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 money should be called usurer, should be ld with an opprobrious name, any more than if he had bought an house with it, and made a proportionable profit by the house, is more than I can see.
Another thing I would also wish to learn, is, why the legislator should be more anxious to limit the rate of interest one way, than the other? why he should set his face against the owners of that species of property more than of any other? why he should make it his business to prevent their getting more than a certain price for the use of it, rather than to prevent their getting less? why, in short, he should not take means for making it penal to offer less, for example, than 5 per cent as well as to accept more? let any one that can, find an answer to these questions; it is more than I can do: I except always the distant and imperceptible advantage, of sinking the price of goods of all kinds; and, in that remote way, multiplying the future enjoyments of individuals. But this was a consideration by far too distant and refined, to have been the original ground for confining the limitation to this side.
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