This article originally appeared in the Jewish Free Press, Calgary

A Bad Business*

When one individual offers advice about how other people should spend or invest their money, this can raise some perplexing legal and ethical issues. It is ultimately the investor who must bear the consequence of any bad advice, and those consequences can at times be costly.

In the days of the Talmud, the economy was less complex than it is today, and the range of available investment opportunities was limited. For Jews, the possibilities were even more restricted, owing to the Torah's stringent prohibitions against the taking of interest.

Nevertheless, there were occasions when individuals would seek expert counsel concerning financial matters, and the question arose whether the consultants bore any legal accountability for bad advice.

One financial domain that was more complicated in former times was that of coinage. In our times, it is only on rare occasions that doubts arise with respect to the value or legality of currency. However, in ancient times many doubts attached to coins, relating to their worth or their political acceptability. Money used to derive its value from its actual metallic content, and the relative worth of the different metals could fluctuate, or become debased with age or by intention. Furthermore, ambitious political leaders would often mint coins as a demonstration of their newly declared independence. Of course, the public would be cautious about accepting such currency, lest the independence--and the value of their money--turn out to be short-lived.

When questions arose concerning the wisdom of accepting dubious currency, they would normally be directed to the local money-changer. In Hebrew such an individual was known as a "shulhani," literally a "table-keeper," a term that is akin to the "banker" (i.e., bench-keeper) of European languages.

The shulhani was concerned primarily with exchanging coins between large and small denominations, an area of expertise that demanded intimate familiarity both with the coins themselves and with the changing economic and political circumstances.

The best way to keep up to date with developments in the market was to keep constantly in practice. The midrash used this truth to illustrate symbolically the difference between a sage who is truly wise and one who is merely "understanding." "A wise man may be likened to a wealthy money-changer, who examines coins not only at the request of a client, but also examines his own money when he has no clients. However, an "understanding" man is like a poor money-changer who can only examine coins when working for a client, but must otherwise remain idle."

It was therefore common to consult successful money-changers about the wisdom of prospective investments.

Some Talmudic rabbis were involved in such professional activity. Thus, it is related concerning Rabbi Hiyya, who was an accomplished merchant, that a woman once approached him with a denar that had recently been offered to her. Based on the rabbi's assurances, she agreed to accept the coin, only to discover to her dismay afterwards that no one wanted to take it from her.

Rabbi Hiyya consented to compensate the woman for his unsound advice. The Talmud was of the opinion that Rabbi Hiyya did not really have a legal obligation to compensate the woman, but that he acted as he did out of moral scruples. Their reasoning was that he was such an virtuoso at his occupation that any error that he might have committed must have been on such an esoteric point that it must be considered unavoidable--perhaps because the currency had been removed from circulation only very recently.

The exemption extended by the Talmud to first-class financial experts puzzled the commentators, since no such concession was given to other professionals, no matter what their qualifications.

Rabbi Solomon Ibn Adret (the "Rashba") suggested that this followed naturally from the nature of the profession; for unlike other crafts that demand complex skills, and therefore provide varied opportunities to mess up, a financial consultant's vocation consists solely of expertise and keenness of observation. Hence it is more reasonable to assume that the ill-advised judgment must have resulted from truly unavoidable circumstances.

Medieval authorities were nevertheless uncomfortable with a situation where a financial consultant could be let off the hook for professional shortcomings. Therefore they explained that the Talmud exempted Rabbi Hiyya only because he had offered his services gratis; however, advisors who accept payment for their opinions, or have been explicitly informed that their advice will be used as the basis for an investment, can be held financially liable when they cause their clients a loss.

Perhaps the issue was most astutely summed up by Rabbi Hiyya himself. At the conclusion of the Talmudic anecdote, as he was taking the money from his purse to pay the aggrieved lady, he ordered his assistant--his young nephew Rav, who would later achieve renown as one of the foremost Talmudic sages--to add a sardonic note to the margin of his ledger: "This was a bad business"!

This article and many others are now included in the book

Why Didn's I Learn This in Hebrew School?Why Didn't I Learn This in Hebrew School

by Jason Aronson Publishers


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My email address is: eliezer.segal@ucalgary.ca

[1]

  • First Publication:
    • JFP, January 23 1997, pp. 8-9.
  • Bibliography:
    • M. Beer, The Babylonian Amora'im: Aspects of Economic Life, Ramat-Gan, 1974.
    • A. Gulak, "Banking in Talmudic Law," Tarbiz 2 (1931), 154-171.
    • S. Warhaftig, Jewish Labour Law, Jerusalem, 1982.