The History of Economic Ideas by Brandon Dupont

Author:Brandon Dupont
Language: eng
Format: epub
ISBN: 9781317326809
Publisher: Routledge

Chapter Conclusion

Modern economics is almost entirely silent on the issue of usury, recognizing it mostly as a curious form of price control that has since passed into history. Yet this perspective is not quite right. While usury was more important in the medieval world, anti-usury laws still remain in Europe, the United States, and other countries today. Regulation Q, for example, prohibited American banks from paying interest on demand deposits—a modern holdover from ancient restrictions on interest that was only phased out in 1986. Interest rate ceilings also still exist throughout Europe, where some countries have absolute limits on interest rates while others set maximum interest rates relative to average market interest rates.

Opposition to usury remains central to modern Islamic banking institutions, which are based on the Quran’s prohibition of usury. Furthermore, there are still legislative efforts to control the rate of interest on everything from consumer credit cards to payday lenders to student loans. Even though we may view usury laws as antiquated, we still often balk at the notion of charging a high rate of interest to a poor borrower—fundamentally the same position as those who condemned usurers as violating charity and justice. We may accept the principle of interest today, but many people still cling to the distinction between usury and interest that was first articulated centuries ago. As the old adage goes, the more things change, the more they remain the same.

Few economic issues have seen such an evolution as that of usury. Saint Athanasius (295–373) included avoiding usury as one of ten requirements for achieving salvation. Cyril of Jerusalem (315–367) labeled usury as one of the snares of Satan, used to pull mankind into sin. The early Church Fathers almost universally viewed usury as a means by which the poor were oppressed by the rich. Yet with time, the opposition to usury gradually weakened as it came to be more clearly distinguished from legitimate interest charges. Between 1832 and 1836, the Catholic Church officially dropped its centuries-old prohibitions on usury, letting any interest that was allowed under civil law to be received by anyone.

The lessons to be learned from studying the intellectual evolution of lending with interest apply well beyond this issue. In fact, scholarly attitudes toward financial markets, lending, and interest reflect more general attitudes toward commerce itself. They also reflect how well-intentioned policy might in fact carry unintended consequences that harm the very people the policy intends to help.

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