Besides prodigals, there are three other classes of persons, and but three, for whose security I can conceive these restrictive laws to have been designed. I mean the indigent, the rashly enterprizing, and the simple: those whose pecuniary necessities may dispose them to give an interest above the ordinary rate. rather than not have it, and those who, from rashness, may be disposed to venture upon giving such a rate, or from carelessness combined with ignorance, may be disposed to acquiesce in it.
In speaking of these three different classes of persons, I must beg leave to consider one of them at a time: and accordingly, in speaking of the indigent, I must consider indigence in the first place as untinctured with simplicity. On this occasion. I may suppose, and ought to suppose, no particular defect in a man's judgment, or his temper, that should mislead him, more than the ordinary run of men. He knows what is his interest as well as they do, and is as well disposed and able to pursue it as they are.
I have already intimated, what I think is undeniable. that there are no one or two or other limited number of rates of interest, that can be equally suited to the unlimited number of situations, in respect of the degree of exigency, in which a man is liable to find himself: insomuch that to the situation of a man, who by the use of money can make for example 11 per cent, six per cent is as well adapted, as 5 per cent is to the situation of him who can make but 10; to that of him who can make 12 per cent seven and so on. So, in the case of his wanting it to save himself from a loss, (which is that which is most likely to be in view under the name of exigency) if that loss would amount to 11 per cent 6 per cent is as well adapted to his situation, as 5 per cent would be to the situation of him, who had but a loss amounting to ten per cent to save himself from by the like means. And in any case. though. in proportion to the amount of the loss, the rate of interest were even so great, as that the clear saving should not amount to more than one per cent or any fraction per cent yet so long as it amounted to any thing, he would be just so much the better for borrowing, even on such comparatively disadvantageous terms. If, instead of gain, we put any other kind of benefit or advantage -- if: instead of loss. we put any other kind of mischief or inconvenience, of equal value, the result will be the same.
A man is in one of these situations, suppose, in which it would be for his advantage to borrow. But his circumstances are such, that it would not be worth any body's while to lend him, at the highest rate which it is proposed the law should allow; in short, he cannot get it at that rate. If he thought he could get it at that rate, most surely he would not give a higher: he may he trusted for that: for by the supposition he has nothing defective in his understanding. But the fact is, he cannot get it at that lower rate. At a higher rate, however he could get it: and at that rate, though higher, it would be worth his while to get it: so he judges, who has nothing to hinder him from judging right; who has every motive and every means for forming a right judgment; who has every motive and every means for informing himself of the circumstances, upon which rectitude of judgment, in the case in question, depends. The legislator, who knows nothing, nor can know any thing, of any one of all these circumstances, who knows nothing at all about the matter, comes and says to him -- "It signifies nothing; you shall not have the money: for it would be doing you a mischief to let you borrow it upon such terms." -- And this out of prudence and loving-kindness! -- There may be worse cruelty. but can there be greater folly?
The folly of those who persist, as is supposed, without reason, in not taking advice, has been much expatiated upon. But the folly of those who persist, without reason, in forcing their advice upon others, has been but little dwelt upon, though it is, perhaps, the more frequent, and the more flagrant of the two. It is not often that one man is a better judge for another, than that other is for himself, even in Cases where the adviser will take the trouble to make himself master of as many of the materials for judging, as are within the reach of the person to be advised. But the legislator is not, can not be, in the possession of any one of these materials. -- What private, can be equal to such public folly?
I should now speak of the enterprizing class of borrowers: those. who, when characterized by a single term, are distinguished by the unfavourable appellation of projectors: but in what I shall have to say of them, Dr Smith, I begin to foresee, will bear so material a part, that when I come to enter upon that subject, I think to take my leave of you, and address myself to him.
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