph Hayek, Friedrich, 74, 74 fn 30, 78 Heaton, E. W., 27 fn 6, 31, 31 fn 14 Heichelheim, F. M., 104 f.n. 43 Heinemann, Joseph, 149 fn 7, 152 fn 10, 153, 155, 155 fn 13 Heiner, Ronald A., 132 f.n. 12 Henry II, 209 Herodotus, 111 Hertz, J. H., 194 f.n. 17 (Should be Herz) Heschel, A. J., 83, 83 f.n. 5 Hesiod, 29 f.n. 11 Hezekiah, King, 25 Hezekiah, R., 177, 178, 179, 193 Hicks, John R., 74 f.n. 31 Hillel the Elder, R., 10, 10 fn 16, 11, 11 fn 21, 76 Hillel, R., 70 Hirsch, Samson, R., 176, 176 fn 13, 177, 187 fn 5 Hisda, R., 107, 133, 140 Hoffman, D., 167 f.n. 29 Holly, Sean and Hallet, A. H., 125 f.n. 1 Horowitz, Marcus, 10 fn 20 Horwitz, George, 10 fn 20, 23 Hosea, 192, 193 Hoshiah, R., 200 Huebner, S. S., 198 f.n. 23 Huna, R., 106 Hutcheson, Francis, 220, 221 Ibn, Ezra, 22, 22 fn 35, 151 Ishmael, R., 10, 153 Israel, Jonathan, 219 f.n. 44, f.n. 46

name index Jacob bar Aha, R., 97 Jacob ben Asher, 213 Jacob, Louis, 9 fn 12, 14, 112 fn 6 Jastrow, Marcus, 98 fn 36, 116, 130, 148 fn 6 Jenkis, Helmut, 156 f.n. 15 Jeremiah, R., 13 Jesus, 182 Jevons, H. S., 64 Jevons, W. S., 62, 62 fn 2, 64, 67, 78 Jezabel, 158 (Should be Jezebel) Johanan, R., 5, 56 fn 29, 63, 65, 66, 67, 68, 69, 73, 74, 75, 76, 77, 78, 139, 222 Johanan ben Beruka, R., 166 Johanan, Nuri, 23 Johanan b. Zaccai, R., 5 Joseph, 28, 62, 63, 192 Joseph, R., 69, 148 fn 6 Joseph b. Migash, 213 Josephus Flavius, 5, 5 f.n. 7 Joshua b. Hanania, 23 Joshua b. Korhah, R., 124 Joshua b. Levi, R., 66 f.n. 13 Joshua, R., 12 Juda, R. (The Patriarch), 4, 86, 101, 104, 112 Juda ben Simeon, 160 Juda Loew b. Bezalel, 177 (See Maharal) Juda Halevi, 215 Juglar, Clement, 62, 62 fn 2 Jung, Leo, 178 f.n. 7 Kadushin, M., 9 fn 13, 171 fn 2 Kantor, Brian, 138 f.n. 27 Karayiannis, Anastasios, D., 196 f.n. 20 Katz, Jacob, 207 fn 13 Kaye, F. B., 52 f.n. 16 Keynes, M., 74 Kiker, B. F., 185 f.n. 2 King Juan II, 217 Kirschenbaum, Aaron, 10 f.n. 20 Kleiman, E. xii fn*, 95 f.n. 29, 195 fn 18 Klein, Lawrence, 61 f.n. 1 Knight, Frank, 125, 131, 131 fn 11, 132, 137, 137 fn. 24 Kohut, Alexander, 130 f.n. 8 Kondratieff, N. D., 67 f.n. 16 Kowalski, Kazimierz, 208 f.n. 16 Kreamer, David, 11 f.n. 21 Kreinin, M. E., viii, ix Kuhn, W. E., 62 f.n. 4 Kuran, Timur, 204

227

Lave, L. B., 119, 119 fn 15 Leibnitz, 23 Lelyveld, A., 171 f.n. 2 Lenski, Gerhard, 211, 212 fn 31 Lerner, Max, 207 f.n. 14 Lessius, 91 f.n. 18 Levy, Isaac, 176 f.n. 13 Levine, Aaron, 95 f.n. 30 Lieberman, Saul, xiii, 8, 10 fn 17, 86 fn 11, 88, 88 fn 15, 89 Liebermann, Yehoshua, 133 f.n. 15, 137 fn 26, 221 fn 48 Lindahl, E., 85 Lindblum, Johannes, 26, 26 fn 4 (Should be Blom) Lipsey, R. G., 29 f.n. 10 Lipsium, Justus, 219 Lissner, Will, xiv Little, J. D. M., 145 f.n. 2 Loeb, Lawrence D., 82 f.n. 5 Lowry, Todd, 145 f.n.*, 158 f.n. 16, 204 fn 2, 224 Lucas, Robert, 139 f.n. 28 Lys, Daniel, 172, 172 f.n. 5 Maharal, ( Juda Loew b. Bezalel), 177, 178, 179, 179 fn 17, 180 Maharsha (Edels, Samuel), 50 f.n. 8, 66, 67, 175 Maimonides (Moses b. Maimon), 9 fn 15, 48 fn 3, 89, 133 fn 15, 161 fn 22, 163, 181 fn 20, 190 fn 14, 193, 193 fn 16, 213, 213 fn 33 Maly, Eugene, 37, 37 fn 24 Mana, R., 70, 96, 97, 98, 99 Mandeville, Bernard, ix, 49, 52, 53, 54, 55, 58 Marshal, Alfred, ix, 23, 81, 82 fn 3, 91, 91 fn 20, 95, 130 fn 7, (Should be Marshall) Martini, Raymond, 218 Marx, Karl, 210 Maskin, Eric, 110 f.n. 3 Matthew, 131 Mattathias, Antigonus, 153 McCloskey, D., 85 f.n. 9 McKane, William, 27, 27 fn 6, 28 fn 9, 29, 30 fn 12, 31, 31 fn 15 McKinsey, J. C. C., 114, 114 fn 9 Measha, R., 5 Meir, R. 15 Mercier, Jean, 219

228

name index

Meyer, Michael, 5 f.n. 5 Mielziner, Moses, 23 Milk, J., 88 f.n. 15 Mill, J. S. 77, 81 Minash, Ben, J. R., 130 f.n. 10 Mises, Ludwig von, 145 f.n. 2 Mitchell, W. C, 61 f.n. 1 Mizrachi, Elijah, 178 fn 15 Molina, Luis, 214 Monroe, A. E., 91 f.n. 19, 221 f.n. 49 Montefiore, C. G., 160 f.n. 18 Moore, George Foot, 49 f.n. 6 Moore, H. L., 64 Mordekhai b. Hillel, 129 f.n. 7 Moresh, Stephen, xiv Morgenstern, Oscar, ix, 109, 109 fn 2 Moses, 4, 5, 27 f.n. 6, 38, 186, 191 Moss, Laurence, xiv

Oser, Jacob, 211, 211 f.n. 28 Oshia the Great, 200 (Should be Hoshiah?)

Naboth, 158 Nahman, R., 90, 91 Nahmanides, 151 (also Ramban) Nahum the Scribe, 5 Nalebuff, Barry, 110 f.n. 3 Natanyahu, B., 217 f.n. 41 Nathan bar Ami, R., 163 Nathan, R., 47, 140 Nathan b. Oshia, 134, 140 Navarrus, M. A., 77 fn 34, 91, 214, 222, (Also Azpileueta Navaro) Nehorai, R., 149 Nelson, Benjamin, 90 fn 16 Nelson, R. H., 85 fn 9 Neufeld, E., 103 f.n. 16, 164 f.n. 16 Neuman, John von, xii, 106, 121 f.n. 2 Neusner, Jacob, 104 f.n. 34 Nielson, E., 21 f.n. 6 Nikodemus, 158, 162, 163 f.n. 23 Nissim, Gerondi R., 94 f.n. 27 Noonan, J. T., 205 f.n. 4 North, Martin, 26 North, Robert, 36, 36 fn 21, 159 fn 17

Quesnay, Francois, 220, 221

O’Brian, D. O., 61 fn 1 (Should be O’Brien) O’Brien, John, xiv, 58 Okun, Arthur M., 61 f.n. 1 Ohrenstein, Roman A., vii, viii, ix, 18 fn 29, 61 fn 1, 63 fn 5, 71 fn 23, 93 fn 24, 95 fn 29, 158 fn 16, 161 fn 21, 196 fn 21, 199 fn 25, 209 fn 20, 224 O’Neil, Barry, 22, 22 fn 35, 124 fn 17 Orchard, B., 65 f.n. 12 Orlinsky, Harry M., 37 f.n. 23

Papa, R., 134, 140 Pareto, Vilfredo, 145, 161 Pelican, J., 5 fn 7 Petty, William, 64, 185 Phillips, Anthony, 33 fn 16, 33 fn 17, 36, 36 fn 20 Philo, 5, 158, 159, 159 fn 17 Pigou, Arthur Cecil, 82, 82 fn 3, 84, 145, 145 fn 2 Plato, 149, 156, 156 fn 15, 162 Polish, David, 41 f.n. 29 Polynices, 5 Power, E., 65, 65 fn 12 (Should be H.?) Pufendorf, 220

Rabin, Mathew, 160 f.n. 20 Rabinovitch, Nahum, 21, 21 fn 34, 22, 124 Rabinovitz, Ch.D., 189, 189 fn 10, 193 fn 15 Rad, Gerhard von, 26 fn 3, 26, 37 fn 23, 38, 38 fn 25, 41, 41 fn 29 Ramban, 176 Rashbam (Samuel b. Meir), 133 fn 15 Rashi (R. Shlomo Yitzhaki), 50 fn 9, 66, 67, 69 fn 19, 72 fn 24, 102, 106 fn 48, 114 fn 8, 130 fn 8, 133, 133 fn 15, 134,135, 135 fn 19, fn 20, 136, 137, 141, 151 Ratner, Dov, 96 fn 33 Rav, R., 86, fn 11, 87, 112 Rava, R., 90, 163 Rawls, John, 85 f.n. 9, 146, 152 Raymond of Penafort, 213 Reich, Nathan, 210 f.n. 26 Reinach, S., 219 f.n. 44 Ricardo, David, 77 Rif (See Alfasi, Isaac) Rist, Charles, 54 f.n. 26 Robins, Lord, 17 (One or two Bs?) Robinson, Joan, 171, 171 f.n. 1 Rodkinson, Michael, 133, 133 fn 14, fn 16, 134 Rosenthal, Gilbert, 17, 209 fn 18 Rosenwasser, H., 150 f.n. 7 Rosh (see Asher b. Yehiel), 198, 213 Roth, Cecil, 208 fn 15, 215, 216 fn 40, 218 fn 42, 223, 223 fn 51

name index Rothbard, Murray N., 82 f.n. 3, 87 fn 19 Ruth, 6 Saadia, Gaon, 172 f.n. 6 Sachar, H. M., 212 f.n. 32 Sagi, Avner, 10, 10 f.n. 19 Samuel b. Barukh, 129 f.n. 7 Samuelson, Larry, 160 f.n. 20 Samuelson, Paul, 165, 28 fn 8, 72, 72 fn 26, 75, 75 fn 32, 78 Santagnel, Luis de, 217, 218 Sargent, Thomas, 139 f.n. 28 Scaliger, Joseph, Justus, 218, 219 Schotter, Andrew, 110 f.n. 3 Schumpeter, Joseph, 48, 61, 61 fn 1 62, 64, 64 fn 7, 76 fn 34, 221, 221 fn 48 Schwarzschild, Steven S., 146 f.n. 3 Schwodiauer, Gerhard, 110 f.n. 3 Scott, R. B. Y., 26 f.n. 1 Seligman, Ben B., 82 f.n. 3 Senior, Abraham, 217 Senior, Nassau, 130 fn 7, 197 fn 22 Septimus, Severus, 205 f.n. 5 Shackle, G. L., 100 82 f.n. 3 Shaftel, Haim, 154 f.n. 12 Shaked, Avner, 160 f.n. 20 Shapiro, Aharon, 166, 167 f.n. 28 Sheed, Andrew and McMeel, 82 f.n. 3 Shemen, B., 150 f.n. 7 Sherabia, R., 127 Sheshet, R., 148 f.n. 6 Shiffman, P., 11 f.n. 21 Shmuel, R., 103 f.n. 11 Silver, Morris, 158 f.n. 16 Simai, R., 175 f.n. 10 Simeon b. Pazzi, 66 f.n. 13 Simeon b. Yohai, R., 148, 149 Simon Meshantz, R., 166 fn 27 Smith, Adam, ix, 52, 54, 55, 57, 58, 59, 93, 93 fn 25, 95, 95 fn 31, 145 fn 2, 220, 221, 223 Solis, Duarto Leon, 223 Solomon, 21, 27, 30 Solomon b. Abraham, Adret, 213 Sombart, Werner, 210, 211, 212, 210 f.n. 21 Sophocles, 5, 5 f.n. 5 Soss, N. M., 159 f.n. 16 Spengler, Joseph, 19 f.n. 30, 20 fn 32 Sperber, Daniel, 70 f.n. 20, 105 f.n. 43, 153, 158 f.n. 11 Spiegel, H. W., 20 f.n. 32, 82 f.n. 3, 86 fn 12, 147, 220 fn 47, 222

229

Spina, Alonso de, 218 Spira, Nathan, 199 Stadtmauer, Murray, xiv Steinsaltz, Adin, 8 f.n. 11, 20, 20 f.n. 31 Stephenson, Carl, 105 f.n. 46 Strack, Herman, 23 Tacitus, 111, 155 f.n. 14 Tarfon, R., 84, 84 f.n. 8 Tawney, R. H., 92, 92 f.n. 21 Thaler, H., 117, 117 f.n. 13 Thom, W., 62 f.n. 2 Tisdell, Clement, ix, xiv, 124 f.n. 17 Tooke, Thomas, 64, 76 Tosaphot, 118, 137, 137 fn 25, 173 fn 8, 181 fn 20 Tzamrion, Tzemach, xviii Veblen, Thorstein, 207 f.n. 14 Vicker, Douglas, 82 f.n. 4, 83 f.n. 6 Vorspan, Alber, 146 f.n. 3 Wallace, Neil, 139 f.n. 28 Wallace, R., 28 f.n. 8, 139 f.n. 28 Weber, Max, 208, 208 f.n. 15, 209 Weinfeld, Moshe, 26, 26 f.n. 5 Wieser, Friedrich von, 95, 96 fn 32, 180, 180 fn 19 Weisfeld, Israel H., 155, 149 f.n. 7, 151 fn 9, 155 fn 13 Weis, A., 167 f.n. 29 Weiss-Halivni, David, 9 fn 14, 23 Weiss, Isaac Hirsh, 18 f.n. 24 Weissman, Seth, 11 f.n. 21 Werblowski, R. J., 47 f.n. 1 Westbrook, Raymond, 159 f.n. 18 Whybray, R. N., 27, 27 f.n. 7 Wieser, Friedrich von, 95, 96 f.n. 32 Wigoder, G., 47 f.n. 1 Wilde, K. D., A. D. Le Baron, D. Israelsen 132 fn 12 Worland, S. T., 183, 182 f.n. 22 Wykstra, R. 185 f.n. 1 Yehoiada, 189 Yehoshua, R., 188 Yitzhaki, R., 70 Yodin, R., 94 Yose, R., 96, 97, 98, 99 Zakovitch, Yair, 86 f.n. 22, 40 f.n. 28 Zarnowitz, Victor, 61 f.n. 1 Zeno of Elea, 83 f.n. 6 Zlotnick, Dov, 5, 5 f.n. 4, 28

SUBJECT INDEX

Administered price, 116 Agar Natar, 90, 93, 100, 129 fn 7 Aggadah, 47–48 Agio, 82, 179 altruism, 52, 160 Amoraim, 4, 15 Animals, 31–33, 34–37, 42 Apocrypha, 85–86 Asmakhta, 114–116, 123 Avak ribbit, 90 Babylon, 3–4 Banking, 208, 223 Bargaining, 103 Batzores, 68, 71–78 Bedek-Habait, 189–191 Ben Tovim, 165 Bible economics, 17–19 law codes, 5–6, 32 Bitzzu’a, 123 Business cycle, 61–76 Capital, 14, 30–31, 32, 84, 96–99, 126–131, 140, 189–190 Capitalism, 32, 203, 209–212 Commenda (Iska), 92, 206 Competition, 41, 100–102, 109 Consumption, 16, 18, 29, 40–41, 204–205 conversos (new Christians), 216 Cosmic order, 148 Countervailing powers, 153 Covenant, 32, 40–41 Credit, 75 Credit crunch, 75–76, 207 Creditor’s dilemma, 117, 120 Cultural interpenetration, 213–218 Damages, 5, 32, 38–42, 43–44, 94–95, 186, 194–197 Debt, 11, 32–33, 40, 157 Demand, 105–107 Demonopolization, 152 Depreciation, 197–199 Depression, 61–69 Distribution, 150 Dror, 19

Ecclesiastes, 83 Ecclesiasticus, 85 Economic Behavior, 20, 52, 58, 91, 140–141 Interdependence, 124 Liberalism, 47, 54, 57–58, 211 Progress, 47–59 Welfare, 28, 39–40, 72, 145–167, 183 Economics Classical, 76, 95 Islamic, 204, 212–214 Neo-classical, 95, 94, 180, 185 Scholastic, 182, 185, 214 Education, 27, 74–75, 186, 191, 199 Egypt, 27, 33, 62–63, 151, 152, 156 Erekh, 171, 172–174, 176, 181 Eretz Israel, 4, 10 Eunomia, 8 Exchange, 28, 97, 102, 185 Exile, 6, 49, 205 Expectation, 32, 126–141, 198 Fiduciary, 165 Fiscal categories, 164 Foreigners, 32, 38–39 Gambling, 114 Game Theory, 109–124 Game of chance, 113 Gemilut-Hasadim, 160 Gifts, 33, 35, 40, 43 God (Creator, Deity, Lord), 13, 26, 32–37, 38, 41, 55, 147, 171–175, 187, 192 Great Assembly, 6 Guilds, 152 Hagiographic literature, 158 Halakha, 3, 7, 10, 11, 12, 207 Harvest-cycle, 67 Harvest theory, 64 Heaven, 12, 13, 26, 49, 85 Hellenism, 8, 47, 211 Holiness Code, 32 Holland, 219 Hora’at Sha’a, 20 Human capital, 37, 95, 128, 151, 185, 198

subject index Income, 82 Income distribution, 150–152 Income redistribution, 156–159 Inflation, 74 Interest, 39, 84–85, 87–91, 204–207 Inventory policy, 63 Invisible hand, 57 Jerusalem, 3–4, 152 Jubilee, 34–35, 36–43, 158–159 Justice, 11, 42, 146, 151, 165, 198 Justinian Code, 204 Kafna, 68, 71–78 Kethubah, 126–129 Kings, 35, 41, 148, 208 Kubbiya, 113 Labor dignity, 147–151 division, 151 hazardous, 151 legislation, 151, 157 remuneration, 185 skilled, 151, 185 as a social value, 147 therapeutic, 148 Laborers, 32–33, 40–41, 85 Labor conflict, 152–154 Land, 34–35, 40, 41, 158–159, 208 Leisure, 94 Leket, 157 Lex talionis, 6 Ma’aser, 157 Markets, 41–43, 100–102 Marriage, 127 Marxism, 211 Mathematics, 20–23 Matrix, 110, 120–123 Melekhet Mahashevet, 188 Merchants, 52, 93, 97–99, 206 Midrash, 4, 53–57 Mini-max, 109, 115 Mishnah, 3–5, 68, 84, 88, 89, 101, 103, 155 Money, 5, 14–15, 38–39, 49 72–76, 87–91, 97–99, 105, 117–123 129–131, 138, 152–154, 165–167 175, 182, 186, 190–194, 199 204–209, 213, 221–222 Monetary reform (Diocletian), 153 Moral suasion, 162 Natural law, 220 Nature, 12, 17, 18, 34, 37

231

Neder, 173 Need, 156, 163–165, 166–167 Nephesh, 172–175 Neshamah, 175 Opportunity cost, 71, 81–82 Palestine, 3, 69, 152 Paradise lost, 17 Pareto optimal, 161 Pharisees, 7 Poor, 29, 34–39 Population, 28, 179 Portugal, 222–223 Poverty, 159, 162 Price, 19, 41–44, 64–78, 86–92, 195–107 administered, 101 inflation, 69–71 setter and taker, 105 Priests, 38, 43–47, 52, 106, 180–181, 189 Probability, 9, 12, 126 Production, 18, 31–35, 53–57, 146 Productivity, 42–43, 179–5, 189, 191, 194, 195–196 Profit, 30, 96–99, 131, 205, 210 Prosperity, 30, 72–76 Providence, 54, 55–56 Puritanism, 209 Pruzbul also Pruzbol, 11, 76, 161–162 Quantity theory, 76, 221 Recession, 76 Ribbit Ketzutza, 90 Risk, 125–130 Rubba, 9, 12 Sabbath, 33–34, 147 Sabbatical year, 34, 76, 158, 161, 198 Saducees, 7 Sages, 7, 10, 12, 94, 101–102, 114, 152 Sanhedrin, 7, 14, 47–8 Sales promotion, 101 Scarcity, 16, 17, 71–73 Schoolmen of the Middle Ages, 185 Scribes, 6, 7 Self interest, 47–48, 56–7 Shikul-da’at, 9, 11 Sinai, 4, 5, 12, 38 Skhar B’teilah, 94 Slaves, 34–37, 43, 111, 158, 173, 186, 194, 197–198 Socialism, 211 Solar activity, 64–67 Soul, 50, 51, 172, 174

232

subject index

Spain, 212–215 Strangers, 32, 39, 40, 147, 157 Sugya, 13 Supply, 68, 71, 72, 73 Supply shock, 68, 71, 72 Svara, 9–10

Uncertainty, 109, 125–141 United States, 210 Usury (interest), 87, 176, 204–207, 213, 221 Utility, 28, 53, 151, 161–62, 171, 173–4, 196

Tabernacle, 186–187 Talmud majority rule, 12–16, 25 method, 8–12, 109–111 origin, 4–6, 8 structure, 3–4, 41–42 Tahnaim, 4–6 Tarbit, 87–88 Taxation, 157 Tax incidence, 163 Temple, 6–7, 38, 40, 44, 105, 152–153, 154, 187, 189 Time, 81, 82, 83, 90 market, 81 preference, 82–4, 86 waiting time, 84, 87–91 Tithe, 38, 40–41, 106, 157 Torah (Pentateuch), 4–6, 25, 87, 149, 150, 154–156, 200 Tovath Hanoah, 135, 136, 161

Valuation, 133–5, 172–81, 185–186 Value, 8, 42, 95, 171–184, 192, 197–98 Valueless value, 171, 180 Virtue, 38, 48–51 Wages, 29, 31, 48, 84, 150–54, 190 minimum, 151 War, 37, 109 Wealth (riches), 29–32, 41, 53, 57, 158–161 Wisdom tradition, xiii, 25–30, 84, 134, 147, 184–5, 187 Work, 31–2, 39, 52–3, 144–8, 174, 184–5, 190 Yetzer Hara, 49 Zeyoona, 127, 130

LIST OF ABBREVIATIONS

A.R.N. A.Z. Aram. T.B. B.B. B.M. B.K. Ber. Chron. Deut. Eccl. Ecclus. Eru. Ex. Ex. R. Gen. Git. Hag. Jer. Keth. Kid. Lev. Mal. Mid. Tanh. M. M.B.B. M.B.M. M. Peah Ned. Pes. Prov. Ruth R. Sab. San. Suk. T.J. Tos. Yeb. Zech.

Abot d’Rabbi Nathan Aboda Zarah Aramaic Babylonian Talmud Baba Bathra Baba Metzia Baba Kama Berakhot Chronicles Deuteronomy Ecclesiastes Ecclesiasticus Erubin Exodus Exodus Rabba Genesis Gittin Hagiga Jeremiah Kethuboth Kiddushin Leviticus Malakhi Midrash Tanhuma Mishnah Mishnah Baba Bathra Mishnah Baba Metzia Mishnah Peah Nedarim Pesakhim Proverbs Ruth Rabba Shabbat Sanhedrin Sukkah Talmud Jerushalmi (Palestinian Talmud) Tosephta Yebamoth Zechariah

Supplements to The Journal of Jewish Thought and Philosophy edited by

Leora Batnitzky (Princeton University) Christian Wiese (University of Sussex) Elliot Wolfson (New York University)

VOLUME 8

Economic Analysis in Talmudic Literature

Multinational Enterprise and Economic Analysis (Cambridge Surveys of Economic Literature)

The Talmudic Argument: A Study in Talmudic Reasoning and Methodology

The Talmudic Argument: A Study in Talmudic Reasoning and Methodology

Development of Economic Analysis

Development of Economic Analysis

Analysis of Economic Data

Introduction to Economic Analysis

Introduction to Economic Analysis

Engineering economic analysis

Development of Economic Analysis

History of Economic Analysis

Babylonia Judaica in the Talmudic Period

Economic Analysis of Law in China

Fighting Corruption in the Public Sector, Volume 284 (Contributions to Economic Analysis) (Contributions to Economic Analysis) (Contributions to Economic Analysis)

Nine Talmudic Readings

Multinational Enterprise and Economic Analysis, Third Edition (Cambridge Surveys of Economic Literature)

Game theory and economic analysis

Multinational enterprise and economic analysis

Mathematical optimization and economic analysis

Fourier Analysis of Economic Phenomena

Game Theory and Economic Analysis

Increasing Returns and Economic Analysis

New Directions in Macromodelling, Volume 269 (Contributions to Economic Analysis) (Contributions to Economic Analysis)

An economic analysis of democracy

Economic Analysis of Accident Law

Game Theory and Economic Analysis

Real Analysis with Economic Applications

Engineering economic analysis, 9th edition

Explaining Growth in the Middle East, Volume 278 (Contributions to Economic Analysis) (Contributions to Economic Analysis)

Essays in Greco-Roman and Related Talmudic Literature (The Library of Biblical Studies)

Economic Analysis in Talmudic Literature

Multinational Enterprise and Economic Analysis (Cambridge Surveys of Economic Literature)

The Talmudic Argument: A Study in Talmudic Reasoning and Methodology

The Talmudic Argument: A Study in Talmudic Reasoning and Methodology

Development of Economic Analysis

Development of Economic Analysis

Analysis of Economic Data

Introduction to Economic Analysis

Introduction to Economic Analysis

Engineering economic analysis

Development of Economic Analysis

History of Economic Analysis

Babylonia Judaica in the Talmudic Period

Economic Analysis of Law in China

Fighting Corruption in the Public Sector, Volume 284 (Contributions to Economic Analysis) (Contributions to Economic Analysis) (Contributions to Economic Analysis)

Nine Talmudic Readings

Multinational Enterprise and Economic Analysis, Third Edition (Cambridge Surveys of Economic Literature)

Game theory and economic analysis

Multinational enterprise and economic analysis

Mathematical optimization and economic analysis

Fourier Analysis of Economic Phenomena

Game Theory and Economic Analysis

Increasing Returns and Economic Analysis

New Directions in Macromodelling, Volume 269 (Contributions to Economic Analysis) (Contributions to Economic Analysis)

An economic analysis of democracy

Economic Analysis of Accident Law

Game Theory and Economic Analysis

Real Analysis with Economic Applications

Engineering economic analysis, 9th edition

Explaining Growth in the Middle East, Volume 278 (Contributions to Economic Analysis) (Contributions to Economic Analysis)

Essays in Greco-Roman and Related Talmudic Literature (The Library of Biblical Studies)

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