Aristotle's line between running a house and making money

The household is where the city starts

Aristotle opens his Politics with the household. The city, he says, is built from it. The household is "the partnership therefore that comes about in the course of nature for everyday purposes", and he quotes the farmer-poet Hesiod's list of what it needs: a house, a wife and an ox.¹ Three relationships make it up: master and servant, husband and wife, parent and child.²

Then he turns to money, and draws a line that has been argued over ever since.

Two kinds of getting wealth

Some people, Aristotle notes, think household management and money-making are the same thing.² He says they are not. Household management uses wealth to live well, and the wealth it needs has a limit. There is only so much a household can use. Money-making as a trade, buying in order to sell, has no limit, because money can always be turned into more money.³

He tells the story of Midas to make the point. A man whose touch turns everything to gold starves. Money is a tool for getting what you need. Treated as the goal, it stops being useful.³ Against Solon's line that there is no fixed bound to riches, Aristotle answers that for the good life there is.⁴

"Money born of money"

The sharpest sentence is about lending at interest. Interest, Aristotle says, "is most reasonably hated, because its gain comes from money itself and not from that for the sake of which money was invented".⁵ Money was made for exchange. Interest makes money breed. The Greek word for interest, tokos, also means offspring, and he uses the pun: interest is money born of money, and of all ways of getting wealth "the most contrary to nature".⁵

You do not have to agree with him. Modern economies run on lending at interest, and interest at a fair rate is the ordinary price of credit. But the line he drew, between wealth as a means for a household and wealth as an end for a trade, is the one that this whole track keeps returning to. The household's economy has a limit. The businesses it deals with do not.

The book that carries his name and is not his

A short work called the Oeconomica, "Household Matters", circulated under Aristotle's name for two thousand years. Most scholars now attribute it to a pupil of Aristotle or of his successor Theophrastus.⁶ Its third book survives only in a Latin translation.⁶ It is still worth knowing, because it was the version of household economics that universities taught.

Its first book contrasts "housecraft" with "statecraft". Its second book reviews how kings and cities raised money, and states the rule that runs through every household manual since: expenditure must not exceed income.⁷ A Latin translation made at Anagni in August 1295 put it on the medieval syllabus.⁸ Between 1371 and 1377 Nicole Oresme translated it into French for the king of France, alongside the Ethics and the Politics.⁹

Why the misattribution matters

It matters because the book was read as Aristotle's, and so its rules carried his authority. When you see "Aristotle said the household should live within its income", the sentence is probably from the Oeconomica, and probably not by Aristotle. Say instead "the Oeconomica that circulated under Aristotle's name". The rule is sound either way. The name on it is not.