On the other hand, the prevailing ideas among our commercial politicians in this island are (if I am not mistaken) in favour of our existing laws; and they are supported by an authority justly entitled to the highest respect on all questions of Political Economy, that of Mr. Adam Smith.* Indeed, I do not recollect that any writer of note (excepting the two already mentioned) have ventured to dispute the expediency of this part of our code; although a pretty strong presumption obviously presents itself against it, from the example of the Dutch and Hamburghers, and the total silence of our political writers on the subject during the ten years that have elapsed since the publication of Mr. Bentham's Essay. A very competent judge, Sir Francis Baring, in his late Pamphlet, On the Bank of England, [1797,] has not scrupled to say that Mr. Bentham's Essay still remains unanswered, for the best of all possible reasons, that it is perfectly unanswerable.

Another very obvious consideration, which may well excite our curiosity in examining the expediency of our existing laws on this subject, is suggested by the variations in the rate of interest (whether established by law or by custom) among different nations, and in the same nation at different periods. Among the Romans, till the time of Justinian, we find it as high as twelve per cent. In England, so late as the time of Henry VIII., we find it at ten per cent. Even at present in Ireland, it is at six per cent.; and in the West Indies at eight per cent.; and in Hindostan, where there is no rate limited by law, the lowest customary rate is ten or twelve. At Constantinople, in certain cases, thirty per cent. is said to be 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 evinces 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

* [Wealth of Nations, Book II. chap. iv.; Vol. II. p. 44, tenth edition.]

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 six per cent. for money: I wish to do so. "No," says the Law, "you shan't." Why so? "Because it is not convenient for your neighbour to give above five for it." The absurdity of the reason surely does not stand in need of any comment.

Much has not been done as yet by legislators in order to fix the price of other commodities; and in what little has been done the wisdom of their regulations is very far from being generally acknowledged. Putting money out at interest, is exchanging present money for future; but why a policy, which, as applied to exchanges in general, would be commonly deemed absurd and mischievous, should be deemed necessary in the instance of this particular kind of exchange, is a proposition about which it is surely reasonable to hesitate, till it has been carefully considered. For him who takes as much as he can get for the use of a house, or of any other article of value, there is no particular appellation, nor any term of reproach: 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 money, should be called usurer, or loaded with any other opprobrious name, any more than if he had bought a house with it, and made a proportionable profit by the house, it is not easy to imagine; upon that general view of the question, at least, which first presents itself to our notice.

I proceed, therefore, now to a closer examination of the subject; for which purpose I shall consider, First, the various arguments that have been alleged in favour of that limitation. of interest which is fixed by our laws;-after which I shall [Secondly] point out some of the inconveniences which these laws seem likely to produce. In both discussions I shall avail myself, without scruple, of the ideas of Mr. Bentham, wherever they appear to me to be useful for establishing the conclusions. I have in view.

VOL. IX.

L

Before, however, I enter on the general question, I think it necessary to remark, that those who dispute the expediency of anti-usurious laws, argue against these laws only so far as they are supposed to abridge the liberty of the contracting parties; for in cases where there is no contract, it seems to be manifest that the rate of interest should be fixed by law. Such cases may happen from many different causes. When a sum of money, for instance, becomes due, the right to it is litigated by the debtor. The litigation continues for years, the money in the meantime remaining in the hands of the debtor. At last he is found not only to have disputed the debt on insufficient grounds, but not even to have had what the law calls a probabilis causa litigandi. Here it is just that he not only pay the principal but the interest on it, while the money, in consequence of his unfounded claim, was withheld from the creditor; and in such a case it is necessary that the rate of interest should be determined by law. Again, suppose a man is abroad when a sum falls due to him, and that he has no attorney who has power to receive it, the debtor keeps it in his hand and uses it for years; here there is no contract to fix what the rate of interest shall be, and therefore it is proper that law should supply the defect. The case of tutors who have the administration of the money of minors is very similar.

In these cases, and others of like nature, where there was not any bargain between the parties what the rate of interest should be, it seems proper and necessary that it should be determined by law. And for this purpose two different plans might be proposed: First, by a constant rate fixed at once by the Legislature, to take place in all cases, without regard to the casual variations of the market rate; a plan which is adopted in our own country, where five per cent. has been fixed ever since the reign of Queen Anne, as the rate which may be legally demanded if no express stipulation has been made to the contrary. Or, Secondly, the rate of interest payable in cases where there is no contract, might be fixed annually by a jury, as near to the market rate for the time as can be done; in like

manner as the price of grain in Scotland is fixed annually by a jury in what is called the fiars.

Taking for granted, therefore, as a point about which there cannot be any dispute, that there ought to be a fixed rate of interest for the adjustment of all differences that may arise among parties who have not previously settled the terms of their money-contracts, let us consider the reasons that may be alleged for a legal rate by which the terms of every such contract are to be restrained within certain limits.

"The

Of these reasons one of the most plausible is founded on the expediency of maintaining, as far as possible, habits of economy in the great body of a people, and of checking the thoughtlessness and extravagance of those who are in danger of ruining their fortunes by prodigality. Were it not for this class of men, Sir James Steuart is of opinion that there would be not occasion for a statute to regulate the rate of interest. profits of trade," he observes, " would strike an average among the industrious classes, and that average would fall or rise, in proportion to the flourishing or decay of commerce." A case, therefore, which appeared to this ingenious and profound writer to be so strong as of itself to justify the policy of Anti-usurious Laws, will require to be considered with particular attention.2

In examining the grounds on which this opinion rests, I shall wave entirely the general question, whether it ought to be one of the objects of law to impose restraints on the prodigality of spendthrifts. It is sufficient for our purpose to remark, that in so far as this is the aim of the Anti-usurious Laws, they are altogether inadequate to the end proposed.

In proof of this, let us attend to the situation in which persons of this description are placed: First, on the supposition that the prodigal has some security to offer for the money he borrows; and, Secondly, on the supposition that he has none. In the first case, it seems to be abundantly manifest, that so

1 Political Economy, [Book IV. chap. iv.; Works, Vol. III. p. 158.]

2 Mr. Locke, too, rests his opinion of

the expediency of these laws nearly on the same consideration, Vol. II. p. 31. [(First) Considerations on Interest and Money.]

long as the prodigal has any thing to pledge or to dispose of, whether in possession or even in reversion, no Anti-usurious Laws can be efficacious in checking his extravagance. While he has ready money of his own, or effects which he can turn. into ready money without loss, he will never think of borrowing money to spend; and when at last these resources fail him, so long as he has security to give, equal to that upon which money is to be had at the highest ordinary rate, he has no occasion, nor is at all likely to borrow money at an extraordinary interest. It is true that from persons of this disposition regular payment of interest is not to be expected; but supposing the money-lender to be satisfied with the security, he will seldom hesitate about the loan, in consequence of any apprehensions founded on the character of the borrower. On the contrary, Mr. Bentham observes, that where the security is good, there will be always found a sufficient number of money-lenders, with whom a disposition to prodigality will operate as a recommendation. In confirmation of this he mentions the advantage to be made in case of mortgage, by foreclosing or forcing a sale; an advantage which, he says, is not uncommonly looked for in transactions of this nature," as is well known to all who have had occasion to observe the course of business in the Court of Chancery."*

It remains for me only to mention, under this head, the case of those who, although they have no real or good security to offer, have some contingency in prospect, which they may wish to avail themselves of, in supporting their credit. In such instances there will be found, no doubt, money-lenders, who (if there were no laws to the contrary) would be willing to run the risk for an extraordinary profit: And it may be imagined. that the penalties on usury may be useful in preventing the prodigal from advancing farther in his ruinous career. But is this really the case? So much the reverse that our Antiusurious Laws only aggravate the evil they are meant to remedy. The following dilemma may be fairly stated on the subject:-Either these laws are effectual in restraining usury, * [Defence of Usury, Letter iii.; Works, Vol. III. p. 6.]