Gustave de Molinari, Les Soirées de la rue Saint-Lazare: entretiens
sur les lois économiques et défense de la propriété (Evenings on Saint
Lazarus Street: Discussions on Economic Laws and the Defence of Property)
[A Draft of Liberty Fund's new translation]
[May 17, 2012]
[SUMMARY: The right to lend. –Legislation regulating
lending at interest. –
Definition of capital. – Motives driving capital formation. – On
credit. – On interest. – On its constituent elements. –
Labor. – Hardship. – Risks. – How these conditions can be
alleviated. – That the laws cannot achieve this. – The disastrous
results of legislation restricting the rate of interest.]
Title Page of the original 1849 edition
The photo of Molinari (1819-1912) which accompanied
his obituary in the Journal des économistes
Related Links in the Library:
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Molinari's book Les Soirées de la rue Saint-Lazare; entretiens sur les
lois économiques et défense de la propriété. (Paris: Guillaumin, 1849)
is being translated by Liberty Fund. The translation was done by Dennis O'Keeffe
and it is being edited by David M. Hart. The critical apparatus of foontnotes
and glossary entries, and introduction are being provided by David Hart.
We welcome feedback from Molinari scholars to ensure that this edition will
be a great one and thus befitting Molinari in his centennial year.
page has a detailed Table of Contents and links to other Chapters.
The Fifth Evening
SUMMARY: The right to lend. –Legislation regulating lending at interest. –
Definition of capital. – Motives driving capital formation. – On
credit. – On interest. – On its constituent elements. –
Labor. – Hardship. – Risks. – How these conditions can be
alleviated. – That the laws cannot achieve this. – The disastrous
results of legislation restricting the rate of interest.
Rotten usurer! To lend money to a scatterbrain who squanders his inheritance
in advance on the young ladies of the Opéra, and, heavens above, at what a
rate of interest!
So whom are you railing at?
At a damned money-lender who has decided to lend a huge sum to one of my sons.
At what rate?
At 2% a month, 24% a year, no more nor less!
That is not very dear. Imagine if you were still [p118] in the flower of youth,
strong and healthy. Next, imagine that the law categorically forbade lending
at interest. The legal rate of interest is five per cent in civil matters and
six in commercial matters.
Well it is precisely because the legal interest rate is five or six per cent
that people should not be lending at twenty four.
Lending happens, however. And to be wholly truthful with you I will say that
I think the law counts for a part of this twenty four per cent.
What? But does not the law authorize me to pursue this vile money-lender….
This capitalist bloodsucker….
Who lends at above the legal rate. So this is the issue then. I will tell
you what is going to happen. You are going to sue the money-lender with whom
your son has allowed himself to get involved in order to anticipate his inheritance.
The man will have to defend himself. The case will be judged and he will win
for lack of sufficient evidence. But the proceedings will even so have cost
him money. Moreover his reputation will have suffered a new blemish. All these
are risks to which he would not be exposed if there were no laws limiting the
rate of interest. Now a lender has to cover his risks.
Yes, but twenty four per cent?
If we consider how short the supply of funds is today, and how risky investments
are, especially if the borrower is an habitué of Breda-Street, and
also how the regulatory system has inflated the cost of legal proceedings,
we will find at the end of the day that twenty four per cent is not excessive.
You’re joking. If that were the case, why should legislation have limited
the legal rate of interest to five or six per cent?
Because the legislator concerned was a poor economist.
So you want usury to be permitted henceforth?
And you want labor to be handed over without mercy to the tyranny of capital?
On the contrary I want the rate of interest always to be as low as possible.
That is why I urge lawmakers not to get involved in the matter.
But if you put no brakes on the greed of money-lenders, where in that case
will the exploitation of heads of families stop?
But if the law does not limit the power of capitalists where will the exploitation
of the workers stop?
So justify this anarchical and immoral doctrine of laisser-faire.
Yes, justify this “bankocratic” and
Malthusian doctrine of laisser-faire.
What a charming alliance….So tell me then, oh worthy and venerable conservative,
did you not applaud the famous proposal of M. Proudhon, regarding the gradual
abolition of interest?
I? I denounced it with the full force of my indignation.
You were wrong. You showed yourself to be utterly illogical in denouncing
it. What did M. Proudhon want? He wanted, by means of government action, to
reduce interest to zero.
This Utopian, however, was content to follow the early lead of your legislators.
The only difference is that instead of holding himself to your legal limit
of five or six percent, he demanded that the limit be lowered to zero.
Is there no difference, then, between these two limits? Certainly one can
fairly say to people: you will not lend at more than five or six per cent.
That is a reasonable, [p121] an honest level. To oblige them to lend for nothing,
however, is that not plundering them, the….Oh, those thieving socialists!
It makes me very angry; but it is you who brought them into existence, those
thieves. Socialism is only a radical extrapolation, though a perfectly logical
one, of your laws and regulations. You decided, in the interest of society,
that it should be the law which decides what happens to the estates left by
heads of family. Socialism decides, in the interests of society, that it will
be handed over by law to the community. You have decided that various industries
shall be run and their workforce paid by the state; socialism has decided that
all industries shall be run, and all their employees paid for, by the state.
You decided that interest would be limited to five or six per cent; socialism
decides that it shall be reduced to zero.
If you had the right to limit the rate of interest, that is to say partially
to suppress interest payments, socialism has a perfect right, it seems to me,
to suppress it totally.
This is incontestable. We have the right, by the very reckoning of our enemies,
and we use it to the full. So in what way are we blameworthy?
That conservatives show consideration towards capital, is understandable.
They live on it. They have felt themselves, however, the need to put limits
on capitalist exploitation; and
they have protected themselves against the most wily and greedy people in their
own gang. Capitalists have forbidden lending at very high interest by [ p122]
condemning it as usury. We in turn have arrived on the scene, however, and
recognizing the inadequacy of this law we have undertaken to cut out the evil
at its root and we have said: let the legal rate of interest henceforth be
lowered from five or six per cent. You protest! But if the capitalists have
been able legitimately to demand the abolition of gross usury, why should we
be committing a crime by demanding the suppression of petty usury? In what
way is the one more legitimate than the other?
Your claims are perfectly logical. The only thing is you would no more be
able to reduce the rate of interest to zero than the legislators of the Empire
were able to lower it to a maximum of five or six per cent. You would end up
like them causing it to rise further.
What do you know about it ?
I could invoke the history of all such laws setting a maximum rate and prove to
you consulting the evidence that each time people have wanted to limit the
price of things whether labor, capital or goods, they have invariably pushed
it up. I would like to get you to see, however, the why and wherefore of this
rise. I prefer to explain to you how it comes about that interest should naturally
be sometimes at ten, fifteen, twenty and thirty per cent, sometimes at five,
four, three and two per cent and even lower; and how it arises that no ad hoc
legislation can make it go below this.
Do you know what the price of things is made up of?
What you economists usually say [p123] is that the price of things is constituted
by their production costs.
And in what do production costs consist?
Again according to the Economist, production costs are made up from the labor
needed to produce a given merchandise and put it on the market.
Yes, but does the price at which things sell always represent exactly the
cost of the labor required, that is their costs of production?
No, not always. The costs of production represent what Adam Smith, rather
wisely in my opinion, has called the natural price of things. Now this same
Adam Smith notes that the price at which things sell, the market price, does
not always coincide with the natural price.
Yes, but Adam Smith also notes that the natural price is, as it were, the
central point around which the market price gravitates constantly, and towards
which it is irresistibly drawn back.
How does that happen?
When the price of a good exceeds its production costs, those who produce it
or who sell it realize an exceptional return. The lure of this unusual return
[p124] attracts competition and to the extent that this competition mounts,
the price falls.
Where does it all stop?
The limit is the costs of production. Sometimes also the price falls below
these costs. In this latter case, however, production ceasing to yield a sufficient
return, itself slows down, the market becomes depleted and prices rise again.
Thanks to this economic gravitation, prices tend always and irresistibly, to
attain their natural level; that is to say to represent exactly the amount
of labor the merchandise has cost. I will have occasion to come back later
to this law which is really the keystone of the economic edifice.
To resume: interest is constituted by the costs of production. The current
rate of interest gravitates continuously round these production costs.
And from what, may I ask, are the production costs of the rate of interest
From the labor costs and the risks of losses or damage, from which must be
From the labor costs and the risks of losses or damage.
This is what is not clear.
This will become clear shortly. First, what things does one lend?
Well, we lend things which possess some value.
Having a value means, as you know, being appropriate to the satisfaction of
one or other of the needs of man. How do things acquire such appropriateness?
Sometimes they possess it naturally; sometimes it is bestowed on them by labor.
The value which nature imparts to things is free. Nature works for nothing.
Only man has his labor paid for, or to put it better, exchanges his labor for
that of others. Things are exchanged in terms of their production costs, that
is to say according to the quantities of labor which they embody. These quantities
of labor are the foundation of their exchange value. The more one possesses
things which embody labor, the richer one is: in fact the better one can satisfy
one’s needs, either by consuming these things or exchanging them for other
consumable things. If we do not want to consume them right away we can either
store them or lend them.
Those things which embody useful labor are known as “capital”.
Capital is accumulated by savings.
Two motives drive man to save.
The first arises from the very nature of man. Working life scarcely stretches
beyond two thirds of the human lifetime. In his infancy and in his old age,
[p126] man consumes without producing. He is therefore obliged to put aside
a portion of his daily labor to bring up his family and to provide for his
own subsistence in his old age. Such is the first motive which leads man not
to consume immediately the whole value of his labor, in other words to accumulate
There is another motive as well. If need be, man can produce without capital.
Where might that be seen?
Do you think the first men were born with a bow and arrows, an axe and a plane
to hand? At a pinch we can produce without capital but not on any kind of scale.
In order to create many useful things in return for little effort, one needs
numerous, sophisticated tools; the production of certain things demands, moreover,
a lot of time. Now the producer cannot survive during this time unless he gets
an advance sufficient for subsistence, unless he has a certain capital at his
disposal. The individual therefore has an interest in putting by some of his
output, in accumulating capital, in order to be able to increase his production
while reducing his efforts, in order to render his labor more fruitful.
But this second motive which leads to the accumulation of capital, is far
less general than the first. It acts [p127] only on industrial entrepreneurs and those who
aspire to become such.
That is to say on everybody.
No! There are many laborers in manufacturing who do not dream of becoming
manufacturers, many farm laborers who have no ambition to run farms, many bank
clerks who do not aspire to set up a bank. And as industry develops on a bigger
scale, there will be fewer and fewer such aspirants.
In the present state of affairs, the manufacturing entrepreneurs are already in a minority. If they
were reduced just to their own resources, to the capital they are able to accumulate
themselves, this would be completely inadequate.
There is no doubt about that. If each manufacturing entrepreneur, manufacturer, farmer or merchant
found himself reduced to his own resources; if he had at his disposal only
his own capital, production would be endlessly stymied by lack of funds for
Whereas there would be in the hands of non-entrepreneurs, a considerable
quantity of inactive capital.
We have surmounted that difficulty by means of credit.
Say rather that we should have surmounted it. Unfortunately society has not
yet been able to bring credit under control.
Credit has taken care of itself since the beginning of the world. On the day
when, for the first time one man lent
to another some product of his own labor, credit was invented. Since that day
it has never stopped developing. Intermediaries have set themselves up between
the capitalists and the entrepreneurs. The numbers of these traders
in capital, bankers or business agents, have multiplied enormously. Stock exchanges
have been set up where one can sell capital wholesale and retail.
Ah, the stock exchange….that vile haunt of the pimps of capital, where they
gather to negotiate their foul purchases. When are we going to close these
temples of usury?
Then you had better close “le marché des Innocents (The Innocents’ Market), too,
since theft takes place there as well…Capital lending has been organized on
a huge scale and it is destined to develop much further once it has ceased
to be directly and indirectly hobbled.
Capital is accumulated in all its forms. In what form however is it accumulated
most willingly? In the form of durable objects, not cumbersome and easily exchanged.
Certain objects combine these qualities to a higher degree than all the others;
I mean precious metals. The price of precious metals has consequently become
the bench mark for all prices. When somebody lends his capital in a less durable
and more readily depreciating form, the borrower has to be paid compensation
for this difference in durability and tendency to depreciation. Furnishings
and houses [p129] are let out more expensively than a sum of money of the same
value. When someone lends capital in the form of precious metal, the price
of the loan takes the name interest, when the loan is transacted in another
form, when people are lending land, houses, furniture, the price is called
Interest is therefore the sum we pay for the use of a certain quantity of
labor accumulated in the most durable form, the least inconvenient and the
most freely exchangeable.
Sometimes this use of capital costs more, sometimes less, sometimes it is
free and sometimes the capitalists even pay a premium to those to whom they
entrust their capital.
Are you joking? Wherever can lenders be seen paying interest to their borrowers?
The world would be upside down!
Do you know on what conditions the first deposit banks which were established
in Amsterdam, Hamburg and Genoa took in capital deposits? In Amsterdam
the capitalists first of all paid a premium of ten florins when an account
was opened for them; next they paid an annual maintenance duty of one per cent.
Moreover the various monies at that time being subject to sizeable depreciations,
the bank levied a variable charge on the sum deposited. In Amsterdam this charge
was commonly 5%. Well, despite the harshness of these conditions, the capitalists
preferred to entrust their funds to a bank, rather than keeping them or lending
them directly to people who had need of them.
At that time interest was less.
That is right. Well, as in all eras, the man who has accumulated capital has
to engage in a certain supervision and to run certain risks if he looks after
it himself; since it can happen that it is less trouble and he runs fewer risks
if he lends it, interest can therefore, at any time, fall to zero or even below
You also understand, however, that if this negative portion of the costs of
production were to become very substantial; if holding capital were subject
to very great risks, such as a lack of security or excessive taxation; if lending
too offered only inadequate security, accumulation would come to a halt. People
would stop saving their funds if they could no longer count on consuming them
themselves, at least for the most part. Man would start living from day to
day, ceasing to care for his old age and for the future of his family, without
concerning himself any more with perfecting or expanding his production. Civilization
would regress rapidly under such a regime.
The weaker the negative tendency of interest, the more powerful is the stimulus
which drives man to save.
Let us have a look now at the positive aspect of interest.
This latter represents labor, damages and risk.
If you go to a certain amount of trouble, if you experience certain losses,
if you run certain risks in [p131] the keeping of your own capital, you are
routinely obliged to take even more care, to sustain even more damage and run
even more risks if you lend it.
In what circumstances are you, as a capitalist, disposed to lend out funds?
It is when you have no outlet for them at present. You lend money willingly
until the time comes when you need it yourself. Two borrowers, two men with
a present need for capital, approach you: with which one will you deal? You
will choose, will you not, the one who gives you the better financial and moral
guarantees, the richer and more upright of the two, the one who will reimburse
you the more reliably? Unless, however, his competitor happens to offer you
a higher price, in which case you will weigh the difference in risk and rates
offered and then decide. If you go for the second, it will be because the better
rate seems to you to balance and go a little beyond balancing, the difference
in financial and moral guarantees.
Thus the function of interest payments is to cover risks.
You lend your capital for a pre-arranged period; but are you quite sure you
will not need it during this period? Could not some accident come your way
obliging you to seek access to your savings? Does it not also happen, rather
frequently, that we lend funds which we need ourselves? In the first case the
harm is only potential; in the second it is real; but whether real or potential,
does it not require some payment?
Interest serves therefore to compensate for such losses.
You keep your wealth in a safe, or a barn or elsewhere. If you lend it out,
you will have to go to some trouble, that is do a certain amount of work, moving
it and having the loan regularized, as well inspecting the use to which the
loan will be put. These tasks must be paid for.
Interest therefore serves to pay for this labor.
A premium serving to cover risk, a compensatory payment to cover damages,
a cash sum to pay for work done: such are the positive elements in the production
costs of interest payments.
These three elements appear, in different degrees, in all loans made at interest.
We would suppress them if we socialized credit.
Really? Are there any risks? If you are a lender you can do as much as you
like, whether you are banker, a financial agent, a supplier of capital, or
a saver, but you will still always be at risk when you lend.
1.You are dealing with people of absolute integrity and perfect knowledge;
2. You are dealing with people whose work is not exposed, directly or indirectly,
to any chance catastrophe.
Short of this, you are running risks, and people will have to pay you a premium
to cover them.
I agree; but if industry were less [p133] risky, this premium could be considerably
Yes, considerably. So rather than setting up commercial banks, study the real
causes which make industry a risky undertaking and study also the causes which
change a population’s morality or lessen its knowledge.
This is a point of view which seems to me rather novel. Interest rates can
be lower, then, in a country which has high standards of morality and practical
knowledge than in a country where these qualities are scarce.
Say rather that they must be lower? Do you not lend more happily to an honest
man than to some fellow who is half rogue?
That goes without saying.
Well what you do, everyone else does too. The rate of interest rises in proportion
as morality declines. It also rises as knowledge is lessened or is mistaken.
Take these economic maxims to heart and know how to apply them opportunely.
The risks which undoubtedly constitute the most considerable element in the
costs of production of interest, can fall very significantly indeed, but I
doubt whether they can vanish completely.
If memory serves me well, one of the notables of the School of Saint-Simon,
M. Bazard, thought quite the opposite.
You are muddling things. Here is what M. Bazard wrote in his preface to the
French translation of Bentham’s Defense of Usury:
“…It is permissible to conclude that interest, as representing the rent
accruing to the tools of production, has a tendency to disappear completely,
and that of the elements which compose it today, the insurance premium is
the only one which has to remain, while itself diminishing, because of progress
in industrial organization, as compared to solely those risks which can be
regarded as beyond the foresight and wisdom of human beings”.
Like M. Bazard, I doubt whether the risks of lending can ever disappear completely;
for I do not think we can ever succeed in eliminating all the accidents, natural
or otherwise, which threaten capital lending. Those who use capital, those
who risk its destruction, will always have to pay an insurance premium to cover
But a mutual benefit insurance company….
No such company could prevent real risks from falling on people. You lend
money to a farmer whose work-sheds may [p135] be destroyed by a fire or whose
harvests may be ravaged by hail, or weevils, or some other thing. Consequently
you are running various risks. These risks must be covered, otherwise, you
do not lend.
But what if the farmer is insured against fire, hail and weevils?
He will still pay an annual premium on the capital you have lent him to increase
his equipment and expand his cultivation; only instead of paying you he will
pay it to underwriters. He will pay them less, since insurance is their speciality
and it is not yours; but he will pay it to them. The parts of the interest
he will pay annually to have the use of your capital are separate but they
will subsist on it nonetheless.
And the rent; do you agree with M. Bazard that it could disappear?
The rent, as defined by M. Bazard, is the portion of the production costs
of interest representing compensation for damages and loss and the payment
Can one relinquish capital, without experiencing any damage as a consequence
of its absence? Yes, if one is sure of not having need of it until the time
when it will be reimbursed, or
perhaps again of being able to recover it or realize it without loss. Will
these two circumstances happen one day in an orderly, normal, [p136] permanent
way? Will it turn out that all the capital used in production will be reimbursable
or realizable without loss at the behest of the lenders?
I would not be so sure. We should note that all the capital employed or even
employable in production, does not constitute all the capital at society’s
disposal. One generally lends only such capital as one does not need at present.
Well it could turn out that we do not lend any other kind of capital. In this
case we will not be undergoing any real risk by lending. Will it be feasible
likewise to eliminate potential damage? Will the development of capital one
day operate sufficiently perfectly that the exit of capital from production
will routinely be compensated for, by capital entry? I could not say but this
is possible. If the production and circulation of capital were not slowed and
harassed by a thousand obstacles, we would soon be fully informed in this regard.
There remain the payments remunerating the labor involved in the loan, the
trouble the lender has to go to in undertaking the loan. The work is real and,
like all real work, merits payment.
Since the invention and multiplication of banks this labor has been displaced
or split up. The capitalist who sends his money to a bank now incurs very little
inconvenience. On the other hand the bank which lends this money to an industrial
out serious work and accumulates very considerable costs. This work must be
paid for and these costs must be covered. Who should [p137] pay? Obviously
he who uses the capital, provided that he can pass them on to the consumer
of the goods produced with the aid of the capital.
Can it be supposed that these costs will ever disappear? No! While they can
fall as a result of the proliferation of specialist intermediaries working
in the field of capital lending, they could not be eliminated. A bank has to
pay and will always have to pay for its premises and pay its employees etc.
There at least, we see one part of the production costs of interest that is
This is most fortunate.
Why would you say this? Is not the society which consumes the products of
labor also interested in their selling at the lowest possible price? Well,
the interest on capital figures to a greater or lesser extent in the prices
of all things. If it did not exist or were smaller, one could buy these things
in exchange for a smaller amount of labor, because they would contain less
The general affluence of populations grows in proportion as interest rates
fall; it would be at its maximum if interest came to fall naturally to zero.
I grasp perfectly this analysis of the costs of the production of interest;
I see that interest is composed of real parts which must be covered, without
…the capitalists would not lend their capital, or if they were forced to lend
would cease to accumulate, [p138] would cease to save. Now since capital, with
the exception of precious metals and a few other goods, is essentially destructible,
the material capital of society today
– fields of wheat, pasturage, vineyards, houses, furniture, tools, provisions – would
just disappear in a very few years if we did not take care to renew them by
means of work and savings.
You have successfully conveyed my own thinking. I also understand that these
different parts of the costs of production tend naturally to fall. But is the
current rate of interest therefore always the exact representation of the elements
or costs of production of interest?
The same holds for capital as for everything. When people are offering more
capital than is demanded, the present rate of interest will fall. Even so,
it could never fall much below the production costs of interest, for we would
rather hang on to capital than lend it out at a loss. The price could rise
above these costs when demand for capital is greater than its supply. If the
disproportion becomes too marked, however, the capital attracted by the increasingly
large premium offered to it, will soon come flooding into the market and equilibrium
will reestablish itself. The market price will in this case converge once again
with the natural price.
This equilibrium establishes itself spontaneously, unless artificial obstacles
prevent its doing so. I will talk about these obstacles when we are considering
the banks. In
the main, however, it is on the costs of production that we must make an impact
if we have to act to lower [p139] the rate of interest in an ordered and lasting
way. The fact is that these costs could not be lowered, either in whole or
in part, by means of a law.
So here we are, back with the legal rate!
One can no more say to a capitalist: “You will not lend your capital at above
a maximum interest rate of five or six per cent”, than you can to a merchant:
“You will not sell your sugar for more than a maximum price of eight sous a
pound”. If at eight sous the merchant cannot cover the production costs of
the sugar and remunerate his own labor, he will stop selling sugar. Likewise,
if being subject to an interest rate maximum of five or six per cent, the capitalist
is not covering the risks of the loan, nor the damage resulting from going
a while without his capital, nor the work he had to put in to his lending,
he will cease lending.
But they do not stop. My usurer…
Or if he continues to lend, will he not be obliged to add to the interest
he is making, a premium for the extra risks he runs in breaking the law? This
is just what your usurer has not failed to do. If there were no law limiting
the rate of interest, he might have charged only twenty per cent or even less.
What? You think that the production costs of the interest on the capital lent
to my son really amount to twenty per cent?
Yes, I think so. There are great risks in lending to the youthful customers
of Breda Street. Will you not admit that these friendly discounters of the
right to an inheritance do not supply moral guarantees of a very substantial
All things considered, though, the laws against usury cannot have had really
catastrophic effects. They are so easily evaded.
Do not be so sure! Many men find themselves in a situation such that they
cannot borrow, short of paying heavy interest. Well, the law having banned
so-called usurious loans, the people who conform religiously to the present
law, whether it be good or bad, abstain from lending to these needy men. The
latter are reduced to approaching certain individuals not burdened with these
scruples, men who profit from being few in number and from the urgency of their
clients’ needs by raising the rate of interest yet again.
The law restricting the rate of interest establishes, you see, a real monopoly
in favor of the least scrupulous lenders, and to the detriment of the poorest
borrowers. It is thanks to this absurd law that the shady lenders or usurers
bleed dry the workers or shopkeepers who incur short-term debts, or traders
who have just experienced losses, and many others.
Do you now understand that political economy takes a stand, in the interests
of the masses, against this [p141] limitation on the right to lend, and undertakes
the defense of usury?
Yes, I understand. I see that the law does not prevent usury and that, on
the contrary, it makes it more bitter. I see that if this restrictive law were
to be abolished, the most needy borrowers would pay smaller premiums to the
That would be an immense benefit to the poorest classes in society. Let us
therefore demand the abolition of legal interest. It would be the best way
of getting the better of the usurers and of putting an end to usury.
 Molinari wrote the article on “Usure” (Usury) for the DEP (1852), vol. 2, pp. 790-95. The main article on “Intérêt” (Interest)
was written by Léon Faucher, ibid., vol. 1, pp. 953-70. Both referred to the attack on the charging
of interest made by P.-J. Proudhon and the exchange between him and Bastiat
in late 1849 which was published as Gratuité
du crédit. Discussion entre MM. Bastiat et Proudhon (Paris:
Guillaumin, 1850) where Proudhon argued for a Peoples Bank which would
lend at a maximum interest rate of 1%. It began as a reply to Bastiat’s
pamphlet on Capital
et rente which was published in February 1849. Molinari reviewed Bastiat’s
pamphlet critically in the JDE in
June 1849. He believed that Bastiat had ignored the opportunity costs and
the risks faced by those lending the capital.
 In 1789 Turgot wrote a Mémoire on
interest for the Constituent Assembly in which he advocated the complete
liberalization of the laws regarding the charging of interest. The Assembly
passed legislation legalizing the charging of interest but allowed the
state to set the maximum allowed rate. The Law of 1807 set the rate for
civil transactions at 5% and for commercial transactions at 6%.
 Prostitutes or "lorettes” frequented the quartier Bréda in the 9th
arrondissement in Paris during the July Monarchy. They got their name from
the church, the "Notre-Dame-de-Lorette” which was located there. Molinari
uses “Breda-Street” in the original.
 This is one of the half dozen or so references in the Soirées to the doctrine of “laissez-faire” or the idea that there should
be no government intervention in economic matters whatsoever. [See the
glossary entry on “Laissez-faire” and Molinari’s use of this expression
throughout Les Soirées.]
 GdM puts the made-up word “bancocratique” into the mouth of the Socialist.
It means “rule by the bankers.”
 The Socialist uses the expression “l’exploitation capitaliste” (capitalist
exploitation) which has become the standard expression to describe their
theory that workers do not receive the full value of their labour in the
form of wages, and are thus “exploited” by the capitalist. Socialists also
believe that workers are also exploited by other forms of “unearned income”
in the form of interest and rent. The Economists, on the other hand, also
had a theory of “exloitation” (although they did not call it that). They
believed that an individual’s property was unjustly taken from them in
the form of taxes, tithes, and tariffs and other interventions by the state.
They called this “legal plunder” (spoliation) to use the terminology developed
by Frédéric Bastiat. [See the glossary entry on “Plunder”.]
 The most notorious “lois de maximum”was enacted in 1793 by the Convention
to prevent price rises of food caused by war shortages, a failed harvest,
and inflation caused by the issuing of the Assignat paper currency. [See
the classic work by Andrew D. White, Fiat
Money Inflation in France, How it came, what it brought and how it ended (New
York: D. Appleton & Co., 1896). </title/1948>. See
also Charles Coquelin, “Assignats”, DEP, vol. 1, pp. 77-78.]
 In the Wealth
of Nations, Book I, chap. VII, Adam Smith states that "The actual price
at which any commodity is commonly sold is called its market price. It
may either be above, or below, or exactly the same with its natural price.
The market price of every particular commodity is regulated by the proportion
between the quantity which is actually brought to market, and the demand
of those who are willing to pay the natural price of the commodity, or
the whole value of the rent, labour, and profit, which must be paid in
order to bring it thither.” </title/220/217397/2312908>.
 Molinari has an extended discussion of the tendency of market prices
to approach the natural price in Soirée 12 where he discusses his theory
 Here Molinari is expounding a “labor theory of value”which was very much
part of the classical school’s theory of economics. It was taken up later
by Karl Marx as the justification for the kind of redistribution of profit
and interest which the Socialist here is demanding. At the very time Molinari
is writing the Soirées Bastiat
was trying to reformulate the classical theory to avoid these difficulties
by setting the idea of the mutual exchange of “services” at the heart of
production and exchange rather than “labor”. These services were “estimated”
or valued by each individual consumer and producer according to their particular
needs and situation, thus hinting at a “subjectivist”or “Austrian” view
of the matter which was to emerge in the 1870s during the so-called “Marginal
Revolution.” [See Bastiat’s discussion in Economic
Harmonies the first part of which was published in early 1850, chap. 5 “On
Value,” pp. 103 ff. (FEE edition).]
 Molinari uses the word entrepreneur many times in the Soirées, most without any qualification, as in simply
"entrepreneur", but also many times with some qualification or
description, as in "entrepreneur d'industrie” (industrial entrepeneur)
"entrepreneur d'education” (entrepreneur in the education business).
We will indicate in a footnote when this is the case. [See the glossary entry
"Entrepreneur” and the different kinds of entrepreneurs Molinari discusses.]
 “Entrepreneurs de production” (manufacturing entrepreneurs). [See the
glossary entry "Entrepreneur” and the different kinds of entrepreneurs
 “Entrepreneur de production” (manufacturing entrepreneur). [See the glossary
entry "Entrepreneur” and the different kinds of entrepreneurs Molinari
 “Non-entrepreneurs” is the original French which requires no translation.
[See the glossary entry "Entrepreneur” and the different kinds of
entrepreneurs Molinari discusses.]
 The "marché des Innocents” was a vegetable market established in
1789 in central Paris on the site of the Cemetery of the Innocents. It
was expanded under Napoleon in 1808 and eventually became the central food
market for Paris (Les Halles). When Molinari was writing, an architectural
competition was underway in order to design a much larger structure to
house the markets. Construction began in 1852.
 [See the article on “Banque”by Charles Coquelin in DEP, vol. 1, pp. 107-45, especially section 4 “Revue historique - Les
banques de dépôt: Venise, Gênes, Amsterdam, Hambourg”, pp. 120 ff.]
 The expression Molinari puts into the mouth of the Socialist is “en organisant
le crédit” (by organizing credit), that is by having the state provide
credit at a subsidized level. For many working men and women a common source
of small loans was the government monopoly pawn shops or "monts-de
piété". The name is a corruption of the Italian "monte di pietà”
"mercy loan” which were bodies established in the 15th century to provide
loans to the poor. The monts-de piété were formerly established in France
in 1777 as a state privileged institution with a monopoly of the pawn broking
business which could lend at 10% interest. During the inflation of the early
part of the French Revolution the monts-de piété were forced to close in
1795, only to reopen in 1797, and were re-regulated under the Empire in year
XII. In 1844 the monts-de piété of Paris lent fr. 25.6 million. By 1847 there
were 45 monts-de piété across France which loaned a total of fr. 48.9
million. Horace Say described them as "ne sont autre chose que des banques
privilégiées de prêts sur gages” (nothing more than state privileged banks
in the pawn broking business). [See Horace Say,
"Monts-de piété,” DEP,
vol. 2, pp. 229-35.]
 Saint-Armand Bazard (1791-1832) was a member of Saint-Simonian school
of socialism. [See the glossary entry on “Saint-Simon” and “The Socialist
 Bazard translated Bentham's Defence
of Usury (1787) in 1828. His edition also included Turgot's Mémoire
sur les prêts d'argent (1789).
- Preface to the Défence
de usure by Jeremy Bentham. Mélanges
d’Économie politique, T. II, p. 518, Édition Guillaumin.
 Molinari has his own theory of rent which he presents in the final 12th
Soirée and in his Cours
d’économie politique in 1855).
 This is the first hint by Molinari that time might be a factor in the
price of interest but he does not develop it further. The idea of “time
preference”, that one places a higher value on goods or money at the present
time than one does on the same goods or money at some future time, was
an insight of the Austrian school later in the 19th century. He is still
trying to explain interest with reference primarily to labor costs, although
he has also introduced Turgot’s ideas of opportunity cost and risk as additional
factors in determining the amount of interest charged.
d’industrie”. [See the glossary entry "Entrepreneur” and the different
kinds of entrepreneurs Molinari discusses.]
 [See the discussion in Soirée 9 below.]
 Molinari is arguing that the young men who expect to inherit as a right
(“le droit à l’héritage”) can go to lenders who would be willing to lend
them money in anticipation of their inheriting their father’s estate, but
only at a high interest rate or “discount”. [See the previous footnote
on the difference between “le droit à l’héritage” (the right to an inheritance)
and “le droit de l’héritage” (the right to bequeath one’s estate to whomever