pretence for more than ordinary interest, inasmuch as the security is, in this case, not only equal to, but better than, what it can be in any other: to wit, the present possession of a moveable thing, of easy sale, on which the creditor has the power, and certainly does not want the inclination, to set such price as is most for his advantage. If there be a case in which the allowing of such extraordinary interest is attended with more danger than another, it must be this: which is so particularly adapted to the situation of the lowest poor, that is, of those who, on the score of indigence or simplicity, or both, are most open to imposition. This trade however the law, by regulating, avowedly protects. What the rate of interest is, which it allows to be taken in this way, I can not take upon me to 80 LETT. VIII. Virtual to remember: but I am much deceived, if it amounts to less than 12 per cent, in the year, and I believe it amounts to a good deal more. "Whether if were 12 per cent, or 1200, I believe would make in practice but little difference. What commission is in the business of drawing and re-drawing, warehouse-room is, in that of pawnbroking. Whatever limits then are set to the profits of this trade, are set, I take it, not by the vigilancy of the law, but, as in the case of other trades, by the competition amongst the traders. Of the other regulations contained in the acts relative to this subject, I recollect no reason to doubt the use. The other instance is that of bottomry and respondentia: for the two transactions, being so nearly related, may be spoken of together. Bottomry is the usury of pawnbroking: respondentia Usury alloivfd. 81 Usury alloivfd. 81 dentia is usury at large, but combined in a manner with insurance, and employed in the assistance of a trade carried on by sea. If any species of usury is to be condemned, I see not on what grounds this particular species can be screened from the condemnation. " Oil but" (says sir William Blackstone, or any body else who takes upon himself the task of finding a reason for the law) " this is " a maritime country, and the trade, " which it carries on by sea, is the " great bulwark of its defence." It is not necessary I should here inquire, whether that branch, which, as Dr. Smith has shewn, is, in every view but the mere one of defence, less beneficial to a nation, than two others out of the four branches which comprehend all trade, has any claim to be preferred to them in this or any other way. I £ 3 admit, 82 LETT. VIII. Virtual admit, that the liberty which this branch of trade enjoys, is no more than what it is perfectly right it should enjoy. What I want to know is, what there is in the class of men, embarked in this trade, that should render beneficial to them, a liberty, which would be ruinous to every body else. Is it that sea adventures have less hazard on them than land adventures? or that the sea teaches those, who have to deal with it, a degree of forecast and reflection which has been denied to land men?
It were easy enough to give farther and farther extension to this charge of inconsistency, by bringing under it the liberty given to insurance in all its branches, to the purchase and sale of annuities, and of post-obits, in a word to all cases where a man is permitted to take upon himself an unlimited Usury allowed. S3 mited degree of risk, receiving for sodoing an unlimited compensation. Indeed I know not where the want ©f instances would stop me: for in what part of the magazine of events, about which human transactions are conversant, is certainty to be found? But to this head of argument, this argument ad hominem, as it may be called, the use of which is but subsidiary, and winch has more of confutation in it than of persuasion or instruction, 1 willingly put an end.
84 LETT. IX. Blackstone considered.
LETTER IX.
Blackstone considered..
I Hope you are, by this time, at least, pretty much of my opinion, that there is just the same sort of harm, and no other, in making the best terms one can for one's self in a money loan, as there is in any other sort of bargain. If you are not, Blackstone however te, whose opinion I hope you will allow to be worth something. In speaking of the rate of interest*, he starts a parallel between a bargain for the loan of money, and a bargain about a horse, and pronounces, without hesitation, that the harm of making too good a bargain, LETT. IX. Blackstone cons idercd. 85 bargain, is just as great in the one case, as in the other. As money-lending, and not horse-dealing, was, what you lawyers call, the principal case, he drops the horse-business, as soon as it has answered the purpose of illustration, which it was brought to serve. But as, in my conception, as well the reasoning by which he supports the decision, as that by which any body else could have supported it, is just as applicable to the one sort of bargain as to the other, I will carry on the parallel a little farther, and give the same extent to the reasoning, as to the position which it is made use of to support. This extension will not be without its use; for if the position, when thus extended, should be found just, a practical inference will arise; which is, that the benefits of these restraints ought to be extended from the 86 LETT. IX. Blackstone considered.
the money-trade to the horse-trade. That my own opinion is not favourable to such restraints in either case, has been sufficiently declared j but if more respectable opinions than mine are still to prevail, they will not be the less respectable for being consistent.
The sort of bargain which the learned commentator has happened to pitch upon for the illustration, is indeed, in the case illustrating, as in the case illustrated, a loan: but as, to my apprehension, loan or sale makes, in point of reasoning, no sort of difference, and as the utility of the conclusion will, in the latter case, be more extensive, I shall adapt the reasoning to the more important business of selling horses, instead of the less important one of lending them.
A circumstance^ that would render the extension of these restraints to the horse- LETT. IX. Blackstone considered. 87 horse-trade more smooth and easy, is, that in the one track, as well as in the other, the public has already got the length of calling names. Jockey- ship, a term of reproach not less frequently applied to the arts of those who sell horses than to the arts of those who ride them, sounds, I take it, to the ear of many a worthy gentleman, nearly as bad as usury: and it is well known to all those who put their trust in proverbs, and not less to those who put their trust in party, that when we have got a dog to hang, who is troublesome and keeps us at bay, whoever can contrive to fasten a bad name to his tail, has gained more than half the battle. I now proceed with my application. The words in italics are my own: all the rest are Sir William Blackstone's: and I restore, at bottom, 88 LETT. IX. Btackstone considered.
torn, the words I was obliged to discard, in order to make room for mine.
" To demand an exorbitant price " is equally contrary to conscience, " for the loan of a horse, or for the " loan of a sum of money: but a rea- " sonable equivalent for the tempo- " rary inconvenience, which the own- " er may feel by the want of it, and " for the hazard of his losing it en- " tirely, is not more immoral in one " case than in the other. * * * * " As to selling horses, a capital dis- " tinction must be made, between a " moderate and an exorbitant profit: " to the former of which we give the " name of horse-dealing*, to the latter "the truly odious appellation of joe- " key-ship^: the former is necessary " in every civil state, if it were but to * interest. f usury.
" exclude LETT. IX. Blackstone considered. 89 " exclude the latter. For, as the whole " of this matter is well summed up " by Grotius, if the compensation " allowed by law does not exceed " the proportion of the inconvenience " which it is to the seller of the horse to " part ivith it*, or the want which the " buyer has of z7f, its allowance is " neither repugnant to the revealed " law, nor to the natural law: but " if it exceeds these bounds, it is " then an oppressive jockey-ship\: and " though the municipal laws may give " it impunity, they never can make it " just.
" We see, that the exorbitance or " moderation of the price given for a ft horse§ depends upon two circum- " stances: upon the inconvenience of * hazard run. t felt by the loan. J usury, $ interest for the money lent.
" parting 90 LETT. IX. Blackstone considered.
" parting with the horse one has*, and " the hazard of not being able to meet " with such another^. The inconveni- " ence to individual sellers of horses^, " can never be estimated by laws; the " general price for horses^ must depend " therefore upon the usual or general " inconvenience. This results entirely " from the quantity of horses\[ in the " kingdom: for the more horses^ there tf are running about** in any nation, " the greater superfluity there will be " beyond what is necessary to carry on " the business of the mail coaches-\-\ and " the common concerns of life. In " every nation or public community " there is a certain quantity of horses^ " then necessary, which a person well " skilled in political arithmetic might * it for the present. -f losing it entirely.
$ lenders. § rate of general interest. || money. 5f specie. ** circulating. ft exchange, j! money.
" perhaps LETT. IX. Blackstone considered. 91 " perhaps calculate as exactly as a pri- " vate horse-dealer* can the demand " for running horses in his own stables -\: " all above this necessary quantity " may be spared, or lent, or sold, with* " out much inconvenience to the re- " spective lenders or sellers: and the " greater the national superfluity is, " the more numerous will be the sell' " ers^y and the lower ought the na- " tional price of horse-flesh § to be: " but where there are not enough, or " barely enough spare horses || to an- " swer the ordinary uses of the pub- «' lie, horse-flesh f will be proportion- " ably high: for sellers** will be " but few, as few can submit to the in- " convenience of setting^." — So far the learned commentator.
* banker, f cash in his own shop. J lenders.
§ the rate of the national interest.
i circulating cash. ^ interest. ** lenders.
ft lending.
I hope 92 LETT. IX. Blackstone considered.
I hope by this time you are worked up to a proper pitch of indignation, at the neglect and inconsistency betrayed by the law, in not suppressing this species of jockey-ship, which it would be so easy to do, only by fixing the price of horses. Nobody is less disposed than I am, to be uncharitable:. but when one thinks of the 15001. taken for Eclipse, and 20001. for Rockingham, and so on, who can avoid being shocked, to think how little regard those who took such enormous prices must have had for " the law of revelation and the law " of nature?" Whoever it is that is to move for the municipal law, not long ago talked of, for reducing the rate of interest, whenever that motion is made, then would be the time for one of the Yorkshire members to get up, and move, by way of addition, for LETT. IX. Blackstone considered. 93 for a clause for fixing and reducing the price of horses. I need not expatiate on the usefulness of that valuable species of cattle, which might have been as cheap as asses before now, if our lawgivers had been as mindful of their duty in the suppression of joe 'keyship, as they have been in the suppression of usury.
It may be said, against fixing the price of horse-flesh, that different horses may be of different values. I answer — and I think I shall shew you as much, when I come to touch upon the subject of champerty — not more different than the values which the use of the same sum of money may be of to different persons, on different occasions.
94 LETT. X. Grounds of the LETTER X.
Grounds of the Prejudices against Usury.
IT is one thing, to find reasons why it is Jit a law should have been made: it is another to find the reasons why it was made: in other words, it is one thing to justify a law: it is another thing to account for its existence. In the present instance, the former task, if the observations I have been troubling you with are just, is an impossible one. The other, though not necessary for conviction, may contribute something perhaps in the way of satisfaction. To trace an error to its fountain head, says lord Coke, is to refute Prejudices against Usury. 95 refute it; and many men there are who, till they have received this satisfaction, be the error what it may, cannot prevail upon themselves to part with it. " If our ancestors have been all along " under a mistake, how came they to t( have fallen into it?" is a question that naturally presents itself upon all such occasions. The case is, that in matters of law more especially, such is the dominion of authority over our minds, and such the prejudice it creates in favour of whatever institution it has taken under its wing, that, after all manner of reasons that can be thought of, in favour of the institution, hare been shewn to be insufficient, we still cannot forbear looking to some unassignable and latent reason for its efficient cause. But if, instead of any such reason, we can find a cause for it in some notion, of the erroneousness of which 96 LETT. X. Grounds of the which we are already satisfied, then at last we are content to give it up without further struggle; and then, and not till then, our satisfaction is complete.
In the conceptions of the more considerable part of those through whom our religion has been handed down to us, virtue, or rather godliness, which was an improved substitute for virtue, consisted in self-denial: not in self-denial for the sake of society, but of selfdenial for its own sake. One pretty general rule served for most occasions: not to do what you had a mind to do; or* in other words, not to do what would be for your advantage. By this of course was meant temporal advantage: to which spiritual advantage was understood to be in constant and diametrical opposition. For, the proof of a resolution, on the part of a being of Prejudices against Usury. 97 of perfect power and benevolence, to make his few favourites happy in a state in which they were to be, was his determined pleasure, that they should keep themselves as much strangers to happiness as possible, in the state in which they were. Now to get money is what most men have a mind to do: because he who has money gets, as far as it goes, most other things that he has a mind for. Of course nobody was to get money: indeed why should he, when he was not so much as to keep -what he had got already? To lend money at interest, is to get money, or at least to try to get it: of course it was a bad thing to lend money upon such terms. The better the terms, the worse it was to lend upon them: but it was bad to lend upon any terms, by which any thing could F be 98 LETT. X. Grounds of the be got. What made it much the worse was, that it was acting like a Jew: for though all Christians at first were Jews, and continued to do as Jews did, after they had become Christians, yet, in process of time, it came to be discovered, that the distance between the mother and the daughter church could not be too wide.
By degrees, as old conceits gave place to new, nature so far prevailed, that the objections to getting money in general, were pretty well over-ruled: but still this Jewish way of getting it, was too odious to be endured. Christians were too intent upon plaguing Jews, to listen to the suggestion of doing as Jews did, even though money were to be got by it. Indeed the easier method, and a method pretty much in vogue, was, to let the Jews get Prejudices against Usury. 99 get the money any how they could, and then squeeze it out of them as it was wanted.
In process of time, as questions of all sorts came under discussion, and this, not the least interesting, among the rest, the anti-Jewish side of it found no unopportune support in a passage of Aristotle: that celebrated heathen, who, in all matters wherein heathenism did not destroy his competence, had established a despotic empire over the Christian world. As fate would have it, that great philosopher, with all his industry, and all his penetration, notwithstanding the great number of pieces of money that had passed through his hands (more perhaps than ever passed through the hands of philosopher before or since), and notwithstanding the uncommon pains he had bestowed on the subject of ge- F2 neration, 100 LETT. X. Grounds of the Deration, had never been able to discover, in any one piece of money, any organs for generating any other such piece. Emboldened by so strong a body of negative proof, he ventured at last to usher into the world the result of his observations, in the form of an universal proposition, that all money is in its nature barren. You, my friend, to •whose cast of mind sound reason is much more congenial than ancient philosophy, you have, I dare to say, gone before me in remarking, that the practical inference from this shrewd observation, if it afforded any, should have been, that it would be to no purpose for a man to try to get five per cent, out of money — not, that if he could contrive to get so much, there would be any harm in it. But the sages of those days did not view the matter in that light.
A con- Prejudices against Usury. 101 A consideration that did not happen to present itself to that great philosopher, but which had it happened to present itself, might not have been altogether unworthy of his notice, is, that though a daric would not beget another daric, any more than it would a ram, or an ewe, yet for a daric which a man borrowed, he might get a ram and a couple of ewes, and that the ewes, were the ram left with them a certain time, would probably not be barren. That then, at the end of the year, he would find himself master of his three sheep, together with two, if not three, lambs; and that, if he sold his sheep again to pay back his daric, and gave one of his lambs for the use of it in the mean time, he would be two lambs, or at least one lamb, richer than if he had made no such bargain.
These 102 LETT. X. Grounds of th& These theological and philosophical conceits, the offspring of the day, were not ill seconded by principles of a more permanent complexion.
The business of a money-lender, though only among Christians, and in Christian times, a proscribed profession, has no where, nor at any time, been a popular one. Those who have the resolution to sacrifice the present to future, are natural objects of envy to those who have sacrificed the future to the present. The children who have eat their cake are the natural enemies of the children who have theirs. While the money is hoped for, and for a short time after it has been received, he who lends it is a friend and benefactor: by the time the money is spent, and the evil hour of reckoning is come, the benefactor is found to Imve changed his nature, and to have put Prejudices against Usury. 103 put on the tyrant and the oppressor. It is an oppression for a man to reclaim his own money: it is none to keep it from him. Among the inconsiderate, that is among the great mass of mankind, selfish affections conspire with the social in treasuring up all favour for the man of dissipation, and in refusing justice to the man of thrift who has supplied him. In some shape or other that favour attends the chosen object of it, through every stage of his career. But, in no stage of his career, can the man of thrift come in for any share of it. It is the general interest of those with whom a man lives, that his expense should be at least as great as his circumstances will bear: because there are few expenses which a man can launch into, but what the benefit of it is shared, in some proportion or other, by those with whom he lives.
In 104 LETT. X. Grounds of the In that circle originates a standing law, forbidding every man, on pain of infamy, to confine his expenses within what is adjudged to be the measure of his means, saving always the power of exceeding that limit, as much as he thinks proper: and the means assigned him by that law may be ever so much beyond his real means, but are sure never to fall short of them. So close is the combination thus formed between the idea of merit and the idea of expenditure, that a disposition to spend finds favour in the eyes even of those who know that a man's circumstances do not entitle him to the means: and an upstart, whose chief recommendation is this disposition, shall find himself to have purchased a permanent fund of respect, to the prejudice of the very persons at whose expense he has been gratifying his appetites and his pride.
Prejudices against Usury. 105 pride. The lustre, which the display of borrowed wealth has diffused over his character, awes men, during the season of his prosperity, into a submission to his insolence: and when the hand of adversity has overtaken him at last, the recollection of the height, from which he has fallen, throws the veil of compassion over his injustice.
The condition of the man of thrift is the reverse. His lasting opulence procures him a share, at least, of the same envy, that attends the prodigal's transient display: but the use he makes of it procures him no part of the favour which attends the prodigal. In the satisfactions he derives from that use, the pleasure of possession, and the idea of enjoying, at some distant period, which may never arrive, nobody comes in for any share. In the midst of his opulence he is regarded as a F 3 kind 106 LETT. X. Grounds of the kind of insolvent, who refuses to honour the bills, which their rapacity would draw upon him, and who is by so much the more criminal than other insolvents, as not having the plea of inability for an excuse.
Could there be any doubt of the disfavour which attends the cause of the money-lender, in his competition with the borrower, and of the disposition of the public judgment to sacrifice the interest of the former to that of the latter, the stage would afford a compendious, but a pretty c6nclusive proof of it. It is the business of the dramatist to study, and to conform to, the humours and passions of those, on the pleasing of whom he depends for his success: it is the course which reflection must suggest to every man, and •which a man would naturally fall into, though he were not to think about it.
He Prejudices against Usury. 107 He may, and very frequently does, make magni6cent pretences, of giving the law to them: but woe be to him that attempts to give them any other law than what they are disposed already to receive. If he would attempt to lead them one inch, it must be with great caution, and not without suffering himself to be led by them at least a dozen. Now, I question, whether, among all the instances in which a borrower and a lender of money have been brought together upon, the stage, from the days of Thespis to the present, there ever was one, in which the former was not recommended to favour in some shape or other, either to admiration, or to love, or to pity, or to all three j and the other, the man of thrift, consigned to infamy.
Hence 108 LETT. X. Grounds of the Hence it is that, in reviewing and adjusting the interests of these apparently rival parties, the advantage made by the borrower is so apt to slip out of sight, and that made by the lender to appear in so exaggerated a point of view. Hence it is, that though prejudice is so far softened as to acquiesce in the lender's making some advantage, lest the borrower should lose altogether the benefit of his assistance, yet still the borrower is to have all the favour, and the lender's advantage is for ever to be clipped, and pared down, as low as it will bear. First it was to be confined to ten per cent, then to eight, then to six, then to five, and now lately there was a report of its being to be brought down to four; with constant liberty to sink as much lower as it would. The burthen Prejudices against Usury. 109 then of these restraints, of course, has been intended exclusively for the lender: in reality, as I think you have seen, it presses much more heavily upon the borrower: I mean him who either becomes, or in vain wishes to become so. But the presents directed by prejudice, Dr. Smith will tell us, are not always delivered according to their address. It was thus that the mill-stone designed for the necks of those vermin, as they have been called, the dealers in corn, was found to fall upon the heads of the consumers. It is thus — but further examples would lead me further from the purpose.
110 LETT. XI. Compound Interest.
LETTER XI.
Compound Interest.
A Word or two I must trouble you with, concerning compound interest; for compound interest is discountenanced by the law; I suppose, as a sort of usury. That, without an express stipulation, the law never gives it, I well remember: whether, in case of an express stipulation, the law allows it to be taken, I am not absolutely certain. I should suppose it might: remembering covenants in mortgages that interest should become principal. At any rate, I think the law cannot well punish it under the name of usury.
If LETT. XI. Com/mind Interest. 1 11 If the discountenance shewn to this arrangement be grounded on the horror of the sin of usury, the impropriety of such discountenance follows of course, from the arguments which shew the un-" sinfulness 0/*that sin" Other argument against it, I believe, was never attempted, unless it were the giving to such an arrangement the epithet of a hard one: in doing which, something more like a reason is given, than one gets in ordinary from the common law.
If that consistency were to be found in the common law, which has never yet been found in man's conduct, and which perhaps is hardly in man's nature, compound interest never could have been denied.
The views which suggested this denial, were, I dare to suy, very good: the 1 12 LETT. XI. Compound Interest.
the effects of it are, I am certain, very pernicious.
If the borrower pays the interest at the day, if he performs his engagement, that very engagement to which the law pretends to oblige him to conform, the lender, who receives that interest, makes compound interest of course, by lending it out again, unless he chooses rather to expend it: he expects to receive it at the day, or what meant the engagement? if he fails of receiving it*, he is by so much a loser. The borrower, by paying it at the day, is no loser: if he does not pay it at the day, he is by so much a gainer: a pain of disappointment takes place in the case of the one, while no such pain takes place in the case of the other. The cause of him whose contention is to catch a gain, is thus preferred LETT. XI. Compound Interest. 113 ferred to that of him whose contention is to avoid a loss: contrary to the reasonable and useful maxim of that branch of the common law which has acquired the name of equity. The gain, which the law in its tenderness thus bestows on the defaulter, is an encouragement, a reward, which it holds out for breach of faith, for iniquity, for indolence, for negligence.
The loss, which it thus throws upon the forbearing lender, is a punishment which it inflicts on him for his forbearance: the power which it gives him of avoiding that loss, by prosecuting the borrower upon the instant of failure, is thus converted into a reward which it holds out to him for his hard-heartedness and rigour. Man is not quite so good as it were to be wished he were; but he would be bad indeed, 114 LETT. XI. Compound Interest.
indeed, were he bad on all the occasions where the law, as far as depends on her, has made it his interest so to be.
It may be impossible, say you, it often is impossible, for the borrower to pay the interest at the day: and you say truly. What is the inference? That the creditor should not have it in his power to ruin the debtor for not paying at the day, and that he should receive a compensation for the loss occasioned by such failure. — He has it in his power to ruin him, and he has it not in his power to obtain such compensation. The judge, were it possible for an arrested debtor to find his way into a judge's chamber instead of a spunging-house, might award n proper respite, suited to the circumstances of the parties. It is not possible: but a respite is purchased, proper or LETT. XI. Compound Interest. 115 or not proper, perhaps at ten times, perhaps at a hundred times the expense of compound interest, by putting in bail, and fighting thecreditor through all the windings of mischievous and unnecessary delay. Of the satisfaction due either for the original failure, or for the subsequent vexation by which it has been aggravated, no part is ever received by the injured creditor: but the instruments of the law receive, perhaps at his expense, perhaps at the debtor's, perhaps ten times, perhaps a hundred times the amount of that satisfaction. Such is the result of this tenderness of the law.
It is in consequence of such tenderness that on so many occasions a man, though ever so able, would find himself a loser by paying his just debts: those very debts of which the law has recognized 116 LETT. XI. Compound Interest.
recognized the justice. The man who obeys the dictates of common honesty, the man who does what the law pretends to bid him, is wanting to himself. Hence your regular and securely profitable writs of error in the house of lords: hence your random and vindictive costs of one hundred pounds, and two hundred pounds, now and then given in that house. It is natural,.and it is something, to find, in a company of lords, a zeal for justice: it is not natural, to find, in such a company, a disposition to bend down to the toil of calculation.
LETT. XII. Maintenance, &Vr. 11?
LETTER XII.
Maintenance and Champerty.
HAVING in the preceding letters had occasion to lay down, and, as I flatter myself, to make good, the general principle, that no man of ripe years, and of sound mind, ought, out of loving kindness to him, to be hindered from making such bargain, in the way of obtaining money, as, acting with his eyes open, he deems conducive to his interest, I •will take your leave for pushing it a little farther, and extending the application of it to another class of regulations still less defensible. I mean the antique 118 LETT. XII. Maintenance antique laws against what are called Maintenance and Champerty.
To the head of Maintenance, I think you refer, besides other offences which are not to the present purpose, that of purchasing, upon any terms, any claim, which it requires a suit at law, or in equity, to enforce.
Champerty, which is but a particular modification of this sin of Maintenance, is, I think, the furnishing a man who has such a claim, with regard to a real estate, such money as he may have occasion for, to carry on such claim, upon the terms of receiving a part of the estate in case of success.
What the penalties are for these offences I do not recollect, nor do I think it worth while hunting for them, though I have Blackstone at my elbow. They are at any rate, sufficiently severe and Champerty. 119 vere to answer the purpose, the rather as the bargain is made void.
To illustrate the mischievousness of the laws by which they have been created, give me leave to tell you a story, which is but too true an one, and which happened to fall within my own observation.
A gentleman of my acquaintance had succeeded, during his minority, to an estate of about 30001. a year: I won't say where. His guardian, concealing from him the value of the estate, which circumstances rendered it easy for him to do, got a conveyance of it from him, during his nonage, for a trifle. Immediately upon the ward's coining of age, the guardian, keeping him still in darkness, found means to get the conveyance confirmed. Some years afterwards, the ward discovered the value of the inheritance he 120 LETT. XII. Maintenance