By and large, I am not a fan of Jeremy Bentham. I think that his politics were middling at best, and his philosophical ethics are philosophically mistaken and both morally and politically corrosive. But I have been impressed by the early essay I’m currently in the middle of reading, in which Bentham argues against State control of the financial markets, which he provocatively if unfortunately entitled a Defence of Usury. Letter IV, on the
Protection of Indigence, includes this wonderful response to the argument State command-and-control can or should be enlisted to protect the poor from their own decisions to seek credit from
predatory lenders. As perfectly disgusting as I find most of the sharks who target poor people in money trouble, the problem has to do with laws that regulate and restrict formal-sector credit so as to make too little credit in too few forms available from too narrow a class of people. The proposed statist remedies — more bans and more restrictions — are worse than the disease. Here’s Bentham:
A man [sic] is in one of these situations, suppose, in which it would be for his advantage to borrow. But his circumstances are such, that it would not be worth any body’s while to lend him, at the highest rate which it is proposed the law should allow; in short, he cannot get it at that rate. If he thought he could get it at that rate, most surely he would not give a higher: he may he trusted for that: for by the supposition he has nothing defective in his understanding. But the fact is, he cannot get it at that lower rate. At a higher rate, however he could get it: and at that rate, though higher, it would be worth his while to get it: so he judges, who has nothing to hinder him from judging right; who has every motive and every means for forming a right judgment; who has every motive and every means for informing himself of the circumstances, upon which rectitude of judgment, in the case in question, depends. The legislator, who knows nothing, nor can know any thing, of any one of all these circumstances, who knows nothing at all about the matter, comes and says to him —It signifies nothing; you shall not have the money: for it would be doing you a mischief to let you borrow it upon such terms.— And this out of prudence and loving-kindness! — There may be worse cruelty, but can there be greater folly?
The folly of those who persist, as is supposed, without reason, in not taking advice, has been much expatiated upon. But the folly of those who persist, without reason, in forcing their advice upon others, has been but little dwelt upon, though it is, perhaps, the more frequent, and the more flagrant of the two. It is not often that one man [sic] is a better judge for another, than that other is for himself, even in Cases where the adviser will take the trouble to make himself master of as many of the materials for judging, as are within the reach of the person to be advised. But the legislator is not, can not be, in the possession of any one of these materials. — What private, can be equal to such public folly?
–Jeremy Bentham, Defence of Usury (1787), Letter IV.
I’ll leave it as an exercise for the reader to apply the same principles to parallel arguments against government-imposed wage floors, or against bans on so-called
price gouging on essential commodities.