prix par rapport aux Etats voisins. "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 Considera 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.] 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 |