Welcome to Halachic Finance

The Origin of Our Science

Léon Walras first coined the term “halachic finance” in 1905, the same year Einstein published his paper on the wave/particle duality of light. The term first appears in private correspondence with his collaborator and friend, Mirza Fatali Akhundov of Iran, where Walras meant it as a sarcastic dismissal of his and Akhundov’s rivals in academic economics. These rivals eventually coalesced into the school of thought known to modernity as Monetarism; but at the time Walras was active, banking did not have the same institutional position it does today, and “monetarism” would not have been a sensible label. (Ironically, some modern Monetarist thinkers, like Alan Meltzer, have proudly reclaimed the “halachic finance” label for their own use.)

Stripped of this combative history, the term “halachic finance,” at its most denotative, simply means the opposite economic system from sharia finance. The term “sharia finance,” although spoken much more often than “halachic finance,” is, perhaps sometimes unfairly, used as an aspersion. Sharia finance is simply that portion of the larger body of Islamic religious laws and rules (“sharia law”) which pertains to prosperity, productivity, stewardship, prudence, and merit – all the things that the modern Western mind reflexively bundles together as “economics.”

Sharia finance is most commonly known for its prohibition against the charging of interest, but Walras’s point to Akhundov, which he coined the term “halachic finance” to illustrate, is that sharia finance prohibits the charging of interest not in itself, from first principles, but rather as an inevitable side-effect of any economic system that does not mandate or value sacrificial activity constituting a true generation of value in the traditional microeconomic sense of the term.

The word “halachic” has the same relationship to Judaism that “sharia” has to Islam. Like the Quran, the Hebrew Bible also contains a list of laws (which Christians sometimes refer to as “the Mosaic Law”). There are 613 of these laws, which, taken together, constitute “the halacha” (or “halakha” depending on the depth of one’s enmeshment in the rabbinate).

Central to the halachic worldview is the notion that the act which ought properly stand at the center of all human economic activity is sacrifice to an authority. In the Hebrew Bible, the original authority was YHWH (who Christians call “God”), to whom sacrifices were mandated in a literal, physical fashion, during the period of the Pentateuch (approximately 1200 – 900 BC) during which Judaism asserts that YHWH lived physically on Earth and to whom Moses spoke face-to-face. Later, when YHWH’s presence was no longer characterized in this way, the rabbinate of the day elected not to dismantle the sacrificial system altogether, but instead erected a new, synthetic authority to which sacrifices could continue to be offered. This synthetic authority was the Temple.

In light of all this, Walras’s point to Akhundov was that sharia finance is, in a certain narrow, structural sense, more efficient than halachic finance, because sharia finance does not value sacrificial activity for its own sake, and hence does not impose a mandate to erect some synthetic authority like a deity or temple. Because halachic finance does impose, or at least condone, such a sacrificial mandate, Walras wrote, this guarantees that its overall structure will always be less efficient because a certain percentage of activity which appears at first blush to be “productive,” or “fostering prosperity,” will, upon closer inspection, be revealed to be merely “sacrificial,” which involves merely the transfer of wealth rather than its creation.

An entire body of economic literature sprang into being in the twentieth century which explored Walras’s themes, but without using his terminology. The spectre of World War II left a great many thinkers quite sensibly afraid to criticize, or be perceived as criticizing, anything connected with the Hebrew Bible. These thinkers instead expressed their criticisms of halachic finance in more neutral terms of “central banking.”

The US State Department has been one of the few organizations to be pragmatic in its insistence on using whatever terminology is most likely to generate results. Through its USAID economic-development agency, countless foreign service officers have relied on Walras’s insights to deliver on its mission to evangelize halachic finance within all the developing nations and emerging markets of the world.

In light of the Trump administration’s ill-advised gutting of USAID, we here at HalachicFinance.org have decided to bring this “semiotic technology” into the mainstream of private enterprise, rather than allowing it to continue languishing within a governmental bureaucracy that, rightly or wrongly, finds its powers on the decline.