Reflections on the Formation and Distribution of wealth [21]
or interest, expresses it exactly, usura pecuniae, a word which adopted into the French language is become odious, by a consequence of false ideas being adopted on the interest of money.
72. False ideas on lending upon interest.
The rate of interest is by no means founded, as may be imagined, on the profit the borrower hopes to make, with the capital of which he purchases the use. This rate like the price of all other merchandize, is fixed by the circumstances of buyer and seller; by the proportion of the sum offered with the demand. People borrow with every kind of view, and with every sort of motive. One borrows to undertake an enterprize that is to make his fortune, another to buy an estate, another to pay his losses at play, another to supply the loss of his revenue, of which some accident has deprived him, another to exist on, in expectation of what he is able to gain by his labour. but all these motives which determine the borrower, are very indifferent to the lender. He attends to two things only, the interest he is to receive, and the safety of his capital. He never attends to the use the borrower puts it to, as a merchant does not care to what use the buyer applies the commodities he sells him.
73. Errors of the schoolmen refuted.
It is for want of having examined the lending of money on interest in its true point of view that moralists, more rigid than enlightened, would endeavour to make us look on it as a crime. Scholastic theologists have concluded, that as money itself was not prolific, it was unjust to require a premium for the loan of it. Full of these prejudices they have fancied their doctrine was sanctioned by this passage in the Gospel, mutuum date nihil inde sperantes: Those theologians who have adopted more reasonable principles on the subject of interest of money, have been branded with the harshest reproaches from those who adopt the other side of the question. Nevertheless, there are but few reflections necessary to expose the trifling reasons that are adduced to condemn the taking of interest. A loan of money is a reciprocal contract, free between both parties, and entered into only by reason of its being mutually advantageous. It is evident, if the lender finds an advantage in receiving an interest for his money, the borrower is not less interested in finding that money he stands in need of, since otherwise he would not borrow and submit himself to the payment of interest. Now on this principle, can any one look on such an advantageous contract as a crime, in which both parties are content, and which certainly does no injury to any other person? Let them say the lender takes advantage of the wants of the borrower, to force the payment of interest, this is talking as absurd as if we were to say, that a baker who demands money for the bread he sells, takes advantage of his customer's wants. If in this latter case, the money is an equivalent for the bread the buyer receives, the money which the borrower receives to day, is equally an equivalent for the capital and interest he agrees to pay at the expiration of a certain time; for in fact, it is an advantage to the borrower, to have, during that interval, the use of the money he stands in need of, and it is a disadvantage to the lender to be deprived of it. This disadvantage may be estimated, and it is estimated, the interest is the rate. This rate ought to be larger, if the lender runs a risk of losing his capital by the borrower becoming insolvent. The bargain therefore is perfectly equal on both sides and consequently, fair and honest. Money considered as a physical substance, as a mass of metal, does not produce any thing; but money made use of in advances in cultivation, in manufacture, in commerce, produces a certain profit; with money we can acquire land, and thereby procure a revenue: the person therefore who lends his money, does not only give up the unfruitful possession of such money, but deprives himself of the profit which it was in his power to procure by it, and the interest which indemnifies him from
72. False ideas on lending upon interest.
The rate of interest is by no means founded, as may be imagined, on the profit the borrower hopes to make, with the capital of which he purchases the use. This rate like the price of all other merchandize, is fixed by the circumstances of buyer and seller; by the proportion of the sum offered with the demand. People borrow with every kind of view, and with every sort of motive. One borrows to undertake an enterprize that is to make his fortune, another to buy an estate, another to pay his losses at play, another to supply the loss of his revenue, of which some accident has deprived him, another to exist on, in expectation of what he is able to gain by his labour. but all these motives which determine the borrower, are very indifferent to the lender. He attends to two things only, the interest he is to receive, and the safety of his capital. He never attends to the use the borrower puts it to, as a merchant does not care to what use the buyer applies the commodities he sells him.
73. Errors of the schoolmen refuted.
It is for want of having examined the lending of money on interest in its true point of view that moralists, more rigid than enlightened, would endeavour to make us look on it as a crime. Scholastic theologists have concluded, that as money itself was not prolific, it was unjust to require a premium for the loan of it. Full of these prejudices they have fancied their doctrine was sanctioned by this passage in the Gospel, mutuum date nihil inde sperantes: Those theologians who have adopted more reasonable principles on the subject of interest of money, have been branded with the harshest reproaches from those who adopt the other side of the question. Nevertheless, there are but few reflections necessary to expose the trifling reasons that are adduced to condemn the taking of interest. A loan of money is a reciprocal contract, free between both parties, and entered into only by reason of its being mutually advantageous. It is evident, if the lender finds an advantage in receiving an interest for his money, the borrower is not less interested in finding that money he stands in need of, since otherwise he would not borrow and submit himself to the payment of interest. Now on this principle, can any one look on such an advantageous contract as a crime, in which both parties are content, and which certainly does no injury to any other person? Let them say the lender takes advantage of the wants of the borrower, to force the payment of interest, this is talking as absurd as if we were to say, that a baker who demands money for the bread he sells, takes advantage of his customer's wants. If in this latter case, the money is an equivalent for the bread the buyer receives, the money which the borrower receives to day, is equally an equivalent for the capital and interest he agrees to pay at the expiration of a certain time; for in fact, it is an advantage to the borrower, to have, during that interval, the use of the money he stands in need of, and it is a disadvantage to the lender to be deprived of it. This disadvantage may be estimated, and it is estimated, the interest is the rate. This rate ought to be larger, if the lender runs a risk of losing his capital by the borrower becoming insolvent. The bargain therefore is perfectly equal on both sides and consequently, fair and honest. Money considered as a physical substance, as a mass of metal, does not produce any thing; but money made use of in advances in cultivation, in manufacture, in commerce, produces a certain profit; with money we can acquire land, and thereby procure a revenue: the person therefore who lends his money, does not only give up the unfruitful possession of such money, but deprives himself of the profit which it was in his power to procure by it, and the interest which indemnifies him from