256 



ESSAY ON PROBABILITIES. 



estimation of his income, that he should want 5000/. if 

 he died in one year, 4800/. if he died in the second, 

 and so on, it would be desirable that he should be able 

 to insure for these several sums, contingently upon his 

 dying in any of the several years to which they are 

 made to belong. Various modifications of this scheme 

 might be proposed, all having this difference from the 

 usual plans, in that the latter enable a person to make 

 a provision for his family, while the former would only 

 supply the deficiencies which his death would leave in 

 the proceeds derived from other sources. In an ap- 

 pendix (on the value of increasing annuities) will be 

 found the method of calculating the present values of 

 such insurances. 



2. The possible fluctuations of the rate of interest. 

 These may be either general and national fluctuations, 

 or alterations in the value of the property held by the 

 office. The former cannot be guarded against or pre- 

 dicted ; and, as the rate of interest has been slowly 

 falling for centuries, there is some reason to suppose 

 that this depreciation of money may continue. But 

 this gradual sinking of the rate of interest may be only 

 partly dependent upon the fall of profits, and part may 

 be due to the increase of security. I question whether 

 the political economist has found the historical materials 

 for determining this most important element ; namely, 

 the extremes of interest at which loans were contracted 

 in the different periods of our history. The legal 

 maximum of interest, at the beginning of the reign of 

 James I., was 10 per cent., and at the end of the cen- 

 tury, 6 per cent. But, at the beginning of the century, 

 land was commonly bought at 20 years' purchase, and 

 never at less than 1 6 years' purchase ; while at the end 

 of the century it was still at 20 years' purchase. No 

 method of proving such a point is better than the 

 examination of the works on interest which appeared 

 during the century. If, then, we suppose, with Adam 

 Smith, and I believe with most others, that the changes 

 in the legal maximum of interest followed, and did not 



