economics – בין דין לדין

This Land Was Made For You and Me

The Torah emphasizes in many places a positive, welcoming approach to the stranger or immigrant. Indeed, this attitude is described as one of the foremost lessons of our exile in Egypt. For instance, it is forbidden to take advantage of the alien’s vulnerability:

And don’t oppress the stranger nor pressure him, for you were strangers in the land of Egypt. (Exodus 22:20) Don’t pressure the stranger; and you know the feelings of a stranger, for you were strangers in the land of Egypt. (Exodus 23:9)

The Torah even relates specifically to a refugee, one who is fleeing persecution:

Don’t turn in a slave to his master, when he flees to you from his master. Let him dwell with you in your midst, in the place he chooses in one of your gates as suits him; don’t oppress him. (Deuteronomy 23:16)

Note also that the Torah condemns the nations of Ammon and Moav for failing to show compassion to the people of Israel when we were refugees. (Deuteronomy 23:4-5.)

Some of the verses commanding compassion for a “stranger” refer to a proselyte and others refer to a true foreigner, but the underlying ethical message is the same.

Indeed, Rav Avraham Yitzchak HaCohen Kook wrote that having strangers among us is an essential element of a Jewish settlement. (Responsa Daat Cohen 235)

The passage clearly implies that R. Kook’s assertion that “having strangers among us is an essential element of a Jewish settlement” is rooted in “the underlying ethical message” of “a positive, welcoming approach to the stranger or immigrant” – but this is a gross distortion of what R. Kook actually wrote, which is that non-Jews are needed by Jewish settlements to serve as Shabbos goyim (i.e., “to do the work that Jews won’t do”):

החליבה בש”ק על ידי ישראל הוא איסור גמור וחילול שבת נורא, וחס ושלום להורות בזה צד קולא, ואין שום דרך כי אם לחלוב בשבת על ידי נכרי כמו שעשו אבותינו מעולם, ובכלל אי אפשר לישוב יהודי שלא ימצא בתוכו גם כן נכרים אחדים, לפי ההכרח של איזה דברים המותרים להעשות בשבת ויום טוב דוקא על ידי נכרים, וחוקי תוה”ק הם בודאי יותר חזקים באין ערוך מכל מנהגי בדאות שבדאו להם אנשים, והם חיינו ואורך ימינו ויסוד תחייתינו על אדמת הקודש.1

I encountered the above while preparing for a talk that I recently gave on immigration and Jewish law; the recording and accompanying handout are available at the Internet Archive, as are the recording and handout of a talk covering much of the same ground that I gave within the framework of my Reading Responsa series.

עיין ר’ חיים י’ פלס, בבעיות החליבה בשבת בהתישבות הדתית בא”י (סקירה הסטורית), ברקאי קובץ ב’ (סתיו תשמ”ה), עמודים 108-32, ובפרט עמודים 109-12 בענין עמדת ר’ קוק; ר’ זאב וייטמן, חלב שנחלב בשבת באיסור, נתיב החלב ג’ (אדר תש”ע) עמודים 65-74, ובפרט אות ד’ “התנגדות הרב קוק להיתרי חליבה ע”י יהודי”; ר’ מרדכי וולנוב, חלב ‘מהדרין’, חלב מהדרין [↩]

Ribbis: Reasons and Rationales

R. Yair Hoffman writes:

[L]et us try to provide some philosophical explanation for the underlying prohibition of Ribis. Imagine the following scenario:

The family lives in the old country. The eldest son has emigrated and has made it to New York and has an apartment in the Lower East Side of Manhattan. Another son is about to seek his fortune in New York and needs a place to stay. He arrives at the brother’s house. The brother tells him, “Look, brother, you can stay in my apartment, no problem. And I will even charge you less than the Motel Six rates. It will only be $40 per night!” The parents would certainly be upset at their eldest son’s behavior. This is not the way one behaves with a brother.

ONE FAMILY

By the same token, the Torah views all Jewish people as one family. When a brother or sister needs a loan, therefore, we do not charge them interest, just as we would not charge them rent when they stay by us. Indeed, there are six prohibitions in the Torah associated with charging interest. The prohibition is called “Ribis” interest or “Neshech.” Anyone who has ever taken out an interest bearing loan can appreciate the fact that Neshech comes from the Hebrew root word, “bite.” Interest payments certainly do feel like a serious snake bite.

I do not understand this at all: by this logic, the Torah should have prohibited the charging of rent for residential property!

My friend and colleague H.S. cites this sort of rationale in the name of R. Shimon Schwab:

In Parshas Behar, the Torah forbids us to charge another Jew interest. It is not only prohibited for a lender to assess interest, but a borrower is also forbidden to voluntarily pay it. The commentaries have grappled with the rationale for this prohibition. Is there something wrong with charging interest when both parties agree? If one is permitted to charge a rental fee for the use of that person’s car for a week, why can’t one charge a “rental fee” if someone wants to have use of that person’s money for that same amount of time?

Rav Shimon Schwab offers the following explanation: Indeed, in the world of business, interest has its place. A functional economy relies on loans, which are only likely to occur if interest may be charged. In the realm of family, however, interest does not belong. Imagine if your brother or sister needed a loan and, despite having the money readily available, you would only offer the loan with interest! Such an action would be distasteful and inappropriate. The Jewish people, explains Rav Schwab, are all one family. The Torah stresses this by describing the impoverished person as “your brother” and instructing us to let our “brother” live along with us. As long as we view our fellow Jews as family, loans will be granted willingly without the need or desire to charge interest. Our Parsha describes a number of scenarios in which a Jew may become impoverished and need assistance to resolve his situation; in each case, the Torah describes him as “your brother.” If we can successfully adopt this perspective and always view our fellow Jews as our brothers and
sisters, then – like any close-knit family – we will be there for each other in times of need and be prepared to offer assistance without desire for compensation.

But once again, this argument proves far too much:

Imagine if your brother or sister needed a place to live and, despite having a suitable residence readily available, you would only offer it to him at market rent! Such an action would be distasteful and inappropriate.

Incidentally, R. Schwab’s great predecessor, R. Samson Raphael Hirsch, while agreeing with the basic premise that charging interest is not inherently immoral, understands the rationale for the prohibition quite differently:

“I would like to close by sharing with you a thought from Rav Samson Raphael Hirsch about the reason why the Torah prohibited interest. He notes that if the Torah considered charging interest to be inherently immoral, it would have banned charging interest from non-Jews, and also would have prohibited only the lender and not the borrower. Rather, Rav Hirsch notes, the Torah’s prohibition is to demonstrate that the capital we receive from Hashem is so that we donate tzedakah and provide loans, and thereby fulfill our share in building and maintaining a Torah community. The Torah’s goal in banning the use of capital for interest-paying loans is to direct excess funds to chesed and tzedakah.”

Once again, however, this explanation fails to distinguish between loaning money at interest and other forms of investment. Why is making an equity investment in a business any more legitimate than investing in the same business by lending it money at interest?

The truth is that it is really quite difficult to offer a rationale for the prohibition of charging interest that will be completely satisfying to the modern mind, as I discuss in my weekly halachah column for this past פרשת בהר:

In parashas Behar (25:36-37), the Torah forbids usury. The prohibitions against usury, as well as reprobation of the usurer and approbation of he who avoids usury, are reiterated throughout the Bible (Shemos 22:24; Devarim 23:20-21; Yechezkel 18:13,17; Tehillim 15:5). The Torah never explains, however, why usury is prohibited. A number of rationales have been proposed, although none appear entirely satisfactory:

Shaarei Yosher (end of Shaar 5) explains that usury is actually a form of theft. Despite the fact that the borrower willingly accepts the interest obligation, his consent is considered to have been given erroneously, since we presume that he does not fully realize the harm that he is thereby inflicting upon himself. This would not seem to apply, however, to loans with reasonable interest rates that are clearly beneficial to the borrowers, such as prime mortgage loans taken out by homebuyers.

Radak (Tehillim ibid.) declares that an agreement to pay interest is tantamount to a contract entered into under economic duress, since the borrower needs the loan. It is difficult to understand, however, why such an agreement is different from any other contract. E.g., a tenant only agrees to pay rent since he needs a place to live!

Some suggest that since there is a mitzvah to lend money to one’s fellow Jew, the charging of interest is forbidden under the general prohibition against charging for the performance of a mitzvah (see Shut. Avnei Nezer YD 159:3). This rationale would not seem to apply, however, with regard to money that the lender would otherwise be investing for profit, since the prohibition against charging for the performance of a mitzvah contains an exception for the recouping of opportunity costs entailed by such performance (cf. Bris Yehudah Ch. 1 n. 10).

Some suggest that since interest is too reliable a source of income, it eliminates the need for bitachon (reliance) upon Hashem (Kli Yakar Vayikra ibid.; Introduction to Klala De’Ribisa). The idea that taking advantage of the best available opportunities to better one’s lot can be inconsistent with bitachon is, however, a controversial one (see Commentary of Rambam to the Mishnah, Pesachim 56.; Akeidas Yitzchak #26 p. 221).

My weekly parashah lectures for פרשת בהר on this topic, and accompanying handouts, are available at the Internet Archive.

Fair Dealing and Fraud

My weekly lectures (available at the Internet Archive) and column for this past פרשת בהר discussed the laws of אונאה:

In parashas Behar, the Torah commands (25:14): “And if thou sell ought unto thy neighbour, or buyest ought of thy neighbour’s hand, ye shall not oppress [or ‘aggrieve’] one another.” The Talmud (Bava Metzia 51a, 58b) explains that this refers to onaas mamon, i.e., the mispricing of goods in a sale: a seller may not overcharge a buyer, and a buyer may not underpay a seller.

Onaah applies where the price paid is above or below the merchandise’s ‘correct’ price; it is not entirely clear, however, how to define this ‘correct’ price. The Talmud and early sources apparently take for granted that any particular merchandise has a well defined price, and it seems that there was typically little or no variation in price between vendors (but see Aruch Ha’Shulchan CM 227:7). In contemporary markets, however, merchandise is typically sold at a variety of different prices by different vendors; what, then, determines the maximum price at which it may be sold?

One possibility is that the maximum permissible price is simply the lowest one at which the merchandise is available. Since the buyer is able to purchase the merchandise for that price, any higher price is unfair to him and constitutes onaah (see Erech Shai CM beginning of #209). R. Chaim Kohn, however, rejects this as being both untenable (as according to this view, violations of onaah are ubiquitous) and illogical (why should the lowest price be the exclusively legitimate one?). He argues that any price established by the normal free market forces of supply and demand is legitimate, and onaah applies only to prices outside the range established by these forces (Kol Ha’Torah #49 [Tishrei 5761] pp. 286-87, and cf. Pischei Choshen Onaah Ch. 10 n. 1).

Others suggest that the ‘correct’ price is theoretically defined as the midpoint between the highest and lowest prices for which the merchandise is sold, but in practice, there are various reasons why the traditional laws of onaah will generally not apply to sales in the contemporary free market economy (Darkei Horaah pp. 121-24, and cf. Alon Ha’Mishpat #63 [Nisan 5774]).

The fundamental concept upon which the laws of אונאה are based is that of the merchandise’s “fair price”, which is defined as its local, current price. אונאה is generally committed when one buys or sells at a price that deviates from this price, regardless of the price the seller paid for the merchandise or other considerations. Of critical practical importance, therefore – and yet frustratingly difficult to properly address – is the question of how this fair price is determined in a marketplace where various vendors offer the merchandise for sale at different prices. The great nineteenth century חושן משפט authority Rav Shlomo Yehudah Tabak seems to maintain that the fair price is established by the lowest price available, since if the merchandise is sold above that price, the buyer is thereby injured:

ויש להם אונאה כתב הש”ך אפילו אותו דבר אין שער שלו ידוע נשאלתי אם איסור אונאה דוקא בדבר שיש שער קצוב שכל בעלי חנויות מוכרין בשוה אבל כשכל חנוני מוכר כפי מה שיכול להוציא מן הקונה אם מותר למכור ביוקר בדבר שיכול הקונה לקנות דבר זה אצל אחר בזול והשבתי הדבר מבואר בש”ך כאן … [באונאה] אין לחלק דכל שיודע דאפשר ליקחנו אצל אחר בפחות מאנהו ואסור.1

Several leading contemporary חושן משפט authorities, however, find this position completely untenable.

Rav Chaim Kohn:

ולדבריו [של הערך ש”י] יש לעיין כפי הנהוג בשוק החופשי כאשר המחיר וערך הסחורה נקבעין לפי גורמי ביקוש [ו]הצע האם שייכת אונאה באם אינו מוכר במחיר הזול ביותר שהסחורה נמכרת בה, ולפום ריהטא על זה דן הערך ש”י ולפי זה שייך אונאה גם בסחורה הנמכרת לפי גורמי ביקוש והצע והחנויות באותו השוק מוכרות אותה הסחורה במחירים שונים, וממילא המוכר הסחורה במחיר גבוה מהמחיר הזול ביותר יש בו אונאה. ומלבד דאם כן הוא לא שבקת חיי לכל בריה, עצם הסברא אינה מובנת וגם הראיה מהש”ך צ”ע, דהנה גדר אונאה הוא שהמחיר אינו כפי ערך הסחורה, וקביעת ערך הסחורה הוא כפי הגורמים הקובעים את ערכה בשוק, וממילא בשוק שהסחורה נמכרת לפי גורמי ביקוש והצע כל מחיר שהוא בכלל הגורמים הנ”ל הוא בכלל הערך, ואם כן למה נאמר שהמוכר במחיר הזול ביותר הוא זה שקובע את ערך הסחורה והמוכר ביותר ממחיר זה יש בו אונאה, הא גם המוכר במחיר יקר יותר יכול לומר שזהו ערך הסחורה אם המחיר בכלל גורמי הערך הנ”ל. …2

R. Kohn’s own position is that any price that is in accordance with the properly functioning forces of supply and demand (“גורמי ביקוש והצע”) is perforce legitimate. He develops his thesis at some length, but I do not fully understand his distinction between prices that are in accordance with the forces of supply and demand and those that are not.

Similarly, Rav Mendel Shafran argues that R. Tabak does not actually mean what his closing words seem to imply:

ויש שדייקו מהערך ש”י, שמחשבים את השווי של החפץ לענין אונאה על פי בעל החנות הזול ביותר, לפי מה שכתב בסוף דבריו שכל שיודע שאפשר לקנות חפץ כזה יותר בזול אינו רשאי למוכרו ביוקר. אך באמת אין הנידונים דומים, ולנידון זה אין ראיה מהש”ך, דמדברי הש”ך מוכח רק שיש אונאה גם בדבר שאינו קצוב, אך לא מבואר מדבריו כלל לפי איזה מחיר אומדים את האונאה.3

A mini-haburah I delivered a couple of years ago on the application of אונאה to contemporary markets is available at the Internet Archive.

ערך ש”י חו”מ ריש סימן ר”ט [↩]
רב חיים קאהן, מחירים בשוק חפשי ואונאה בדבר שאין לו שער ידוע, קול התורה חוברת מ”ט תשרי ה’תשס”א עמוד רפב [↩]
עלון המשפט, גליון חודש ניסן ה’תשע”ד #63 עמוד 6, ועיין עוד פתחי חושן, הלכות גניבה ואונאה, פרק י’ הערה א’ מד”ה בהמשך פרק זה [↩]