Defence of Usury.txt

Defence of Usury





	by Jeremy Bentham





1787





Defence of Usury; Shewing the Impolity of the Present Legal

Restraints on the Terms of Pecuniary Bargains In a Series of

Letters to a Friend To Which is Added A Letter to Adam Smith,

Esq; LL.D. On the Discouragements opposed by the above Restraints

to the Progress of Inventive Industry

1787



LETTER I.  Introduction

                Crichoff, in White Russia, January 1787



    Among the various species or modifications of liberty, of

which on different occasions we have heard so much in England, I

do not recollect ever seeing any thing yet offered in behalf of

the liberty of making one's own terms in money-bargains. From so

general and universal a neglect, it is an old notion of mine, as

you well know, that this meek and unassuming species of liberty

has been suffering much injustice.

    A fancy has taken me, just now, to trouble you with my

reasons: which, if you think them capable of answering any good

purpose, you may forward to the press: or in the other case, what

will give you less trouble, to the fire.

    In a word, the proposition I have been accustomed to lay down

to myself on this subject is the following one, viz. that no man

of ripe years and of sound mind, acting freely, and with his eyes

open, ought to be hindered, with a view to his advantage, from

making such bargain, in the way of obtaining money, as he thinks

fit: nor, (what is a necessary consequence) any body hindered

from supplying him, upon any terms he thinks proper to accede to.

    This proposition, were it to be received, would level, you

see, at one stroke, all the barriers which law, either statute or

common, have in their united wisdom set up, either against the

crying sin of Usury, or against the hard-named and

little-heard-of practice of Champerty; to which we must also add

a portion of the multifarious, and as little heard-of offence, of

Maintenance.

    On this occasion, were it any individual antagonist I had to

deal with, my part would be a smooth and easy one. "You, who

fetter contracts; you, who lay restraints on the liberty of man,

it is for you" (I should say) "to assign a reason for your doing

so." That contracts in general ought to be observed, is a rule,

the propriety of which, no man was ever yet found wrong-headed

enough to deny: if this case is one of the exceptions (for some

doubtless there are) which the safety and welfare of every

society require should be taken out of that general rule, in this

case. as in all those others, it lies upon him, who alledges the

necessity of the exception, to produce a reason for it.

    This, I say, would be a short and very easy method with an

individual: but, as the world has no mouth of its own to plead

by, no certain attorney by which it can "come and defend this

force and injury," I must even find arguments for it at a

venture, and ransack my own imagination for such phantoms as I

can find to fight with.

    In favour of the restraints opposed to the species of liberty

I contend for, I can imagine but five arguments.

    1. Prevention of usury.

    2. Prevention of prodigality.

    3. Protection of indigence against extortion.

    4. Repression of the temerity of projectors.

    5. Protection of simplicity against imposition. Of all these

in their order.





LETTER II Reasons for Restraint. -- Prevention of Usury.



    I will begin with the prevention of usury: because in the

sound of the word usury lies, I take it, the main strength of the

argument: or, to speak strictly, of what is of more importance

than all argument, of the hold which the opinion I am combating

has obtained on the imaginations and passions of mankind.

    Usury is a bad thing, and as such ought to be prevented:

usurers are a bad sort of men, a very bad sort of men, and as

such ought to be punished and suppressed. These are among the

string of propositions which every man finds handed down to him

from his progenitors: which most men are disposed to accede to

without examination, and indeed not unnaturally nor even

unreasonably disposed, for it is impossible the bulk of mankind

should find leisure, had they the ability, to examine into the

grounds of an hundredth part of the rules and maxims, which they

find themselves obliged to act upon. Very good apology this for

John Trot: but a little more inquisitiveness may be required of

legislators.

    You, my friend, by whom the true force of words is so well

understood, have, I am sure, gone before me in perceiving, that

to say usury is a thing to be prevented, is neither more nor less

than begging the matter in question. I know of but two

definitions that can possibly be given of usury: one is, the

taking of a greater interest than the law allows of: this may be

stiled the political or legal definition. The other is the taking

of a greater interest than it is usual for men to give and take:

this may be stiled the moral one: and this, where the law has not

interfered, is plainly enough the only one. It is plain, that in

order for usury to be prohibited by law, a positive description

must have been found for it by law, fixing, or rather

superseding, the moral one. To say then that usury is a thing

that ought to be prevented, is saying neither more nor less, than

that the utmost rate of interest which shall be taken ought to be

fixed; and that fixation enforced by penalties, or such other

means, if any, as may answer the purpose of preventing the breach

of it. A law punishing usury supposes, therefore, a law fixing

the allowed legal rate of interest: and the propriety of the

penal law must depend upon the propriety of the

simply-prohibitive, or, if you please, declaratory one.

    One thing then is plain; that, antecedently to custom growing

from convention, there can be no such thing as usury: for what

rate of interest is there that can naturally be more proper than

another? what natural fixed price can there be for the use of

money more than for the use of any other thing? Were it not then

for custom, usury, considered in a moral view, would not then so

much as admit of a definition: so far from having existence, it

would not so much as be conceivable: nor therefore could the law,

in the definition it took upon itself to give of such offence,

have so much as a guide to steer by. Custom therefore is the sole

basis, which, either the moralist in his rules and precepts, or

the legislator in his injunctions, can have to build upon. But

what basis can be more weak or unwarrantable, as a ground for

coercive measures, than custom resulting from free choice? My

neighbours, being at liberty, have happened to concur among

themselves in dealing at a certain rate of interest. I, who have

money to lend, and Titius, who wants to borrow it of me, would be

glad, the one of us to accept, the other to give, an interest

somewhat higher than theirs: why is the liberty they exercise to

be made a pretence for depriving me and Titius of ours?

    Nor has blind custom, thus made the sole and arbitrary guide,

any thing of steadiness or uniformity in its decisions: it has

varied, from age to age, in the same country: it varies, from

country to country, in the same age: and the legal rate has

varied along with it: and indeed, with regard to times past, it

is from the legal rate, more readily than from any other source,

that we collect the customary. Among the Romans, till the time of

Justinian, we find it as high as 12 per cent: in England, so late

as the time of Hen. VIII, we find it at 10 per cent: succeeding

statutes reduced it to 8, then to 6, and lastly to 5, where it

stands at present. Even at present in Ireland it is at 6 per

cent; and in the West-Indies at 8 per cent; and in Hindostan,

where there is no rate limited by law, the lowest customary rate

is 10 or 12. At Constantinople, in certain cases, as I have been

well informed, thirty per cent is a common rate. Now, of all

these widely different rates, what one is there, that is

intrinsically more proper than another? What is it that evidences

this propriety in each instance? what but the mutual convenience

of the parties, as manifested by their consent? It is convenience

then that has produced whatever there has been of custom in the

matter: What can there then be in custom, to make it a better

guide than the convenience which gave it birth? and what is there

in convenience, that should make it a worse guide in one case

than in another? It would be convenient to me to give 6 per cent

for money: I wish to do so. "No," (says the law) "you shan't." -

Why so? "Because it is not convenient to your neighbour to give

above 5 for it." Can any thing be more absurd than such a reason?

    Much has not been done, I think, by legislators as yet in the

way of fixing the price of other commodities: and, in what little

has been done, the probity of the intention has, I believe, in

general, been rather more unquestionable than the rectitude of

the principle, or the felicity of the result. Putting money out

at interest, is exchanging present money for future: but why a

policy, which, as applied to exchanges in general, would be

generally deemed absurd and mischievous, should be deemed

necessary in the instance of this particular kind of exchange,

mankind are as yet to learn. For him who takes as much as he can

get for the use of any other sort of thing, an house for

instance, there is no particular appellation, nor any mark of

disrepute: nobody is ashamed of doing so, nor is it usual so much

as to profess to do otherwise. Why a man who takes as much as he

can get, be it six, or seven, or eight, or ten per cent for the

use of a sum of mo...