Defence of Usury [11]
what no man can know, and what one can scarcely think it possible for any man, who, in the character of the borrower, has been concerned in such a transaction, to imagine. He knew that, even in his own judgment, the engagement was a beneficial one to himself, or he would not have entered into it: and nobody else but the lender is affected by it.
LETTER VII Efficacy of anti-usurious laws.
Before I quit altogether the consideration of the case in which a law, made for the purpose of limiting the rate of interest, may be inefficacious with regard to that end, I can not forbear taking some further notice of a passage already alluded to of Dr Smith's: because, to my apprehension, that passage seems to throw upon the subject a degree of obscurity, which I could wish to see cleared up, in a future edition of that valuable work. "No law" says he,(2*) "can reduce the common rate of interest below the lowest ordinary market rate, at the time when that law was made. Notwithstanding the edict of 1766, by which the French king attempted to reduce the rate of interest from five to four per cent money continued to be lent in France at five per cent the law being evaded in several different ways." As to the general position, if so it be, so much, according to me, the better: but I must confess I do not see why this should be the case. It is for the purpose of proving the truth of this general position, that the fact of the inefficacy of this attempt seems to be adduced: for no other proof is adduced but this. But, taking the fact for granted, I do not see how it can be sufficient to support the inference. The law, we are told at the same time, was evaded: but we are not told how it came to be open to evasion. It might be owing to a particular defect in the penning of that particular law; or, what comes to the same thing, in the provisions made for carrying it into execution. In either case, it affords no support to the general position: nor can that position he a just one, unless it were so in the case where every provision had been made, that could be made, for giving efficacy to the law. For the position to be true, the case must be, that the law would still be broken, even after every means of what can properly be called evasion had been removed. True or untrue, the position is certainly not self-evident enough to be received without proof: yet nothing is adduced in proof of it, but the fact above-noticed, which we see amounts to no such thing. What is more, I should not expect to find it capable of proof. I do not see, what it is, that should render the law incapable of "reducing the common rate of interest below the lowest ordinary market rate," but such a state of things, such a combination of circumstances, as should afford obstacles equally powerful, or nearly so, to the efficacy of the law against all higher rates. For destroying the law's efficacy altogether. I know of nothing that could serve, but a resolution on the part of all persons any way privy not to inform: but by such a resolution any higher rate is just as effectually protected as any lower one. Suppose the resolution, strictly speaking, universal, and the law must in all instances be equally inefficacious; all rates of interest equally free; and the state of men's dealings in this way just what it would be, were there no law at all upon the subject. But in this case, the position, in as far as it limits the inefficacy of the law to those rates which are below the "lowest ordinary market rate," is not true. For my part, I cannot conceive how any such universal resolution could have been maintained, or could ever be maintained, without an open concert, and as open a rebellion against government; nothing of which sort appears to have taken place: and, as to any particular confederacies, they are as capable of protecting any higher rates against the prohibition, as any lower ones. Thus much indeed must be admitted, that the low rate in question. viz. that which was the lowest ordinary market rate immediately before the making of the law, is likely
LETTER VII Efficacy of anti-usurious laws.
Before I quit altogether the consideration of the case in which a law, made for the purpose of limiting the rate of interest, may be inefficacious with regard to that end, I can not forbear taking some further notice of a passage already alluded to of Dr Smith's: because, to my apprehension, that passage seems to throw upon the subject a degree of obscurity, which I could wish to see cleared up, in a future edition of that valuable work. "No law" says he,(2*) "can reduce the common rate of interest below the lowest ordinary market rate, at the time when that law was made. Notwithstanding the edict of 1766, by which the French king attempted to reduce the rate of interest from five to four per cent money continued to be lent in France at five per cent the law being evaded in several different ways." As to the general position, if so it be, so much, according to me, the better: but I must confess I do not see why this should be the case. It is for the purpose of proving the truth of this general position, that the fact of the inefficacy of this attempt seems to be adduced: for no other proof is adduced but this. But, taking the fact for granted, I do not see how it can be sufficient to support the inference. The law, we are told at the same time, was evaded: but we are not told how it came to be open to evasion. It might be owing to a particular defect in the penning of that particular law; or, what comes to the same thing, in the provisions made for carrying it into execution. In either case, it affords no support to the general position: nor can that position he a just one, unless it were so in the case where every provision had been made, that could be made, for giving efficacy to the law. For the position to be true, the case must be, that the law would still be broken, even after every means of what can properly be called evasion had been removed. True or untrue, the position is certainly not self-evident enough to be received without proof: yet nothing is adduced in proof of it, but the fact above-noticed, which we see amounts to no such thing. What is more, I should not expect to find it capable of proof. I do not see, what it is, that should render the law incapable of "reducing the common rate of interest below the lowest ordinary market rate," but such a state of things, such a combination of circumstances, as should afford obstacles equally powerful, or nearly so, to the efficacy of the law against all higher rates. For destroying the law's efficacy altogether. I know of nothing that could serve, but a resolution on the part of all persons any way privy not to inform: but by such a resolution any higher rate is just as effectually protected as any lower one. Suppose the resolution, strictly speaking, universal, and the law must in all instances be equally inefficacious; all rates of interest equally free; and the state of men's dealings in this way just what it would be, were there no law at all upon the subject. But in this case, the position, in as far as it limits the inefficacy of the law to those rates which are below the "lowest ordinary market rate," is not true. For my part, I cannot conceive how any such universal resolution could have been maintained, or could ever be maintained, without an open concert, and as open a rebellion against government; nothing of which sort appears to have taken place: and, as to any particular confederacies, they are as capable of protecting any higher rates against the prohibition, as any lower ones. Thus much indeed must be admitted, that the low rate in question. viz. that which was the lowest ordinary market rate immediately before the making of the law, is likely