98 



FARMERS' REGISTER-ESSAY ON USURY LAWS. 



perity of our state, by sweeping from the land and 

 irom commerce, capital as fast as it accumulates, 

 to spread over the distant recrions of the west. So 

 far then from the views which I have taken ot the 

 usury laws being hostile to the interest of agricul- 

 ture, it is directly the reverse— I contend they are 

 in perfect harmony with that interest. 



I hope then, that the following sheets v%dll be 

 honored with a perusal by most of your subscri- 

 bers, especially by the agricultural portion. I am 

 well aware that my opinions on tliis subject are 

 far from being popular. If, llien, I can succeed 

 for the present in awakening the spirit of enquiry, 

 and of directing public opinion to the subject, I 

 shall be fully compensated for my labors. 

 With high respect, and great regard, ^ 

 1 am, dear sir, your ob'dt serv't, 



THOMAS K. DEW. 



For the Farmers' Register. 



ESSAY 



OW THE INTEREST OF MONEY, AND THE POLI- 

 CY OF LAWS AGAINST USURY. 



By TnoiiAS E. Dew, Professor of Political Eeonomy, Metaphy- 

 sics, &.C. College of William and Mary. 



There is no subject connected with the science 

 of political economy, which is more interesting 

 or important, than that of money — the great mea- 

 surer of value, and the most potent agent, by which 

 labor and capital are stimulated into productive 

 action, and the exchanges of society are effected. 

 I have already in former lectures given you an 

 account of the causes which render a circulating 

 medium necessary in the progress of society, and 

 pointed out the circumstances which determine the 

 relative values of the metals and other commodi- 

 ties throughout the civilized world; I have shown 

 you how, by judicious banking, the circulating 

 medium may be economised, and a convertible pa- 

 per be made to perform the functions of the pre- 

 cious metals, at the same time pointing out the 

 multifarious evils consequent on this system, so 

 great and hitherto so universally attendant on it, 

 as to render it a problematical (juestion whether 

 banks up to the present da}^, have not generated 

 more mischief than good. In my present lecture 

 I propose to conclude my remarks on the subject 

 of money, by an investigation of the principles 

 which I'egulate interest, and an examination of 

 the policy of those laws which fix and limit its 

 rate. 



If we look to the liistoiy of the v\'orld we find that 

 in almost all ages, and in all countries, commencing 

 with the Israelites, and continuing down to the 

 present time, lawgivers have attempted either to 

 abolish interest altogether, or limit its rate. Money 

 seems to have been regarded with a jealous eve; 

 it has been looked on as diflcringfrom all other 

 commodities — as forming a sort of anomaly in the 

 politico-economical world, not regulated by the 

 laws and principles which determine the prices, 

 hires, and rents of other species of property, but 

 as being entirely sui generis, {'vec from the har- 

 monious action of supply or demand, and conse- 

 quently requiring the guardian care and restraint 

 of the legislator. I need scarcely inform you that 

 my own opinions on this subject are in unison with 

 those entertained by me on other branches of our 

 fcience, and shall endeavor to prove to you, that 



with i<s\v exceptions, the interest of money ought 

 not to be restrained by law. 



Interest may be defined to be the price lohich the 

 borrower of capital pays the lender for its use; and 

 although m.oney be the material lent, yet it is not 

 generally the money which is wanted by the bor- 

 rower, but the money's worth— the pro])crty or 

 commodities which can be bought with the money. 

 No one borrows money to hoard. Every day of 

 its detention in the hands of the borrower is so 

 much loss to him. He must lay it out in some 

 profitable manner, or he will lose the interest Avhich 

 he is paying. • Having premised thus much, 

 I will proceed to examine the ijrinciplos which, in 

 the absence of all law, regulate the rate of interest. 



I. Rate of interest depends on profits, and risk 

 incurred by the lender. 



The first proposition which I hope to establish, 

 is, that rate of interest depends on the compound 

 ratio of the profits which the borrower expects to 

 make on the money lent, and the risk Avliich the 

 lender runs of never recovering his capital. It is 

 evident that all other things being equal, the bor- 

 rower will be willing to give a higher rate of in- 

 terest for money when he expects to make higher 

 profits by its use, than when his profits are low. This 

 leads me for a moment to advert to the laws which 

 regulate the rate of profits. In my lecture on 

 profits, I endeavored to prove that the j?eneral 

 rate was determined in each country by the pro- 

 portion between the aggregate capital of the so- 

 ciety and the channels of profitable investment. 

 Hence, in .old and densely populated countries 

 profits are lovfer than in new and sparsely popu- 

 lated, especially it" the soils be nearly equal in 

 fertility. For, in the former, the accumulated cap- 

 ital is redundant in proportion to the channels of 

 investment, whereas, in the latter the reverse is 

 the case. Thus profits are lower in Holland than 

 in England, and lower in England than in the 

 United States. A gam, in the same countiy from 

 the same cause, profits are higher in one section 

 than in another, especially if the country be very 

 extensive like the United States of America. 

 Thus we find the rate of profits generally higher 

 in the middle than the iiorthern states, higher in 

 the southern than in the middle — and higher still 

 in the new states of the Avest than in the southern. 

 So likewise in a large state like Virginia, we Avit- 

 ness frequently a considerable difference in profits 

 from section to section. 



In small states there cannot exist a very great 

 difference in the average rate of profits in different 

 sections, because of the tendency in capital to 

 move from the section where profits are low, to 

 those in which they are high, until the equilibrium 

 is restored. When the sections are large and ex- 

 tensive there are so many ties of fi-iends, relations, 

 prejudices, and associations, which bind,usto our 

 native district, and so many obstacles and checks 

 thrown in the way of emiirration, as permanently 

 to pi-event a perfect equilibrium by the transfer- 

 ence of labor and capital. In the western por- 

 tion of Virginia, (our state) where the soils are 

 fresh and the population thin, profits are perhaps 

 higher than in the eastern portion — and no doubt 

 one very beneficial eflect of the great central im- 

 provement of Virginia, will be to raise profits still 

 higher in the western portion of the state by the 

 facilities of transportation which will be offered to 



