Friday, November 18, 2011
Usury Revisited
A while back I had some thoughts about usury as existing in a somewhat unique position from a historical point of view. Professor Bainbridge had a nice response to my post. And this is a more recent and also very thoughtful post by John Schwenkler, discussing a piece by Elizabeth Anscombe, Faith in a Hard Ground, in which she comes down very strongly opposed, that I did not know.
https://mirrorofjustice.blogs.com/mirrorofjustice/2011/11/usury-revisited.html
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As an Anscombe fan, I'm rather disappointed, though I haven't been able to find the full article to ensure this representation is fair. Obviously interest on a loan is the charge for risk + expected inflation. There are rather limited circumstances in which the interest charged might be greater than that (regulatory interference, misleading people about the terms of the loan, and so forth), but it seems obvious that the reason it is just to charge interest is that the loan has seriously impaired value once given (due to risk and inflation). Most cases of folks referring to "exorbitant" interest rates seem like they're really just talking about very high-risk loans, which of course justify very high rates of interest (or else the loans would not be made). It seems like one thing to say we should be ready to give charitably to people (which of course we should) and another to talk as if certain rates of interest are unethical. To say this is to say that the highest-risk (probably poorest) debtors should be prohibited from seeking loans, and only be permitted to beg. Am I missing something significant, or was Anscombe just missing the market price of risk?