PER CONTRA; POLITICAL ECONOMIST.
The students of political economy are not always reformers. It is not their purpose nor the object of their studies to transform society. They only endeavor to explain why things are as they are. They find the taking of usury all but universal, and they endeavor to give the reasons for the prevailing custom. The subject is usually but slightly touched upon and dismissed with a few sentences.
Few economists claim that interest or rental is a part of the cost of production. They mostly affirm that it is no part of production; that it is merely the price paid for the opportunity to produce. The lender of money makes a loan to the borrower and thus gives him a better opportunity to produce than he had before. The landlord for the rental withdraws his hand from over his land and gives the renter the opportunity to produce a harvest.
In justification, or at least in explanation of this exaction for an opportunity, three reasons are usually given. These may be briefly stated as risk, time and abstinence.
- There is some risk in every investment. There is a possibility that the most honest, industrious and careful debtor may by some misfortune not be able to return the loan and it would therefore be lost. To guard against this the usurer requires the rate of interest to be graded by the measure of risk.
This is claimed to be of the nature of insurance, the borrower paying the premium. The profits of insurance are secured by collecting a larger premium than necessary to pay all losses. On this theory, the gain of