These remarks, while they account for the origin of the opinions concerning the practice of taking interest for money among those nations of antiquity whose commercial transactions were few and insignificant, will be sufficient, at the same time, to establish its reasonableness and equity in countries where money is most commonly borrowed for the purposes of commercial profit, and where, of consequence, the use of it has a fixed and determinate value, depending, like that of any commodity in general request, on the circumstances of the market at the time. In such countries both parties are benefited by the transaction, and even the state is a gainer in the end. The borrowers of money are frequently among the most opulent of the community, who wish to enlarge their capitals and extend their trade, and who, by doing so, are enabled to give farther encouragement to industry, and to supply labour and bread to the indigent.

It is not a little remarkable that John Calvin appears to have been one of the first who extricated himself entirely from the

ancient prejudices on this subject. "Pecunia non parit pecuniam. Quid mare quid domus, ex cujus locatione pensionem percipio ? an ex tectis et parietibus argentum proprie nascitur? Sed et terra producit, et mari advehitur quod pecuniam deinde producat, et habitationis commoditas cum certa pecunia parari commutarive solet. Quod si igitur plus ex negotiatione lucri percipi possit, quam ex fundi cujusvis proventu: an feretur qui fundum sterilem fortasse colono locaverit ex quo mercedem vel proventum recipiat sibi, qui ex pecunia fructum aliquem perceperit, non feretur ? et qui pecunia fundum acquirit, annon pecunia illa generat alteram annuam pecuniam ? Unde vero mercatoris lucrum? Ex ipsius, inquies, diligentia atque industria. Quis dubitat pecuniam vacuam inutilem omnino esse ? neque qui a me mutuam rogat, vacuam apud se habere a me acceptam cogitat. Non ergo ex pecunia illa lucrum accedit, sed ex proventu. Illæ igitur rationes subtiles quidem sunt, et speciem quandam habent, sed ubi propius expenduntur, reipsa concidunt. Nunc igitur concludo, judicandum de usuris esse, non ex particulari aliquo Scripturæ loco, sed tantum ex

aequitatis regula."* To those who are acquainted with the prevailing sentiments of Calvin's time, this passage cannot fail to be an object of curiosity.

Notwithstanding, however, this diversity of circumstances in the condition of ancient and modern nations, and the important changes it has operated on their opinions, it has by no means produced universally the effects which might have been expected. A certain rate of interest is indeed allowed by law, and no person doubts of its being perfectly fair and honourable to receive it; but everything above this legal rate is reprobated under the name of usury, as a crime of a very heinous nature, and, till the time of Queen Anne, was punished with confiscation of the usurer's whole moveables, the punishment being mitigated, since that period, to the forfeiture of thrice the sum usuriously lent. In order, too, to repress the crime still more effectually, our law allows of methods for the probation of it, which are contrary to the general maxims of common law. If there is a written bond in the hands of the usurer, he may be forced to exhibit his own bond in order to convict himself, contrary to the common maxim, nemo tenetur edere instrumenta contra se. And where the crime cannot be proved otherwise, it may by the usurer's oath, contrary to the maxim which is received in other cases, nemo tenetur jurare in suam turpitudinem.

There can be little doubt that these laws originated at first in prejudices which took rise in a very different state of society, but they have been powerfully supported by some considerations which have been generally supposed to demonstrate their political and commercial expediency. A few writers only have ventured to call this in question, and to express their doubts, whether the rate of interest should not be left, like the terms of other contracts, to be adjusted by the discretion of the parties. Among these, Mr. Bentham, of Lincoln's Inn, has particularly distinguished himself, in a very ingenious Treatise, entitled, A Defence of Usury, [1787,] in which he attempts to prove, "that no man of ripe years and of sound mind, acting freely and with *[Epistolæ. Quoted also in Dissertation, (Works, Vol. I.) p. 530.]

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 anybody hindered from supplying him upon any terms he thinks proper to accede to."* The late Dr. Reid, too, in an Essay, read a good many years ago before a literary society in Glasgow, maintained nearly the same proposition, and argued in support of it upon principles very similar to those employed by Mr. Bentham. Nor has the opinion been confined to our own country; for it is maintained by several very eminent French writers, by M. Turgot, for example, and the whole sect of the Economists; and it has been actually brought to the test of experience in different commercial states, particularly in Holland and at Hamburgh.

The following passage from Turgot deserves to be quoted, as it states with equal clearness and conciseness the point on which the question turns:

"It is an error to believe that the interest of money in trade ought to be fixed by the laws of princes. It has a current price, like that of all other merchandise. This price varies a little, according to the greater or less security which the lender has; but, on equal security, he ought to raise and lower his price in proportion to the abundance of the demand; and the law no more ought to fix the interest of money than it ought to regulate the price of any other commodities which have a currency in trade."

I quote this passage from Turgot's Reflections, &c. ;† but he has treated the subject at much greater length in a separate Essay, entitled, Mémoire sur le prêt à Intérêt et sur le Commerce des Fers.

At a much earlier period I find the same doctrine advanced by the celebrated Mr. Law, in a memorial presented by him (before his elevation to the ministry) to the Regent Duke of Orleans. This paper is entitled, Mémoire sur l'Usage des Monnoyes, et sur le Profit ou la perte qu'il peut y avoir pour un Prince et pour un Etat, dans l'Altération du Titre des bas Monnoyes, et dans l'Augmentation ou la Diminution de leur * [Letter I. Works, Vol. III. p. 3.] [Euvres, Tom. V. p. 88.]

prix par rapport aux Etats voisins.1 "L'Intérêt de la monnoye ne doit pas être réglé par le Prince. Je suppose qu'elle vaut présentement à gênes quatre pour cent, qu'on attend des vaisseaux d'Espagne avec des grosses sommes, si ces vaisseaux arrivent heureusement, l'intérêt baissera à trois. S'ils n'arrivoient pas, ne dois-je pas en profiter, et faire valoir mon argent cinq pour cent ?

"Le monnoye est comme une marchandise. J'ai un magazin de draps d'Angleterre, qui valent six livres la palme. Si le Prince régloit le prix de nos draps à six livres, il me feroit tort; car s'il arrive une quantité de draps, je ne trouverai plus à vendre les miens à six livres, je serai obligé de m'en défaire à moins, et le Prince ne me bonifiera pas le perte.

"Si ces draps n'arrivent pas, comme je cours le risque de la perte, ne dois-je pas jouir du bénéfice que le prix naturel de mes draps me donne alors?

Pour réduire l'intérêt, il faut rendre le monnoye moins valable, en augmentant la quantité, ou en diminuant la demande. Il y a deux cent ans que l'intérêt était à dix pour cent, présentement il est à cinq, et en quelques endroits à trois pour cent; mais ce n'est pas la loi qui l'a détruit, c'est l'augmentation de la quantité de monnoye depuis la découverte des Indes."

In a note upon this passage by the author of the French work in which Law's Memoir is published, the following remark is made:

"Les principes exposés jusqu'ici par M. Law sont d'une évidence à laquelle il est impossible de se refuser de bonne foi avec un esprit juste. Mais ici il commence à s'éloigner du vrai, pour avoir vu les choses trop en générale, sans faire attention aux circonstances particulières; et son système étoit une conséquence de ce qu'il avance ici sur l'intérêt de l'argent. Si la circulation étoit fort rapprochée de son ordre naturel, il est probable que les princes n auroient pas besoin de régler les taux de l'intérêt. Mais comme dans les Royaumes où la circu

1 Published in the second volume of a work entitled, Recherches et Considéra

tions sur les Finances de France depuis l'Année 1595, jusqu'à l'Année 1721.

lation paroit le mieux établie, il ne laisse pas de subsister un nombre infini de causes d'obstruction, les propriétaires de l'argent composent toujours le plus petit nombre, ainsi ils exercent un véritable monopole."

In support of this remark, a reference is made to a Dissertation on Interest, printed in the same volume, page 477, et seq.

In this Dissertation, after stating some reasons against a legal rate of interest, the author adds:-"Il s'ensuit que le prix de l'argent ne devroit être fixé plus que celui des autres denrées, dont l'abondance ou le rareté règlent le prix: mais la dureté et l'avidité des créanciers, les troubles que leurs rigueurs ont excités en divers états, la facilité plus évidente de convertir l'argent en monopole à la faveur même des gros intérêts que toute autre denrée; enfin depuis les conseils de la charité Chrétienne ont engagé les Législateurs à intervenir dans une convention qui devoit être libre de sa nature."

The same author speaks afterwards of the opinion which reprobates the interference of legislative authority in this particular, as having been first broached in France by Mr. Law. "Une opinion apportée en France pour la première fois par M. Law; c'est que l'état ne doit jamais donner de réglemens, sur le taux de l'intérêts."

"Cette opinion," he continues, "vrai en soi, a cessé de l'être dans la pratique par diverses circonstances, et peut-être le seroitelle encore, si jamais les Législateurs ne fussent intervenus dans ces sortes de réglemens.1 Mais une fois qu'ils se sont chargés de ce soin, il sembleroit à craindre que jamais la bénéfice d'une diminution ne fût générale dans un état. L'expérience prouve du moins que l'ancien taux fournit toujours aux futures des moyens de difficultés et d'embarras qui tiennent l'intérêt au dessus de son cours naturel. L'emploi de l'argent dans les effets publics se fait aujourd'hui sur le pied de quatre à quatre et demi pour cent, et le prêt marchand continue d'être à six," &c. &c. The reasoning which follows is so inconclusive, that it is not worth while to transcribe it.

1 Locke's opinion on the subject seems to coincide with this very nearly. See

his Works, Vol. II. p. 31. [(First) Considerations on Interest and Money.]