Defence of Usury [9]
of the value of land did not take place immediately: but as, on the other hand, neither did it immediately recover its former price upon the peace, if indeed it has even yet recovered it, we may put seven years for the time, during which it would be more advantageous to pay this extraordinary rate of interest than sell the land, and during which, accordingly, this extraordinary rate of interest would have had to run. One per cent for seven years, is not quite of equal worth to seven per cent the first year: say, however, that it is. The estate, which before the war was worth thirty years purchase, that is *3,000 and which the devisor had given to the devisee for that value, being put up to sale, fetched but 20 years purchase, *2,000. At the end of that period it would have fetched its original value, *3,000. Compare, then, the situation of the devisee at the 7 years end, under the law, with what it would have been, without the law. In the former case, the land selling for 20 years purchase, i.e. *2,000 what he would have, after paying the *1,500 is *500; which, with the interest of that sum, at 5 per cent for seven years, viz. *175 makes, at the end of that seven years, *675. In the other case, paying 6 per cent on the *1,500 that is *90 a year, and receiving all that time the rent of the land, viz. *100 he would have had, at the seven years end, the amount of the remaining ten pound during that period, that is *70 in addition to his *1,000. -- *675 substracted from *1,070 leaves *395. This *395 then, is what he loses out of *1,070, almost 37 per cent of his capital, by the loving-kindness of the law. Make the calculations, and you will find, that, by preventing him from borrowing the money at 6 per cent interest, it makes him nearly as much a sufferer as if he had borrowed it at ten. What I have said hitherto is confined to the case of those who have present value to give, for the money they stand in need of. If they have no such value, then, if they succeed in purchasing assistance upon any terms, it must be in breach of the law; their lenders exposing themselves to its vengeance: for I speak not here of the accidental case, of its being so constructed as to be liable to evasion. But, even in this case, the mischievous influence of the law still pursues them; aggravating the very mischief it pretends to remedy. Though it be inefficacious in the way in which the legislator wishes to see it efficacious, it is efficacious in the way opposite to that in which he would wish to see it so. The effect of it is, to raise the rate of interest, higher than it would be otherwise, and that in two ways. In the first place, a man must, in common prudence, as Dr Smith observes, make a point of being indemnified, not only for whatsoever extraordinary risk it is that he runs, independently of the law, but for the very risk occasioned by the law: he must be insured, as it were, against the law. This cause would operate, were there even as many persons ready to lend upon the illegal rate, as upon the legal. But this is not the case: a great number of persons are, of course, driven out of this competition by the danger of the business; and another great number, by the disrepute which, under cover of these prohibitory laws or otherwise, has fastened itself upon the name of usurer. So many persons, therefore, being driven out of the trade, it happens in this branch, as it must necessarily in every other, that those who remain have the less to withhold them from advancing their terms; and without confederating, (for it must be allowed that confederacy in such a case is plainly impossible) each one will find it easier to push his advantage up to any given degree of exorbitancy, than he would, if there were a greater number of persons of the same stamp to resort to. As to the case, where the law is so worded as to be liable to be evaded, in this case it is partly inefficacious and nugatory, and partly mischievous. It is nugatory, as to all such, whose confidence of its being so is perfect: it is mischievous, as before, in regard to all