LETTER I. INTRODUCTION.

AMONG the various species or mo­difications of liberty, of which on different occasions we have heard so much in England, I do not recollect ever seeing any thing yet offer­ed in behalf of the liberty of making one's own terms in money bargains. From so general and universal a neglect, it is an old notion of mine, as you well know, that this meek and unassum­ing [Page 6]species of liberty has been suffering much injustice.

A fancy has taken me, just now, to trouble you with my reasons: which, if you think them capable of answering any good purpose, you may forward to the press; or, in the other case, what will give you less trouble, to the sire.

In a word, the proposition I have been accus­tomed to lay down to myself on this subject, is the following one, viz. that no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit; nor, (what is a necessary consequence) any body hin­dered from supplying him, upon any terms he thinks proper to accede to.

This proposition, were it to be received, would level, you see, at one stroke, all the bar­riers which law, either statute or common, have in their united wisdom set up, either against the [Page 7]crying sin of Usury, or against the hard-named and little-heard-of practice of Champerty; to which we must also add a portion of the multi­farious, and as little-heard-of offence, of Main­tenance.

On this occasion, were it any individual anta­gonist I had to deal with, my part would be a smooth and easy one. ‘You, who fetter con­tracts, you who lay restraints on the liberty of man, it is for you’ (I should say) ‘to assign a reason for your doing so.’ That contracts in general ought to be observed, is a rule, the propriety of which, no man was ever yet found wrongheaded enough to deny; if this case is one of the exceptions (for some doubtless there are) which the safety and wel­fare of every society require should be taken out of that general rule, in this case, as in all those others, it lies upon him, who alleges the neces­sity of the exception, to produce a reason for it.

This, I say would be a short and very easy method with an individual: but as the world [Page 8]has no mouth of its own to plead by, no certain attorney by which it can ‘come and defend this force and injury,’ I must even find argu­ments for it at a venture, and ransack my own imagination for such phantoms as I can find to fight with.

In favour of the restraints opposed to the species of liberty I contend for, I can imagine but five arguments.

• 1. Prevention of usury.
• 2. Prevention of prodigality.
• 3. Protection of indigence against extortion.
• 4. Repression of the temerity of projectors.
• 5. Protection of simplicity against imposition.

Of all these in their order.

LETTER II. Reasons for Restraints.—Prevention of Usury.

I WILL begin with the prevention of usury: because in the sound of the word usury lies, I take it, the main strength of the argu­ment: or, to speak strictly, of what is of more importance than all argument, of the hold which the opinion I am combating has obtained on the imaginations and passions of mankind.

'Usury is a bad thing, and as such ought to be prevented: usurers are a bad sort of men, a very bad sort of men, and as such ought to be punished and suppressed.' These are among the string of propositions which every man finds handed down to him from his progenitors: which most men are disposed to accede to with­out examination, and indeed not unnaturally nor even unreasonably disposed; for it is impossible [Page 10]the bulk of mankind should find leisure, had they the ability, to examine into the grounds of an hundredth part of the rules and maxims, which they find themselves obliged to act upon. Very good apology this for John Trot: but a little more inquisitiveness may be required of legislators.

You, my friend, by whom the true force of words is so well understood, have, I am sure, gone before me in perceiving, that to say usury is a thing to be prevented, is neither more or less than begging the matter in question. I know of but two definitions that can possibly be given of usury; one is, the taking of a greater interest than the law allows: this may be stiled the political or legal definition. The other is the taking of a greater interest than it is usual for men to give and take; this may be stiled the moral one: and this, where the law has not interfered, is plainly enough the only one. It is plain, that in order for usury to be prohibited by law, a positive description must have been found for it by law, fixing, or rather superseding, the [Page 11]moral one. To say, then, that usury is a thing that ought to be prevented, is saying neither more nor less, than that the utmost rate of interest which shall be taken ought to be fixed; and that fixation enforced by penalties, or such other means, if any, as may answer the purpose of preventing the breach of it. A law punishing usury supposes, therefore, a law fixing the allow­ed legal rate of interest; and the propriety of the penal law must depend upon the propriety of the simply-prohibitive, or, if you please, de­claratory one.

One thing then is plain; that, antecedently to custom growing from convention, there can be no such thing as usury: for what rate of interest is there that can naturally be more pro­per than another? what natural fixed price can there be for the use of money more than for the use of any other thing? Were it not then for custom, usury, considered in a moral view, would not so much as admit of a defini­tion: so far from having existence, it would not so much as be conceivable: nor therefore could [Page 12]the law, in the definition it took upon itself to give of such offence, have so much as a guide to steer by. Custom therefore is the sole basis, which, either the moralist in his rules and precepts, or the legislator in his injunctions, can have to build upon. But what basis can be more weak or unwarrantable, as a ground for coercive measures, than custom resulting from free choice? My neighbours, being at liberty, have happened to concur among themselves in dealing at a cer­tain rate of interest. I, who have money to lend, and Titius, who wants to borrow it of me, would be glad, the one of us to accept, the other to give, an interest somewhat higher than theirs: why is the liberty they exercise to be made a pretence for depriving me and Titius of ours?

Nor has blind custom, thus made the sole and arbitrary guide, any thing of steadiness or uniformity in its decisions: it has varied, from age to age, in the same country: it varies from country to country, in the same age: and the legal rate has varied along with it: and indeed, [Page 13]with regard to times past, it is from the legal rate, more readily than from any other source, that we collect the customary. Among the Romans, till the time of Justinian, we find it as high as twelve per cent.: in England, so late as the time of Henry VIII. we find it at ten per cent. Succeeding statutes reduced it to eight, then to six, and lastly to five, where it stands at present. Even at present in Ireland it is at six per cent.; and in the West-Indies at eight per cent.; and in Hindostan, where there is no rate limited by law, the lowest customary rate is ten or twelve. At Constantinople, in certain cases, as I have been well informed, thirty per cent. is a common rate. Now, of all these widely different rates, what one is there that is intrinsi­cally more proper than another? What is it that evidences this propriety in each instance? what but the mutual convenience of the parties, as manifested by their consent? It is convenience, then, that has produced whatever there has been of custom in the matter: What can there then be in custom, to make it a better guide than the convenience which gave it birth? and what is [Page 14]there in convenience, that should make it a worse guide in one case than in another? It would be convenience to me to give six per cent. for money: I wish to do so. "No," (says the law) "you shan't."—Why so? "Because it is not conve­nient to your neighbour to give above five for it." Can any thing be more absurd than such a reason?

Much has not been done, I think, by legis­lators as yet, in the way of fixing the price of other commodities: and, in what little has been done, the probity of the intention has, I believe, in general, been rather more unques­tionable than the rectitude of the principle, or the felicity of the result. Putting money out at interest, is exchanging present money for future: but why a policy, which, as applied to exchanges in general, would be generally deem­ed absurd and mischievous, should be deemed necessary in the instance of this particular kind of exchange, mankind are as yet to learn. For him who takes as much as he can get for the use of any other sort of thing, an house for instance, [Page 15]there is no particular appellation, nor any mark of disrepute: nobody is ashamed of doing so, nor is it usual so much as to profess to do other­wise. Why a man, who takes as much as he can get, be it six, or seven, or eight, or ten per cent. for the use of a sum of money, should be called usurer, should be loaded with an op­probrious name, any more than if he had bought a house with it, and made a proportionable pro­fit by the house, is more than I can see.

Another thing I would also wish to learn, is, why the legislator should be more anxious to limit the rate of interest one way, than the other? why he should set his face against the owners of that species of property more than of any other? why he should make it his business to prevent their getting more than a certain price for the use of it, rather than to prevent their getting less? why, in short, he should not take means for making it penal to offer less, for ex­ample, than five per cent. as well as to accept more? Let any one that can, find an answer to these questions; it is more than I can do: I [Page 16]except always the distant and imperceptible ad­vantage, of sinking the price of goods of all kinds; and in that remote way, multiplying the future enjoyment of individuals. But this was a consideration by far too distant and refined, to have been the original ground for confining the limitation to this side.

LETTER III. Reasons for Restraint—Prevention of Prodigality.

HAVING done with sounds, I come gladly to propositions; which, as far as they are true in point of fact, may deserve the name of reasons. And first, as to the efficacy of such restrictive laws with regard to the prevention of prodigality.

That prodigality is a bad thing, and that the prevention of it is a proper object for the legis­lator to propose to himself, so long as he con­fines himself to, what I look upon as, proper measures, I have no objection to allow, at least for the purpose of argument; though, were this the principal question, I should look upon it as incumbent on me to place in a fair light the reasons there may be for doubting, how far, [Page 18]with regard to a person arrived at the age of discretion, third persons may be competent judges, which of two pains may be of greater force and value to him, the present pain of restraining his present desires, or the future contingent pain he may be exposed to suffer from the want to which the expence of gratifying these desires may hereafter have reduced him. To prevent our doing mischief to one another, it is but too necessary to put bridles into all our mouths: it is necessary to the tranquillity and very being of society: but that the tacking of leading-strings upon the backs of grown persons, in order to prevent their doing themselves mischief, is not necessary either to the being or tranquillity of society, however conducive to its well-being, I think cannot be disputed. Such paternal, or, if you please, maternal care, may be a good work, but it certainly is but a work of supere­rogation.

For my own part, I must confess, that so long as such methods only are employed as to me appear proper ones; and such there are, I [Page 19]should not feel myself disinclined to see some measures taken for the restraining of prodigality: but this I cannot look upon as being of the number. My reasons I will now endeavour to lay before you.

In the first place, I take it, that it is neither natural nor usual for prodigals, as such, to be­take themselves to this method, I mean, that of giving a rate of interest above the ordinary one, to supply their wants.

In the first place, no man, I hope you will allow, prodigal or not prodigal, ever thinks of borrowing money to spend, so long as he has ready money of his own, or effects which he can turn into ready money without loss. And this deduction strikes off what, I suppose, you will look upon as the greatest proportion of the persons subject, at any given time, to the impu­tation of prodigality.

In the next place, no man, in such a coun­try as Great Britain at least, has occasion, nor [Page 20]is at all likely, to take up money at an extraor­dinary rate of interest, who has security to give, equal to that upon which money is commonly to be had at the highest ordinary rate. While so many advertise, as are to be seen every day advertising, money to be lent at five per cent. what should possess a man, who has any thing to offer that can be called a security, to give, for example, six per cent. is more than I can conceive.

Yon may say, perhaps, that a man who wishes to lend his money out upon security, wishes to have his interest punctually, and that without the expence, and hazard, and trouble, and odium of going to law; and that, on this account, it is better to have a sober man to deal with, than a prodigal. So far I allow you; but were you to add, that on this account it would be necessery for a prodigal to offer more than another man, there I should disagree with you. In the first place, it is not so easy a thing, nor, I take it, a common thing, for the lender upon [Page 21]security to be able to judge, or even to form any attempt to judge, whether the conduct of one who offers to borrow his money is, or is not of such a cast, as to bring him under this descrip­tion. The question, prodigal or not prodigal, depends upon two pieces of information; neither of which, in general, is very easy to come at: on the one hand, the amount of his means and reasonable expectations; on the other hand, the amount of his expenditure. The goodness or badness of the security is a question of a very dif­ferent nature: upon this head, every man has a known and ready means of obtaining that sort of information, which is the most satisfactory the nature of things affords, by going to his lawyer. It is, accordingly, I take it, on their lawyers' opinion, that lenders in general found their determination in these cases, and not upon any calculations they may have formed, con­cerning the receipt and expenditure of the bor­rower. But even supposing a man's disposition to prodigality to be ever so well known, I take it there are always enough to be found, to whom [Page 22]such a disposition would be rather an induce­ment than an objection, so long as they were sa­tisfied with the security. Every body knows the advantage to be made in case of mortgage, by foreclosing or forcing a sale: and that this advantage is not uncommonly looked out for, will, I believe, hardly be doubted by any one, who has had any occasion to observe the course of business in the court of Chancery.

In short, so long as a prodigal has any thing to pledge, or to dispose of, whether in possession, or even in reversion, whether of a certain or even of a contingent nature, I see not, how he can receive the smallest benefit, from any laws that are, or can be made to fix the rate of in­terest. For, suppose the law to be efficacious as far as it goes, and that the prodigal can find none of those monsters called usurers to deal with him, does he lie quiet? No such thing: he goes on and gets the money he wants, by felling his interest instead of borrowing. He goes on, I say: for if he has prudence enough to stop him any where, he is not that sort of man, [Page 23]whom it can be worth while for the law to attempt stopping by such means. It is plain enough then, I conclude, that to a prodigal thus circumstanced, the law cannot be of any ser­vice; on the contrary, it may, and in many cases must, be of disservice to him, by de­nying him the option of a resource which, how disadvantageous soever, could not well have proved more so, but would naturally have proved less so, than those which it leaves still open to him. But of this hereafter.

I now come to the only remaining class of prodigals, viz. those who have nothing that can be called a security to offer. These, certainly, are not more likely to get money upon an ex­traordinary rate of interest, than an ordi­nary one. Persons who either feel, or find rea­sons for pretending to feel, a friendship for the borrower, cannot take of him more than the ordinary rate of interest: persons, who have no such motives for lending him, will not lend him at all. If they know him for what he is, that will prevent them of course: and even [Page 24]though they should know nothing of him by any other circumstance, the very circumstance of his not being able to find a friend to trust him at the highest ordinary rate, will be sufficient reason to a stranger for looking upon him as a man, who, in the judgment of his friends, is not likely to pay.

The way that prodigals run into debt, after they have spent their substance, is, I take it, by borrowing of their friends and acquaintance, at ordinary interest, or more commonly at no in­terest, small sums, such as each man may be content to lose, or be ashamed to ask real secu­rity for; and as prodigals have generally an ex­tensive acquaintance (extensive acquaintance being at once the cause and effect of prodigality) the sum total of the money a man may thus find means to squander, may be considerable, though each sum borrowed may, relatively to the circumstances of the lender, have been in­considerable. This I believe to be the race which prodigals, who have spent their all, run at pre­sent, under the actual system of restraining [Page 25]laws: and this, and no other, I take it, would be the race they would run, were those laws out of the way.

Another consideration there is, I think, which will complete your conviction, if it was not complete before, of the inefficacy of these laws, as to the putting any sort of restraint upon prodigality. This is, that there is another set of people from whom prodigals get what they want, and always will get it, so long as credit lasts, in spite of all laws against high interest; and, should they find it necessary, at an ex­pence more than equal to any excess of in­terest they might otherwise have to give.— I mean the tradesmen who deal in the goods they want. Every body knows it is much easier to get goods than money. People trust goods upon much slenderer security than they do money: it is very natural they should do so: ordinary profit upon the whole capi­tal employed in a man's trade, even after the expence of warehouse rent, journeymen's wages, and other such general charges, are ta­ken [Page 26]in to the account, and set against it, is at least equal to double interest; say ten per cent. Or­dinary profit upon any particular parcel of goods must therefore be a great deal more, say at least triple interest, fifteen per cent.: in the way of trading, then, a man can afford to be at least three times as adventurous, as he can, in the way of lending, and with equal prudence. So long, then, as a man is looked upon as one who will pay, he can much easier get the goods be wants, than he could the money to buy them with, though he were content to give for it twice, or even thrice the ordinary rate of interest.

Supposing any body, for the sake of extraor­dinary gain, to be willing to run the risk of sup­plying him, although he did not look upon his personal security to be equal to that of another man, and for the sake of the extraordinary profit to run the extraordinary risk; in the trader, in short in every sort of trader whom he was accus­tomed to deal with in his solvent days, he sees a person who may accept of any rate of profit, without the smallest danger from any laws that [Page 27]are, or can be made against usury. How idle, then, to think of stopping a man from making six, or seven, or eight per cent. interest, when, if he chooses to run a risk proportionable, he may in this way make thirty or forty per cent. or any rate you please! And as to the prodigal, if he cannot get what he wants upon these terms, what chance is there of his getting it upon any terms, supposing the laws against usury to be away? This then is another way, in which, instead of serving, it injures him, by narrowing his option, and driving him from a market which might have proved less disadvantageous, to a more disadvantageous one.

As far as prodigality, then, is concerned, I must confess, I cannot see the use of stopping the cur­rent of expenditure in this way at the fosset, when there are so many unpreventable ways of letting it run out at the bung-hole.

Whether any harm is done to society, upon the whole, by letting so much money drop at once out of the pockets of the prodigal, who [Page 28]would have gone on wasting it, into the till of the frugal tradesman, who will lay it up, is not worth the enquiry for the present purpose: what is plain is, that, so far as the saving the prodigal from paying at an extraordinary rate for what he gets to spend, is the object of the law, that object is not at all promoted, by fix­ing the rate of interest upon money borrowed. On the contrary, if the law has any effect, it runs counter to that object: since, were he to borrow, it would only be, in as far as he could borrow at a rate inferior to that at which other­wise he would be obliged to buy. Preventing his borrowing at an extra rate, may have the effect of increasing his distress, but cannot have the effect of lessening it: allowing his borrow­ing at such a rate, might have the effect of lessening his distress, but could not have the effect of increasing it.

To put a stop to prodigality, if indeed it be worth while, I know but of one effectual course that can be taken, in addition to the incomplete and insufficient courses at present practicable, [Page 29]and that is, to put the convicted prodigal under an interdict, as was practised formerly among the Romans, and is still practised among the French, and other nations who have taken the Roman law for the ground work of their own. But to discuss the expediency, or sketch out the details, of such an institution, belongs not to the present purpose.

LETTER IV. Reasons for Restraint—Protection of Indigence.

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 [Page 32]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, eleven per cent. six per cent. is as well adapted, as five per cent. is to the situ­ation of him who can make but ten; to that of him who can make twelve per cent. seven, and so on. So, in the case of his wanting it to save himself from a loss, (which is what is most likely to be in view under the name of exigency) [Page 33]if that loss would amount to eleven per cent. six per cent. is as well adapted to his situation, as five 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 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 [Page 34]that rate. If he thought he could get it at that rate, most surely he would not give a higher; he may be 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 a mischief to you to borrow it upon such terms.’—And this out of prudence and loving-kindness!—There may be worse cruelty: but can there be greater folly?

[Page 35] 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, cannot 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 [Page 36]when I come to enter upon that subject, I think to take my leave of you, and address myself to him.

LETTER V. Reasons for Restraint.—Protection of Simplicity.

I COME, lastly, to the case of the simple. Here, in the first place, I think I am by this time entitled to observe, that no simplicity, short of absolute idiotism, can cause the individual to make a more groundless judgment, than the legislator, who, in the circumstances above sta­ted, should pretend to confine him to any given rate of interest, would have made for him.

Another consideration, equally conclusive, is, that were the legislator's judgment ever so much superior to the individual's, how weak soever that may be, the exertion of it on this occasion can never be any otherwise than useless, so long as there are so many similar occasions, as there ever must be, where the simplicity of the indi­vidual is equally liable to make him a sufferer, [Page 38]and on which the legislator cannot interpose with effect, nor has ever so much as thought of inter­posing.

Buying goods with money, or upon credit, is the business of every day: borrowing money is the business, only, of some particular exigency, which, in comparison, can occur but seldom. Regulating the prices of goods in general would be an endless task; and no legislator has ever been weak enough to think of attempting it. And supposing he were to regulate the prices, what would that signify for the protection of simplicity, unless he were to regulate also the quantum of what each man should buy? Such quantum is, indeed, regulated, or rather means are taken to prevent buying altogether; but in what cases? in those only where the weakness is adjudged to have arrived at such a pitch, as to render a man utterly unqualified for the management of his affairs: in short, when it has arrived at the length of idiocy.

[Page 39] But in what degree soever a man's weakness may expose him to imposition, he stands much more exposed to it, in the way of buying goods, than in the way of borrowing money. To be informed, beforehand, of the ordinary prices of all sorts of things, a man may have occasion to buy, may be a task of considerable variety and extent. To be informed of the ordinary rate of interest, is to be informed of one single fact, too interesting not to have attracted attention, and too simple to have escaped the memory. A few per cent. enhancement upon the price of goods, is a matter that may easily enough pass unheed­ed; but a single per cent. beyond the ordinary interest of money, is a stride more conspicuous and startling, than many per cent. upon the price of any kind of goods.

Even in regard to subjects, which, by their importance, would, if any, justify a regulation of their price, such as, for instance, land, I question whether there ever was an instance where, without some such ground as, on the one side fraud, or suppression of facts necessary to [Page 40]form a judgment of the value, or at least igno­rance of such facts, on the other, a bargain was rescinded, merely because a man had sold too cheap, or bought too dear. Were I to take a fancy to give a hundred years purchase instead of thirty, for a piece of land, rather than not have it, I do not think there is any court in England, or indeed any where else, that would interpose to hinder me, much less to punish the seller with the loss of three times the purchase­money, as in the case of usury. Yet when I had got my piece of land, and paid my money, repentance, were the law ever so well disposed to assist me, might be unavailing: for the seller might have spent the money, or gone off with it. But, in the case of borrowing money, it is the borrower always, who, according to the indefi­nite, or short term for which money is lent, is on the safe side: any imprudence he may have committed with regard to the rate of interest, may be corrected at any time: if I find I have given too high an interest to one man, I have no more to do than to borrow of another at a lower rate, and pay off the first: If I cannot [Page 41]find any body to lend me at a lower, there can­not be a more certain proof, that the first was not in reality too high. But of this hereafter.

LETTER VI. Mischiefs of the anti-usurious Laws.

IN the preceding letters, I have examined all the modes I can think of, in which the re­straints, imposed by the laws against usury, can have been fancied to be of service.

I hope it appears by this time, that there are no ways in which those laws can do any good. But there are several, in which they cannot but do mischief.

The first, I shall mention, is that of preclud­ing so many people, altogether, from the getting the money they stand in need of, to answer their respective exigencies. Think what a dis­tress it would produce, were the liberty of bor­rowing denied to every body; denied to those who have such security to offer, as renders the [Page 44]rate of interest, they have to offer, a sufficient inducement, for a man who has money, to trust them with it. Just that same sort of distress is produced, by denying that liberty to so many people, whose security, though, if they were permitted to add something to that rate, it would be sufficient, is rendered insufficient by their be­ing denied that liberty. Why the misfortune, of not being possessed of that arbitrarily exacted degree of security, should be made a ground for subjecting a man to a hardship, which is not imposed on those who are free from that mis­fortune, is more than I can see. To discrimi­nate the former class from the latter, I can see but this one circumstance, viz. that their neces­sity is greater. This it is by the very supposition: for were it not, they could not be, what they are supposed to be, willing to give more to be re­lieved from it. In this point of view, then, the sole tendency of the law is, to heap distress upon distress.

A second mischief is that of rendering the terms so much the worse, to a multitude of those, [Page 45]whose circumstances exempt them from being precluded altogether from getting the money they have occasion for. In this case, the mis­chief, though necessarily less intense than in the other, is much more palpable and conspicuous. Those who cannot borrow, may get what they want, so long as they have any thing to sell. But while out of loving kindness, or whatsoever other motive, the law precludes a man from borrowing, upon terms which it deems too dis­advantageous, it does not preclude him from selling, upon any terms, however disadvantage­ous. Every body knows, that forced sales are attended with loss: and to this loss, what would be deemed a most extravagant interest bears in general no proportion. When a man's movea­bles are taken in execution, they are, I believe, pretty well sold, if, after all expences paid, the produce amounts to two thirds of what it would cost to replace them. In this way the provi­dence and loving-kindness of the law costs him thirty-three per cent. and no more, supposing, what isseldom the case, that no more of the effects are taken than what is barely necessary to make up [Page 46]the money due. If, in her negligence and weak­ness, she were to suffer him to offer eleven per cent. per ann. for forbearance, it would be three years before he paid what he is charged with, in the first instance, by her wisdom.

Such being the kindness done by the law to the owner of moveables, let us see how it fares with him who has an interest in immoveables. Be­fore the late war, thirty years' purchase for land might be reckoned, I think it is pretty well agreed, a medium price. During the distress produced by the war, lands which it was neces­sary should be sold, were sold at twenty, eigh­teen, nay, I believe, in some instances, even so low as fifteen years' purchase. If I do not mis­recollect, I remember instances of lands put up to public auction, for which no body bid so high as fifteen. In many instances, villas, which had been bought before the war, or at the be­ginning of it, and, in the interval, had been improved, rather than impaired, sold for less than half, or even the quarter, of what they had been bought for. I dare not here for my part pretend to be exact: but [Page 47]on this passage, were it worth their notice, Mr. Skinner, or Mr. Christie, could furnish very instructive notes. Twenty years' purchase, in­stead of thirty, I may be allowed to take, at least for illustration. An estate then of 100 l. a year, clear of taxes, was devised to a man, charg­ed, suppose, with 1500 l. with interest till the money should be paid. Five per cent. interest, the utmost which could be accepted from the owner, did not answer the incumbrancer's pur­pose: he chose to have the money. But six per cent. perhaps, would have answered his purpose; if not, most certainly it would have answered the purpose of somebody else: for multitudes there all along were, whose purposes were an­swered by five per cent. The war lasted, I think, seven years: the depreciation 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 [Page 48]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 3000 l. and which the devisor had given to the devisee for that value, being put up to sale, sold for but twenty years' purchase, 2000 l. At the end of that period it would have sold for its original value, 3000 l. Compare, then, the situation of the devisee at the seven 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. 2000 l. what he would have after paying the 1500 l. is 500 l.; which, with the interest of that sum, at five per cent. for seven years, viz. 175 l. makes, at the end of that seven years, 675 l. In the other case, paying six per cent. on the 1500 l. that is 90 l. a year, and receiving all that time the rent of the land, viz. 100 l. he would have had, at the seven years' end, the amount of the remain­ing ten pounds during that period, that is 70 l. in addition to his 1000 l.—675 l. subtracted from 1070 l. leaves 395 l. This 395 l. then, is what [Page 49]he loses out of 1070 l. 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 six 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 a 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. [Page 50]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, [Page 51]if there were a greater number of persons of the same stamp to refer 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 such who fail of pos­sessing that perfect confidence. If the borrower can find nobody at all who has confidence enough to take advantage of the flaw, he stands precluded from all assistance, as before: and, though he should, yet the lender's terms must necessarily run the higher, in proportion to what his confidence wants of being perfect. It is not likely that it should be perfect: it is still less likely that he should acknowledge it so to be: it is not likely, at least as matters stand in England, that the worst-penned law made for this purpose should be altogether destitute of effect: and while it has any, that effect, we see, must be in one way or other mischievous.

[Page 52] I have already hinted at the disrepute, the ignominy, the reproach, which prejudice, the cause and the effect of these restrictive laws, has heaped upon that perfectly innocent and even meri­torious class of men, who, not more for their own advantage than to the relief of the distresses of their neighbour, may have ventured to break through these restraints. It is certainly not a matter of indifference, that a class of persons, who, in every point of view in which their con­duct can be placed, whether in relation to their own interest, or in relation to that of the per­sons whom they have to deal with, as well on the score of prudence, as on that of beneficence, (and of what use is even benevolence, but in as far as it is productive of beneficence?) deserve praise rather than censure, should be classed with the abandoned and profligate, and loaded with a degree of infamy, which is due to those only whose conduct is in its tendency the most opposite to their own.

"This suffering," it may be said, "having already been taken account of, is not to be [Page 53]brought to account a second time: they are aware, as you yourself observe, of this incon­venience, and have taken care to get such amends for it, as they themselves look upon as sufficient." True: but is it sure that the com­pensation, such as it is, will always, in the event, have proved a sufficient one? Is there no room here for miscalculation? May there not be un­expected, unlooked-for incidents, sufficient to turn into bitterness the utmost satisfaction which the difference of pecuniary emolument could afford? For who can see to the end of that inexhaustible train of consequences that are liable to ensue from the loss of reputation? Who can fathom the abyss of infamy? At any rate, this article of mischief, if not an addition in its quan­tity to the others above noticed, is at least dis­tinct from them in its nature, and as such ought not to be overlooked.

Nor is the event of the execution of the law by any means an unexampled one: several such, at different times, have fallen within my notice. Then comes absolute perdition; loss of charac­ter, [Page 54]and forfeiture, not of three times the extra­interest, which formed the profit of the offence, but of three times the principal, which gave oc­casion to it.

The last article I have to mention in the account of mischief, is, the corruptive influence, exercised by these laws, on the morals of the people; by the pains they take, and cannot but take, to give birth to treachery and ingratitude. To purchase a possibility of being enforced, the law neither has found, nor, what is very mate­rial, must it ever hope to find, in this case, any other expedient, than that of hiring a man to break his engagement, and to crush the hand that has been reached out to help him. In the case of informers in general, there has been no troth plighted, nor benefit received. In the case of real criminals invited by rewards to inform against accomplices, it is by such breach of faith that society is held together, as in other cases by the observance of it. In the case of real crimes, in proportion as their mischievousness is appa­rent, what cannot but be manifest, even to the [Page 55]criminal, is, that it is by the adherence to his engagement that he would do an injury to soci­ety, and, that by the breach of such engagement, instead of doing mischief, he is doing good: in the case of usury, this is 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 no body else but the lender is affected by it.

LETTER VII. Inefficacy 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 cannot 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, b. ii. ch. 10. vol. ii. p. 45. edit. 8vo. 1784,) ‘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 [Page 58]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 cenfess 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 be 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. [Page 59]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 efficacy of the law altogether, I know 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 it, strictly speaking, universal, and the law must, in all instances, be equally inefficacious; all rates of interest are equally [Page 60]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 to come in for the protection of the public against the law, more frequently than any other rate. That must be the case on two accounts: first, because, by be­ing of the number of the ordinary rates, it was, by the supposition, more frequent than any ex­traordinary [Page 61]ones: secondly, because the dis­repute annexed to the idea of usury, a force which might have more or less efficacy in ex­cluding, from the protection above spoken of, such extraordinary rates, cannot well be sup­posed to apply itself, or at least not in equal degree, to this low and ordinary rate. A lender has certainly less to stop him from taking a rate, which may be taken without disrepute, than from taking one, which a man could not take without subjecting himself to that inconvenience: nor is it likely, that men's imaginations and sentiments should testify so sudden an obsequi­ousness to the law, as to stamp disrepute to-day, upon a rate of interest, to which no such accom­paniment had stood annexed the day before.

Were I to be asked how I imagined the case stood in the particular instance referred to by Dr. Smith; judging from his account of it, assisted by general probabilities, I should answer thus:—The law, I should suppose, was not so penned as to be altogether proof against evasion. In many instances, of which it is impossible any [Page 62]account should have been taken, it was indeed conformed to: in some of those instances, people who would have lent otherwise, abstained from lending altogether; in others of those instances, people lent their money at the reduced legal rate. In other instances again, the law was broken: the lenders trusting, partly to expedi­dients recurred to for evading it, partly to the good faith and honour of those whom they had to deal with: in this class of instances it was natural for the two reasons above suggested, that those where the old legal rate was adhered to, should have been the most numerous. From the circumstance not only of their num­ber, but of their more direct repugnancy to the particular recent law in question, they would na­turally be the most taken notice of. And this, probably, was the foundation in point of fact for the Doctor's general position above men­tioned, that "no law can reduce the common rate of interest below the lowest ordinary mar­ket rate, at the time when that law was made."

[Page 63] In England, as far as I can trust my judg­ment and imperfect general recollection of the purport of the laws relative to this matter, I should not suppose that the above posi­tion would prove true. That there is no such thing as any palpable and universally notorious, as well as universally practicable receipt for that purpose, is manifest from the examples, which, as I have already mentioned, every now and then occur, of convictions upon these sta­tutes. Two such receipts, indeed, I shall have occasion to touch upon presently: but they are either not obvious enough in their nature, or too troublesome or not extensive enough in their application, to have despoiled the law altogether of its terrors or of its preventive efficacy.

In the country in which I am writing, the whole system of laws on this subject is perfectly, and very happily, inefficacious. The rate fixed by law is five per cent.: many people lend money; and nobody at that rate: the lowest ordinary rate, upon the very best real security, is eight per cent.: nine, and even ten, upon such secu­rity, [Page 64]are common. Six or seven may have place, now and then, between relations or other par­ticular friends: because, now and then, a man may choose to make a present of one or two per cent. to a person whom he means to favour. The contract is renewed from year to year: for a thousand roubles, the borrower in his written contract, obliges himself to pay at the end of the year one thousand and fifty. Before wit­nesses, he receives his thousand roubles: and, without witnesses, he immediately pays back his thirty roubles, or his forty roubles, or whatever the sum may be, that is necessary to bring the real rate of interest to the rate verbally agreed on.

This contrivance, I take it, would not do in England: but why it would not, is a question which it would be in vain for me to pretend, at this distance from all authorities, to discuss.

LETTER VIII. Virtual Usury allowed.

HAVING proved, as I hope, by this time, the utter impropriety of the law's limiting the rate of interest, in every case that can be con­ceived, it may be rather a matter of curiosity, than any thing else, to enquire, how far the law, on this head, is consistent with itself, and with any principles upon which it can have built.

1. Drawing and re-drawing is a practice, which it will be sufficient here to hint at. It is perfectly well known to all merchants, and may be so to all who are not merchants, by consulting Dr. Smith. In this way he was shewn how money may be, and has been, taken up, at so high a rate, as thirteen or fourteen per cent. a rate nearly three times as high as the utmost which the law professes to allow. The extra [Page 99]interest is in this case masked under the names of commission, and price of exchange. The commis­sion is but small upon each loan, not more, I think, than one half per cent.: custom having stretched so far, but no farther, it might be thought dangerous, perhaps, to venture upon any higher allowance under that name. The charge, being repeated a number of times in the course of the year, makes up in frequency what it wants in weight. The transaction is by this shift rendered more troublesome, indeed, but not less practicable, to such parties as are agreed about it. But if usury is good for merchants, I do not very well see what should make it bad for every body else.

2. At this distance from all the fountains of legal knowledge, I will not pretend to say, whe­ther the practice of selling accepted bills at an under value, would hold good against all attacks. It strikes my recollection as a pretty common one, and I think it could not be brought under any of the penal statutes against usury. The adequateness of the consideration might, for [Page 67]aught I know, be attacked with success, in a court of equity; or, perhaps, if there were suffi­cient evidence (which the agreement of the parties might easily prevent) by an action at common law, for money had and received. If the practice be really proof against all attacks, it seems to afford an effectual, and pretty com­modious method of evading the restrictive laws. The only restraint is, that it requires the assist­ance of a third person, a friend of the borrow­er's; as, for instance: B, the real borrower, wants 100 l. and finds U, a usurer, who is wil­ling to lend it to him, at ten per cent. B. has F, a friend, who has not the money himself to lend him, but is willing to stand security for him, to that amount. B. therefore, draws upon F, and F. accepts a bill of 100 l. at five per cent. interest, payable at the end of a twelve-month from the date. F. draws a like bill upon B.: each sells his bill to U. for fifty pounds; and it is endorsed to U. accordingly. The 50 l. that F. receives, he delivers over without any consideration to B. This transaction, if it be a valid one, and if a man can find such a friend, [Page 68]is evidently much less troublesome than the practice of drawing and re-drawing. And this, if it be practicable at all, may be practised by persons of any description, concerned or not in trade. Should the effect of this page be to sug­gest an expedient, and that a safe and commo­dious one, for evading the laws against usury, to some, to whom such an expedient might not otherwise have occurred, it will not lie very heavy upon my conscience. The prayers of usurers, whatever efficacy they may have in lightening the burden, I hope I may lay some claim to. And I think you will not now won­der at my saying, that in the efficacy of such prayers I have not a whit less confidence, than in that of the prayers of any other class of men.

One apology I shall have to plead at any rate, that in pointing out these slaws, to the indivi­dual who may be disposed to creep out at them, I point them out at the same time to the legis­lator, in whose power it is to stop them up, if in his opinion they require it. If, notwithstanding such opinion, he should omit to do so, the blame [Page 69]will lie, not on my industry, but on his negli­gence.

These, it may be said, should they even be secure and effectual evasions, are still but eva­sions, and, if chargeable upon the law at all, are chargeable not as inconsistencies but as over­sights. Be it so. Setting these aside, then, as expedients practised or practicable, only behind its back, I will beg leave to remind you of two others, practised from time to time, under its pro­tection and before its face.

The first I shall mention is pawn-broking. In this case there is the less 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 [Page 70]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 can­not take upon me to remember: but I am much deceived, if it amounts to less than twelve per cent. in the year, and I believe it amounts to a good deal more. Whether it were twelve per cent. or twelve hundred, I believe would make in practice but little difference. What commission is in the business of drawing and re-drawing, ware-house room is, in that of pawnbrok­ing. Whatever limits then are set to the profits of this trade, are set, perhaps, 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.

[Page 71] 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 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. "O 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 enquire, 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 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, [Page 72]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 in 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 landmen?

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 degree of risk, receiving, for so doing, an unlimited compensation. In­deed I know not where the want of 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 [Page 73]but subsidiary, and which has more of confuta­tion in it than of persuasion or instruction, I willingly put an end.

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, is, whose opinion I hope you will allow to be worth something. In speaking of the rate of interest, (b. ii. ch. 13.) 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, 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 [Page 76]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 sound just, a practical inference will arise; which is, that the benefits of these restraints ought to be extended from the money-trade to the horse­trade. That my own opinion is not favourable to such restraints in either case, has been suffici­ently declared; but if more respectable opinions than mine are still to prevail, they will not be 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 apprchension, loan or sale makes, in point of [Page 77]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 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 had 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 [Page 78]are my own: all the rest are Sir William Blackstone's: and I restore, (in parentheses) 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 rea­sonable equivalent for the temporary inconveni­ence, which the owner may feel by the want of it, and for the hazard of his losing it entirely, is not more immoral in one case, than in the other. * * * *

"As to selling horses, a capital distinction must be made, between a moderate and an exorbitant profit: to the former of which we give the name of horse dealing, (interest) to the latter the truly odious appellation of jockey-ship, (usury): the former is necessary in every civil state, if it were but to 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 [Page 79]the seller of the horse to part with it, (hazard run) or the want which the buyer has of it, (felt by the loan) 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, (usury): 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 horse (interest for the money lent) depends upon two circumstances: upon the inconvenience of parting with the horse one has, (it for the present) and the hazard of not being able to meet with such another (losing it entirely). The inconvenience to individual sellers of horses (lenders), can never be estima­ted by laws; the general price for horses, (rate of general interest) must depend therefore upon the usual or general inconvenience. This results entirely from the quantity of horses (money) in the kingdom: for the more horses (specie) there are running about (circulating) in any nation, the greater superfluity there will be beyond what is [Page 80]necessary to carry on the business of the mail coaches (exchange) and the common concerns of life. In every nation or public community, there is a certain quantity of horses (money) then ne­cessary, which a person well skilled in political arithmetic might, perhaps, calculate as exactly as a private horse dealer (banker) can the demand for the running horses in his own stables (cash in his own shop): all above this necessary quantity may be spared, or lent, or sold, without much inconvenience to the respective lenders or sellers: and the greater the national superfluity is, the more numerous will be the sellers (lenders), and the lower ought the national price of horse flesh (the rate of the national interest) to be: but where there are not enough, or barely enough spare horses (circulating cash) to answer the or­dinary uses of the public, horse flesh (interest) will be proportionably high: for sellers (lend­ers) will be but few, as few can submit to the inconvenience of selling" (lending).—So far the learned commentator.

[Page 81] 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 1500 l. taken for Eclipse, and 2000 l. 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 a clause for fixing and reducing the price of horses. I need not expatiate on the utility 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 jockey-ship, as they have been in the suppression of usury.

[Page 82] 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 occations.

LETTER X. Grounds of the Prejudices against Usury.

IT is one thing, to find reasons why it is fit 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 it; and many men there are, who, till they have received this satisfaction, be the error what it may, cannot prevail upon themselves ro part with it. "If our ancestors have been all along under a mistake, how came they to have fallen into it?" is a question that [Page 84]naturally presents itself upon 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, have 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 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 compleat.

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 self-denial for its own sake. One pretty general rule served for most occasions: not to do what you had a mind [Page 85]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 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 a 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 be got. What made it much the worse was, that it was acting like a Jew: for [Page 86]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 over­ruled: 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 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 [Page 87]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 a philosopher before or since), and notwithstanding the uncom­mon pains he had bestowed on the subject of generation, 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 [Page 88]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 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 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.

[Page 89] 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 the 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 have changed his nature, and to have 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 [Page 90]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 expence should be at least as great as his circumstances will bear: because there are few expences which a man can launch into, but what the benefit of them is shared, in some pro­portion or other, by those with whom he lives. In that circle originates a standing law, forbid­ding every man, on pain of infamy, to confine his expences 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 [Page 91]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 expence he has been gratifying his appetites and his 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 is 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, [Page 92]he is regarded as a 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 conclusive 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 may, and very frequently does, make magnificent 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 [Page 93]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; and the other, the man of thrift, consigned to infamy.

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 benesit of his assistance, yet still the borrower is to have all the favour, and the lender's advan­tage is forever to be clipped, and pared down, as low as it will bear. First it was to be confined to [Page 94]ten percent. 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 burden 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.

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 the discountenance shewn to this arrange­ment be grounded on the horror of the sin of usury, the impropriety of such discountenance [Page 96]follows of course, from the arguments which shew the unsinfulness of 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 say, very good: 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, [Page 97]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 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 [Page 98]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, 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 a proper res­pite, suited to the circumstances of the parties. It is not possible: but a respite is purchased, proper or not proper, perhaps at ten times, per­haps [Page 99]at a hundred times the expence of com­pound interest, by putting in bail, and fighting the creditor 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 expence, 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 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 [Page 100]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.

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-kindess to him, to be hindered from mak­ing such a 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 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 [Page 102]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 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 a one, which happened to fall within my own observa­tion.

[Page 103] A gentleman of my acquaintance had suc­ceeded, during his minority, to an estate of about 3000 l. a year; I will not 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 non-age, for a trifle. Immedi­ately upon the ward's coming 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 had been throwing away. Pri­vate representations proving, as it may be ima­gined, ineffectual, he applied to a court of equity. The suit was in some forwardness: the opinion of the ablest counsel highly encouraging: but money there remained none. We all know but too well, that, in spite of the unimpeachable integrity of the bench, that branch of justice, which is particularly dignified with the name of equity, is only for those who can afford to throw away one fortune for the chance of re­covering another. Two persons, however, were found, who, between them, were content to [Page 104]defray the expence of the ticket for this lottery, on condition of receiving half the prize. The prospect now became encouraging: when un­fortunately one of the adventurers, in exploring the recesses of the bottomless pit, happened to dig up one of the old statutes against Champerty. This blew up the whole project: however, the defendant, understanding that, some how or other, his antagonist had found support, had thought fit in the mean time to propose terms, which the plaintiff, after his support had thus dropped from under him, was very glad to close with. He received, I think it was, 3000 l.; and for that he gave up the estate, which was worth about as much yearly, together with the arrears, which were worth about as much as the estate.

Whether, in the barbarous age which gave birth to these barbarous precautions, whether, even under the zenith of feudal anarchy, such fettering regulations could have had reason on their side, is a question of curiosity rather than use. My notion is, that there never was a time, [Page 105]that there never could have been, or can be a time, when the pushing of suitors away from court with one hand, while they are beckoned into it with another, would not be a policy equally faith­less, inconsistent, and absurd. But, what every body must acknowledge, is, that, to the times which called forth these laws, and in which alone they could have started up, the present are as op­posite as light to darkness. A mischief, in those times, it seems, but too common, though a mischief not to be cured by such laws, was, that a man would buy a weak claim, in hopes that power might convert it into a strong one, and that the sword of a baron, stalking into court with a rab­ble of retainers at his heels, might strike terror into the eyes of a judge upon the bench. At present, what cares an English judge for the swords of an hundred barons? Neither fearing nor hoping, hating nor loving, the judge of our days is ready with equal phlegm to administer, upon all occasions, that system, whatever it be, of justice, or injustice, which the law has put in his hands. A disposition so consonant to duty, could not have then been hoped for: one [Page 106]more consonant is hardly to be wished. Wealth has, indeed, the monopoly of justice against po­verty: and such monopoly it is the direct ten­dency and necessary effect of regulations like these to strengthen and confirm. But with this monopoly no judge that lives now, is at all chargeable. The law created this monopoly: the law, whenever it pleases, may dissolve it.

I will not, however, so far wander from my subject as to enquire what measure might have been necessary to afford a full relief to the case of that unfortunate gentleman, any more than to the cases of so many other gentlemen who might be found, as unfortunate as he. I will not insist upon so strange and so inconceivable an arrangement, as that of the judge's seeing both parties face to face in the first instance, ob­serving what the facts are in dispute, and de­claring, that as the facts should turn out this way or that way, such or such would be his de­cree. At present, I confine myself to the re­moval of such part of the mischief, as may arise from the general conce [...], of keeping men out of [Page 107]difficulties, by cutting them off from such means of relief as each man's situation may afford. A spunge in this, as in so many other cases, is the only needful, and only availing remedy: one stroke of it for the musty laws against mainte­nance and champerty: another for the more recent ones against usury. Consider, for exam­ple, what would have respectively been the effect of two such strokes, in the case of the unfortu­nate gentleman I have been speaking of. By the first, if what is called equity has any claim to confidence, he would have got, even after pay­ing off his champerty-usurers, 1500 l. a year in land, and about as much in money: instead of getting, and that only by an accident, 3000 l. once told. By the other, there is no saying to what a degree he might have been benefited.— May I be allowed to stretch so far in favour of the law as to suppose, that so small a sum as 500 l. would have carried him through his suit, in the course of about three years? I am sensible, that may be thought but a short sum, and this but a short term, for a suit in equity: but, for the purpose of illustration, it may serve as well [Page 108]as a longer. Suppose he had sought this neces­sary sum in the way of borrowing; and had been so fortunate, or, as the laws against the sin of usury would stile it, so unfortunate, as to get it at 200 per cent. He would then have pur­chased his 6000 l. a year at the price of half as much once paid, viz. 3000 l.; instead of selling it at that price. Whether, if no such laws against usury had been in being, he could have got the money, even at that rate, I will not pretend to say: perhaps he might not have got it under ten times that rate, perhaps he might have got it at the tenth part of that rate. Thus far, I think, we may say, that he might, and probably would, have been the better for the repeal of those laws: but thus far we must say, that it is impossible he should have been the worse. The terms, upon which he met with adventurers willing to relieve him, though they come not within that scanty field, which the law, in the narrowness of its views, calls usury, do, in the present case, at twenty years' purchase of the 3000 l. a year he was content to have sacrificed for such assistance, amount, in effect, to 4000 [Page 109]per cent. Whether it was likely that any man, who was disposed to venture his money at all, upon such a chance, would have thought of insisting upon such a rate of interest, I will leave you to imagine: but thus much may be said with confidence, because the fact demonstrates it, that at a rate not exceeding this, the sum actually would have been supplied. Whatever becomes, then, of the laws against maintenance and champerty, the example in question, when applied to the laws against usury, ought, I think, to be sufficient to convince us, that so long as the expence of seeking relief at law stands on its present footing, the purpose of seeking that relief will, of itself, independently of every other, afford a sufficient ground for allowing any man, or every man, to borrow money on any terms he can obtain it.

Crichoff, in White Russia, March 1787.

LETTER XIII. To Dr. Smith, on Projects in Arts, &c.

I FORGET what son of controversy it was, among the Greeks, who, having put him­self to school, to a professor of eminence, to learn what, in those days, went by the name of wisdom, chose an attack upon his master for the first public specimen of his proficiency. This specimen, whatever entertainment it might have afforded to the audience, afforded, it may be supposed, no great satisfaction to the master: for the thesis was, that the pupil owed him no­thing for his pains. For my part, being about to shew myself in one respect as ungrateful as the Greek, it may be a matter of prudence for me to look out for something like candour by way of covering to my ingratitude. Instead, therefore, of pretending to owe you nothing, I shall begin [Page 112]with acknowledging, that, as far as your track coincides with mine, I should come much nearer the truth, were I to say I owed you every thing. Should it be my fortune to gain any advantage over you, it must be with weapons which you have taught me to wield, and with which you yourself have furnished me; for, as all the great standards of truth, which can be appealed to in this line, owe, as far I can understand, their establishment to you, I can see searce any other way of convicting you of any error or oversight, than by judging you out of your own mouth.

In the series of letters to which this will form a sequel, I had travelled nearly thus far in my researches into the policy of the laws fixing the rate of interest, combating such arguments as fancy rather than observation had suggested to my views, when, on a sudden, recollection pre­sented me with your formidable image, bestrid­ing the ground over which I was travelling pretty much at my ease, and opposing the shield of your authority to any arguments I could produce.

[Page 113] It was a reflection mentioned by Cicero as affording him some comfort, that the employ­ment his talents, till that time, had met with, had been chiefly on the defending side. How little soever blest, on any occasion, with any portion of his eloquence, I may, on the present occasion, however, indulge myself with a portion of what constituted his comfort: for, if I pre­sume to contend with you, it is only in desence of what I look upon as, not only an innocent, but a most meritorious race of men, who are so unfortunate as to have fallen under the rod of your displeasure. I mean projectors: under which invidious name I understand you to com­prehend, in particular, all such persons as, in the pursuit of wealth, strike out into any new chan­nel, and more especially into any channel of in­vention.

It is with the professed view of checking, or rather of crushing, these adventurous spirits, whom you rank with "prodigals," that you ap­prove of the laws which limit the rate of interest, grounding yourself on the tendency, they appear [Page 114]to you to have, to keep the capital of the coun­try out of two such different sets of hands.

The passage, I am speaking of, is in the fourth chapter of your second book, volume the second of the 8vo. edition of 1784. "The legal rate" (you say) "it is to be observed, though it ought to be somewhat above, ought not to be much above, the lowest market rate. If the legal rate of interest in Great Britain, for example, was fixed so high as eight or ten per cent. the greater part of the money which was to be lent, would be lent to prodigals and projectors, who alone would be willing to give this high interest. Sober people, who will give for the use of mo­ney no more than a part of what they are likely to make by the use of it, would not venture into the competition. A great part of the capital of the country would thus be kept out of the hands which were most likely to make a profitable and advantageous use of it, and thrown into those which were most likely to waste and destroy it. Where the legal interest, on the contrary, is fixed but a very little above the lowest market [Page 115]rate, sober people are universally preferred as borrowers, to prodigals and projectors. The person who lends money, gets nearly as much interest from the former, as he dares to take from the latter, and his money is much safer in the hands of the one set of people than in those of the other. A great part of the capital of the country is thus thrown into the hands in which it is most likely to be employed with advantage."

It happens fortunately for the side you appear to have taken, and as unfortunately for mine, that the appellative, which the custom of the language has authorized you, and which the po­verty and perversity of the language has, in a manner, forced you to make use of, is one, which, along with the idea of the sort of per­sons in question, conveys the idea of reproba­tion, as indiscriminately and deservedly applied to them. With what justice or consistency, or by the influence of what causes, this stamp of indiscriminate reprobation has been thus affixed, it is not immediately necessary to enquire. But, [Page 116]that it does stand thus affixed, you and every body else, I imagine, will be ready enough to allow. This being the case, the question stands already decided, in the first instance at least, if not irrevocably, in the judgments of all those, who, unable or unwilling to be at the pains of analysing their ideas, suffer their minds to be led captive by the tyranny of sounds: that is, I doubt, of by far the greater proportion of those whom we are likely to have to judge us. In the conceptions of all such persons, to ask whether it be sit to restrain projects, and projectors, will be as much as to ask, whether it be fit to restrain rashness, and folly, and absurdity, and knavery, and waste.

Of prodigals I shall say no more at present. I have already stated my reasons for thinking, that it is not among them that we are to look for the natural customers for money at high rates of interest. As far as those reasons are conclu­sive, it will follow, that, of the two sorts of men you mention as proper objects of the burden of these restraints, prodigals and projectors, that [Page 117]burden falls exclusively on the latter. As to these, what your definition is of projectors, and what descriptions of persons you meant to in­clude under the censure conveyed by that name, might be material for the purpose of judging of the propriety of that censure, but makes no dif­ference in judging of the propriety of the law, which that censure is employed to justify. Whe­ther you yourself, were the several classes of persons made to pass before you in review, would be disposed to pick out this or that class, or this and that individual, in order to exempt them from such censure, is what, for that pur­pose, we have no need to enquire. The law, it is certain, makes no such distinctions; it falls with equal weight, and with all its weight, upon all those persons, without distinction, to whom the term projectors, in the most impartial and extensive signification of which it is capable, can be applied. It falls, at any rate, (to repeat some of the words of my former definition) upon all such persons, as, in the pursuit of wealth, or even of any other object, endeavour, by the assistance of wealth, to strike into any channel [Page 118]of invention. It falls upon all such persons, as, in the cultivation of any of those arts which have been, by way of eminence, termed useful, di­rect their endeavours to any of those depart­ments in which their utility shines most conspi­cuous and induibitable; upon all such persons as, in the line of any of their pursuits, aim at any thing that can be called improvement; whether it consist in the production of any new article adapted to man's use, or in the meliorating the quality, or diminishing the expence, of any of those which are already known to us. It falls, in short, upon every application of the human powers, in which ingenuity stands in need of wealth for its assistant.

High and extraordinary rates of interest, how little soever adapted to the situation of the prodi­gal, are certainly, as you very justly observe, particularly adapted to the situation of the pro­jector: not however to that of the imprudent projector only, nor even to his case more than another's, but to that of the prudent and well­grounded projector, if the existence of such a [Page 119]being were to be supposed. Whatever be the prudence or other qualities of the project, in whatever circumstance the novelty of it may lie, it has this circumstance against it, viz. that it is new. But the rates of interest, the highest rates allowed, are, as you expressly say they are, and as you would have them to be, adjusted to the situation which the sort of trader is in, whose trade runs in the old channels, and to the best security which such channels can afford. But, in the nature of things, no new trade, no trade carried on in any new channel, can afford a security equal to that which may be afforded by a trade carried on in any of the old ones: in whatever light the matter might appear to perfect intelli­gence, in the eye of every prudent person, ex­erting the best powers of judging which the fal­lible condition of the human faculties affords, the novelty of any commercial adventure will oppose a chance of ill success, superadded to every one which could attend the same, or any other adventure, already tried, and proved to be profitable by experience.

[Page 120] The limitation of the profit that is to be made, by lending money to persons embarked in trade, will render the monied man more anxious, you may say, about the goodness of his security, and accordingly more anxious to satisfy himself re­specting the prudence of a project, in the carry­ing on of which the money is to be employed, than he would be otherwise: and in this way it may be thought that these laws have a tendency to pick out the good projects from the bad, and favour the former at the expence of the latter. The first of these positions I admit: but I can never admit the consequence to follow. A prudent man, (I mean nothing more than a man of ordinary prudence) a prudent man acting un­der the sole governance of prudential motives, I still say will not, in these circumstances, pick out the good projects from the bad, for he will not meddle with projects at all. He will pick out old-established trades from all sorts of projects, good and bad; for with a new project, be it ever so promising, he never will have any thing to do. By every man that has money, five per cent. or whatever be the highest legal rate, is at all [Page 121]times, and always will be, to be had upon the very best security, that the best and most pros­perous old-established trade can afford. Traders in general, I believe, it is commonly understood, are well enough inclined to enlarge their capital, as far as all the money they can borrow at the highest legal rate, while that rate is so low as five per cent. will enlarge it. How it is possible, therefore, for a project, be it ever so promising, to afford, to a lender at any such rate of interest, terms equally advantageous, upon the whole, with those he might be sure of obtaining from an old-established business, is more than I can conceive. Loans of money may certainly chance, now and then, to find their way into the pockets of projectors as well as of other men: but when this happens it must be through incautiousness, or friendship, or the expectation of some collateral benefit, and not through any idea of the advantageousness of the transaction, in the light of a pecuniary bargain.

I should not expect to see it alleged, that there is any thing, that should render the num­ber [Page 122]of well-grounded projects, in comparison of the ill-grounded, less in time future, than it has been in time past. I am sure, at least, that I know of no reasons why it should be so, though I know of some reasons, which I shall beg leave to submit to you by and by, which appear to me pretty good ones, why the advantage should be on the side of futurity. But, unless the stock of well-grounded projects is already spent, and the whole stock of ill-grounded projects that ever were possible, are to be looked for exclusively in the time to come, the censure you have passed on projectors, measuring still the extent of it by that of the operation of the laws in the defence of which it is employed, looks as far backward as forward: it condemns as rash and ill-ground­ed, all those projects, by which our species have been successively advanced from that state in which acorns were their food, and raw hides their cloathing, to the state in which it stands at present: for think, Sir, let me beg of you, whe­ther whatever is now the routine of trade was not, at its commencement, project? whether [Page 123]whatever is now establishment, was not, at one time, innovation?

How it is that the tribe of well-grounded projects, and of prudent projectors (if by this time I may have your leave for applying this epithet to some, at least, among the projectors of time past), have managed to struggle through the obstacles which the laws in question have been holding in their way, it is neither easy to know, nor necessary to enquire. Manifest enough, I think, it must be by this time, that difficulties, and those not inconsiderable ones, those laws must have been holding in the way of projects of all sorts of improvement (if I may say so) in every line, so long as they have had existence: reasonable, therefore, it must be to conclude, that, had it not been for these dis­couragements, projects of all sorts, well-ground­ed and successful ones, as well as others, would have been more numerous than they have been: and that accordingly, on the other hand, as soon, if ever, as these discouragements shall be removed, projects of all sorts, and among the [Page 124]rest, well-grounded and successful ones, will be more numerous than they would otherwise have been: in short, that, as, without these discou­ragements, the progress of mankind, in the career of prosperity, would have been greater than it has been under them in time past, so, were they to be removed, it would be at least proportionably greater in time future.

That I have done you no injustice, in assign­ing to your idea of projectors so great a latitude, and that the unfavourable opinion you have pro­fessed to entertain of them is not confined to the above passage, might be made, I think, pretty apparent, if it be material, by another passage in the tenth chapter of your first book, (edit. 1784, 8vo. p. 177.) "The establishment of any new manufacture, of any new branch of commerce, or of any new practice in agriculture," all these you comprehend by name under the list of "projects:" of every one of them you observe, that "it is a speculation from which the projector promises himself extraordinary pro­fits. These profits (you add) are sometimes [Page 125] very great, and sometimes, more frequently per­haps, they are quite otherwise: but in general they bear no regular proportion to those of other trades in the neighbourhood. If the project succeeds, they are commonly at first very high. When the trade or practice becomes thoroughly established and well known, the competition re­duces them to the level of other trades." But on this head I forbear to insist: nor should I have taken this liberty of giving you back your own words, but in the hope of seeing some alter­ation made in them in your next edition, should I be fortunate enough to find my sentiments confirmed by your's. In other respects, what is essential to the public, is, what the error is in the sentiments entertained, not who it is that entertains them.

I know not whether the observations which I have been troubling you with, will be thought to need, or whether they will be thought to re­ceive, any additional support from those com­fortable positions, of which you have made such frequent use, concerning the constant tendency [Page 126]of mankind to get forward in the career of pros­perity, the prevalence of prudence over im­prudence, in the sum of private conduct at least, and the superior fitness of individuals for manag­ing their own pecuniary concerns, of which they know the particulars and the circumstances, in comparison of the legislator, who can have no such knowledge. I will make the experiment: for, so long as I have the mortification to see you on the opposite side, I can never think the ground I have taken strong enough, while any thing remains that appears capable of rendering it still stronger.

"With regard to misconduct, the number of prudent and successful undertakings" (you ob­serve, b. II. ch. iii. edit. 8vo. 1784, vol. ii. p. 20.) "is every where much greater than that of injudicious and unsuccessful ones. After all our complaints of the frequency of bankruptcies, the unhappy men who fall into this misfortune, make but a very small part of the whole number engaged in trade, and all other sorts of business; [Page 127]not much more perhaps than one in a thou­sand."

It is in support of this position, that you ap­peal to history for the constant and uninterrupted progress of mankind, in our island at least, in the career of prosperity: calling upon any one who should entertain a doubt of the fact, to di­vide the history into any number of periods, from the time of Caesar's visit down to the pre­sent: proposing, for instance, the respective aeras of the Restoration, the Accession of Elizabeth, that of Henry VII. the Norman Conquest, and the Heptarchy, and putting it to the sceptic to find out, if he can, among all these periods, any one at which the condition of the country was not more prosperous than at the period immedi­ately preceding it; in spite of so many wars, and sires, and plagues, and all other public ca­lamities, with which it has been at different times afflicted, whether by the hand of God, or by the misconduct of the sovereign. No very easy task, I believe: the fact is too manifest for the most jaundiced eye to escape seeing it: but [Page 128]what and whom are we to thank for it, but pro­jects, and projectors?

"No," I think I hear you saying, "I will not thank projectors for it; I will rather thank the laws, which, by fixing the rates of interest, have been exercising their vigilance in repressing the temerity of projectors, and preventing their imprudence from making those defalcations from the sum of national prosperity which it would not have failed to make, had it been left free. If, during all these periods, that adventurous race of men had been left at liberty by the laws to give full scope to their rash enterprizes, the increase of national prosperity during these pe­xiods might have afforded some ground for re­garding them in a more favourable point of view. But the fact is, that their activity has had these laws to check it: without which checks you must give me leave to suppose, that the current of prosperity, if not totally stopt, or turned the other way, would, at any rate, have been more or less retarded. Here then," (you conclude) "lies the difference between us: what you look [Page 129]upon as the cause of the increase about which we are both agreed, I look upon as an obstacle to it: and what you look upon as the obstacle, I look upon as the cause."

Instead of stating this as a sort of plea that might be urged by you, I ought, perhaps, rather to have mentioned it as what might be urged by some people in your place: for, as I do not ima­gine your penetration would suffer you to rest satissied with it, still less can I suppose that, if you were not, your candour would allow you to make use of it as if you were.

To prevent your resting satisfied with it, the following considerations would, I think, be sufficient.

In the first place, of the seven periods which you have pitched upon, as so many stages for the eye to rest at in viewing the progress of prospe­rity, it is only during the three last, that the country has had the benefit, if such we are to [Page 130]call it, of these laws: for it is to the reign of Henry VIII. that we owe the first of them.

Here a multitude of questions might be start­ed: Whether the curbing of projectors formed any part of the design of that first statute, or whether the views of it were not wholly confined to the reducing the gains of that obnoxi­ous and envied class of men, the money­lenders? Whether projectors have been most abundant before that statute, or since that sta­tute? And whether the nation has suffered, as you might say—benefited, as I should say, most by them, upon the whole, during the former period or the latter? All these discussions, and many more that might be slarted, I decline engaging in, as more likely to retard, than to forward, our coming to any agreement con­cerning the main question.

In the next place, I must here take the liberty of referring you to the proof, which I think I have already given, of the proposition, that the restraints in question could never have had the [Page 131]effect, in any degree, of lessening the proportion of bad projects to good ones, but only of dimin­ishing, as far as their influence may have extend­ed, the total number of projects, good and bad together. Whatever, therefore, was the general tendency of the projecting spirit previously to the first of these laws, such it must have remain­ed ever since, for any effect which they could have had in purifying and correcting it.

But what may appear more satisfactory, per­haps, than both the above considerations, and may afford us the best help towards extricating our­selves from the perplexity, which the plea I have been combating (and which I thought it necessary to bring to view, as the best that could be urged) seems much better calculated to plunge us into, than bring us out of, is, the considera­tion of the small effect which the greatest waste that can be conceived to have been made within any compass of time, by injudicious projects, can have had on the sum of prosperity, even in the estima­tion of those whose opinion is most unfavourable to projectors, in comparison of the effect which, [Page 132]within the same compass of time, must have been produced by prodigality.

Of the two causes, and only two causes, which you mention, as contributing to retard the accumulation of national wealth, as far as the conduct of individuals is concerned, projecting, as I observed before, is the one, and prodigality is the other: but the detriment, which society can receive even from the concurrent efficacy of both these causes, you represent, on several oc­casions, as inconsiderable; and if I do not mis­apprehend you, too inconsiderable, either to need, or to warrant, the interposition of govern­ment to oppose it. Be this as it may with regard to projecting and prodigality taken together, with regard to prodigality at least, I am certain I do not misapprehend you. On this subject you ride triumphant, and chastise the "imper­tinence and presumption of kings and ministers," with a tone of authority, which it required a courage like yours to venture upon, and a genius like yours to warrant a man to assume (b. II. ch. iii. vol. ii. p. 27. edit. 8vo. 1784.) After [Page 133]drawing the parallel between private thrift and public profusion, "It is" (you conclude) "the highest impertinence and presumption, there­fore, in kings and ministers to pretend to watch over the economy of private people, and to restrain their expence, either by sumptuary laws, or by prohibiting the importation of foreign luxuries. They are themselves always, and without ex­ception, the greatest spendthrifts in the society. Let them look well after their own expence, and they may safely trust private people with theirs. If their own extravagance does not ruin the state, that of their subjects never will."

That the employing the expedients you mention for restraining prodigality, is indeed generally, perhaps even without exception, improper, and in many cases even ridiculous, I agree with you; nor will I here step aside from my subject to defend, from that imputation, another mode suggested in a former part of these papers. But however presumptuous and imperti­nent it may be for the sovereign to attempt in any way to check, by legal restraints, the prodi­gality [Page 134]of individuals; to attempt to check their bad management by such restraints seems abun­dantly more so. To err in the way of prodi­gality is the lot, though, as you well observe, not of many men, in comparison of the whole mass of mankind, yet at least of any man: the stuff fit to make a prodigal of is to be found in every ale-house, and under every hedge. But even to err in the way of projecting is the lot only of the privileged few. Prodigality, though not so common as to make any very material drain from the general mass of wealth, is, how­ever, too common to be regarded as a mark of distinction, or as a singularity. But the stepping aside from any of the beaten paths of traffic, is regarded as a singularity, as serving to distinguish a man from other men. Even where it requires no genius, no peculiarity of talent, as where it consists in nothing more than the finding out a new market to buy or sell in, it requires, how­ever, at least, a degree of courage, which is not to be found in the common herd of men. What shall we say of it, where, in addition to the vul­gar quality of courage, it requires the rare en­dowment [Page 135]of genius, as in the instance of all those successive enterprizes by which arts and manu­factures have been brought from their original nothing to their present splendor? Think how small a part of the community these must make, in comparison of the race of prodigals; of that very race, which, were it only on account of the smallness of its number, would appear too inconsiderable to you to deserve attention. Yet prodigality is essentially and necessarily hurtful, as far as it goes, to the opulence of the state: projecting, only by accident. Every prodigal without exception, impairs—by the very supposi­tion impairs—if he does not annihilate, his for­tune. But it certainly is not every projector that impairs his: it is not every projector that would have done so, had there been none of those wise laws to hinder him: for the fabric of national opulence, that fabric of which you pro­claim, with so generous an exultation, the con­tinual increase, that fabric, in every apartment of which, innumerable as they are, it required the reprobated hand of a projector to lay the first stone, has required some hands at least to be em­ployed, [Page 136]and that successfully employed. When in comparison of the number of prodigals, which is too inconsiderable to deserve notice, the number of projectors of all kinds is so much more inconsiderable—and when from this in­considerable number, must be deducted, the not inconsiderable proportion of successful projec­tors—and from this remainder again, all those who can carry on their projects without need of borrowing—think whether it is possible, that this last remainder could afford a multitude, the reducing of which would be an object, desciv­ing the interposition of government by its mag­nitude, even taking for granted that it were an object proper in its nature?

If it be still a question, whether it be worth while for government, by its reason, to attempt to controul the conduct of men visibly and un­deniably under the dominion of passon, and acting, under that dominion, contrary to the dictates of their own reason: in short, to effect what is acknowledged to be their better judg­ment, against what every body, even themselves, [Page 137]would acknowledge to be their worse; is it en­durable that the legislator should by violence substitute his own pretended reason, the result of a momentary and scornful glance, the offspring of wantonness and arrogance, much rather than of social anxiety and study, in the place of the humble reason of individuals, bending itself with all its force to that very object which he pre­tends to have in view? Nor let it be forgotten, that, on the side of the individual in this strange competition, there is the most perfect and mi­nute knowledge and information, which interest, the whole interest of a man's reputation and fortune, can ensure; on the side of the legislator, the most perfect ignorance. All that he knows, all that he can know, is, that the enterprize is a project, which, merely because it is susceptible of that obnoxious name, he looks upon as a sort of cock; for him, in childish wantonness, to shy at.—Shall the blind lead the blind? is a question that has been put, of old, to indicate the height of folly: but what then shall we say of him who, being necessarily blind, insists on leading, in paths he never trod, those who can see?

[Page 138] It must be by some distinction too fine for my conception, if you clear yourself from the having taken, on another occasion, but on the very point in question, the side, on which it would be my ambition to see you fix.

"What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, (you say) it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate what­soever, and which would no where be so dan­gerous as in the hands of a man who had folly and presumption enough to fancy himself sit to exercise it.

[Page 139] "To give the monopoly of the home market to the produce of domestic industry, in any par­ticular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must in almost all cases, be either a useless or a hurtful regulation." —Thus far you: and I add, to limit the legal interest to a rate at which the carriers on of the oldest, and best established, and least hazard­ous trades are always glad to borrow, is to give the monopoly of the money market to those traders, against the projectors of new ima­gined trades, not one of which but were it only from the circumstances of its novelty, must, as I have already observed, appear more hazardous than the old.

These, in comparison, are but inconclusive topics. I touched upon them merely as afford­ing, what appeared to me the only shadow of a plea, that could be brought, in defence of the policy I am contending against. I come back, therefore, to my first ground, and beg you once more to consider, whether, of all that [Page 140]host of manufactures, which we both exult in as the causes and ingredients of national prosperity, there be a single one, that could have existed at first but in the shape of a project. But, if a regulation, the tendency and effect of which is merely to check projects, in as far as they are projects, without any sort of tendency, as I have shewn, to weed out the bad ones, is de­fensible in its present state of imperfect efficacy, it should not only have been defensible, but much more worthy of our approbation, could the effi­cacy of it have been so far strengthened and compleated as to have opposed, from the begin­ning, an unsurmountable bar to all sorts of pro­jects whatsoever: that is to say, if, stretching forth its hand over the rudiments of society, it had confined us, from the beginning, to mud for our habitations, to skins for our cloathing, and to acorns for our food.

I hope you may by this time be disposed to allow me, that we have not been ill served by the projects of time past. I have already intima­ted, that I could not see any reason why we [Page 141]should apprehend our being worse served by the projects of time future. I will now venture to add, that I think I do see reason, why we should expect to be still better and better served by these projects, than by those. I mean better upon the whole, in virtue of the reduction which experience, if experience be worth any thing, should make in the proportion of the number of the ill-grounded and unsuccesful, to that of the well-grounded and successful ones.

The career of art, the great road which re­ceives the footsteps of projectors, may be consi­dered as a vast, and perhaps unbounded, plain, bestrewed with gulfs, such as Curtius was swallowed up in. Each requires an human vic­tim to fall into it 'ere it can close; but when it once closes, it closes to open no more, and so much of the path is safe to those who follow. To tie men neck and heels, and throw them into the gulfs I have been speaking of, is alto­gether out of the question: but if, at every gulf, a Curtius stands mounted and caparison­ed, ready to take the leap, is it for the legislator, [Page 142]in a fit of old womanish tenderness, to pull him away? Laying even public interest out of the question, and considering nothing but the feel­ings of individuals, a legislator would scarcely do so, who knew the value of hope, "the most precious gift of heaven."

Consider, Sir, that it is not with the inven­tion-lottery (that great branch of the project­lottery, for the sake of which I am desending the whole, and must continue so to do until you or somebody else can shew me how to defend it on better terms), it is not, I say, with the in­vention-lottery, as with the mine-lottery, the privateering lottery, and so many other lotteries, which you speak of, and in no instance, I think, very much to their advantage. In these lines success does not, as in this, arise out of the em­bers of ill success, and thence propagate itself, by a happy contagion, perhaps to all eternity. Let Titius have found a mine, it is not the more easy, but by so much the less easy, for Sempro­nius to find one too: Let Titius have made a capture, it is not the more easy, but by so much [Page 143]the less easy, for Sempronius to do the like. But let Titius have found out a new dye, more bril­liant or more durable than those in use, let him have invented a new and more convenient ma­chine, or a new and more profitable mode of husbandry, a thousand dyers, ten thousand me­chanics, a hundred thousand husbandmen, may repeat and multiply his success: and then, what is it to the public, though the fortune of Titius, or of his usurer, should have sunk under the ex­periment?

Birmingham and Sheffield are pitched upon by you as examples, the one of a projecting town, the other of an unprojecting one, (b. I. ch. x. vol. i. p. 176, edit. 8vo. 1784.) Can you for­give my saying, I rather wonder that this com­parison of your own choosing, did not suggest some suspicions of the justice of the conceptions you had taken up, to the disadvantage of pro­jectors. Shessield is an old oak: Birmingham, but a mushroom. What if we should find the mushroom still vaster and more vigorous than the oak? Not but the one as well as the other, [Page 144]at what time soever planted, must equally have been planted by projectors: for though Tubal Cain himself were to be brought post from Ar­menia to England to plant Sheffield, Tubal Cain himself was as arrant a projector in his day, as ever Sir Thomas Lombe was, or bishop Blaise: but Birmingham, it seems, claims, in common parlance, the title of a projecting town, to the exclusion of the other, because, being but of yesterday, the spirit of project smells fresher and stronger there than elsewhere.

When the odious sound of the word projector no longer tingles in your ears, the race of men thus stigmatized do not always find you their enemy. Projects, even under the name of "dangerous and expensive experiments," are represented as not unfit to be encouraged, even though monopoly be the means: and the mono­poly is defended in that instance, by its simila­rity to the other instances, in which the like means are employed to the like purpose.

[Page 145] "When a company of merchants undertake at their own risk and expence to establish a new trade, with some remote and barbarous nation, it may not be unreasonable (you observe) to incorporate them into a joint stock company, and to grant them, in case of their success, a monopoly of the trade for a certain number of years. It is the easiest and most natural way, in which the state can recompense them, for hazarding a dangerous and expensive experi­ment, of which the public is afterwards to reap the benefit. A temporary monopoly of this kind may be vindicated, upon the same principles, upon which a like monopoly of a new machine is granted to its inventor, and that of a new book to its author."

I have sometimes been tempted to think that were it in the power of laws to put words under proscription, as it is to put men, the cause of in­ventive industry might, perhaps, derive scarcely less assistance from a bill of attainder against the words project and projectors, than it has derived from the act authorizing the grant of patents. [Page 146]I should add, however, for a time: for even then the envy, and vanity, and wounded pride, of the uningenious herd, would, sooner or later, infuse their venom into some other word, and set it up as a new tyrant, to hover, like its pre­decessor, over the birth of infant genius, and crush it in its cradle.

You have defended against unmerited oblo­quy two classes of men, the one innocent at least, the other highly useful; the spreaders of English arts in foreign climes, (b. IV. ch. 8. vol. ii. p. 514. et alibi, edit. 8vo. 1784.) and those whose industry exerts itself in distributing that necessary commodity, which is called by the way of eminence, the staff of life. May I flatter myself with having succeeded at last in my endeavours, to recommend to the same powerful protection, two other highly useful and equally persecuted sets of men, usurers and projectors.—Yes—I will, for the moment at least, indulge so flattering an idea: and, in pur­suance of it, leaving usurers, for whom I have said enough already, I will consider myself as [Page 147]joined now with you in the same commission, and thinking with you of the best means of re­lieving the projector from the load of discou­ragement laid on him by these laws, in so far as the pressure of them falls particularly upon him. In my own view of the matter, indeed, no tem­perament, no middle course, is either necessary or proper: the only perfectly effectual, is the only perfectly proper remedy,—a spunge. But, as nothing is more common with mankind, than to give opposite receptions, to conclusions flowing with equal necessity from the same principle, let us accommodate our views to that contin­gency.

According to this idea, the object, as far as confined to the present case, should be, to pro­vide, in favour of projectors only, a dispensation from the rigour of the anti-usurious laws: such, for instance, as is enjoyed by persons engaged in the carrying trade, in virtue of the indulgence given to loans made on the footing of respon­dentia or bottomry. As to abuse, I see not why the danger of it should be greater in this [Page 148]case than in those. Whether a sum of money be embarked, or not embarked, in such or such a new manufacture on land, should not, in its own nature, be a fact much more difficult to as­certain, than whether it be embarked, or not embarked, in such or such a trading adventure by sea: and, in the one case as in the other, the payment of the interest, as well as the re­payment of the principal, might be made to depend upon the success of the adventure.

If the leading-string is not yet thought tight enough, boards of controul might be instituted to draw it tighter. Then opens a scene of vexa­tion and intrigue: waste of time consumed in courting the favour of the members of the board: waste of time, in opening their understandings, clenched, perhaps, by ignorance, at any rate, by disdain and self-sufficiency, and vanity, and pride: the favour (for pride will make it a fa­vour) granted to skill in the arts of self-recom­mendation and cabal, devoid of inventive merit, and refused to naked merit unadorned by prac­tice in those arts: waste of time on the part of [Page 149]the persons themselves engaged in this imper­tinent inquiry: waste of somebody's money in paying them for this waste of time. All these may be necessary evils, where the money to be bestowed is public money: how idle, where it is the party's own! I will not plague you, nor myself, with enquiring of whom shall be com­posed this board of nurses to grown gentlemen: were it only to cut the matter short, one might name at once the Committee of the Society of Arts. There you have a body of men ready trained in the conduct of enquiries, which re­semble that in question, in every circumstance, but that which renders it ridiculous: the mem­bers or representatives of this democratic body would be as likely, I take it, to discharge such a trust with fidelity and skill, as any aristocracy that could be substituted in their room.

Crichoff, in White Russia, March 1787.