Bentham on the liberty of contracts and lending money at interest (1787)

Jeremy Bentham

The English utilitarian philosopher Jeremy Bentham (1748-1832) defends the practice of lending money at interest (“usury”) as just another example of consenting adults engaging in their legal right to make contracts with each other:

Among the various species or modifications of liberty, of which on different occasions we have heard so much in England, I do not recollect ever seeing any thing yet offered in behalf of the liberty of making one’s own terms in money-bargains. From so general and universal a neglect, it is an old notion of mine, as you well know, that this meek and unassuming species of liberty has been suffering much injustice….

In a word, the proposition I have been accustomed to lay down to myself on this subject is the following one, viz. that no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered, with a view to his advantage, from making such bargain, in the way of obtaining money, as he thinks fit: nor, (what is a necessary consequence) any body hindered from supplying him, upon any terms he thinks proper to accede to.

Bentham turns his defence of the specific economic activity of lending money at interest (commonly criticised as “usury”) into a more general defence of the right of adults (any “man of ripe years and of sound mind”) to make contracts with other consenting adults without being “fettered” by others. Here Bentham lumps together several supposed offences such as “usury” (lending at unreasonably high interest), “champerty” (an agreement in which a third person with no direct interest in a law suit finances the suit in the hope of sharing in any property settlement), and “maintenance” (another form of champerty), which he believes are examples of unjustified interference in the right of individuals to enter into legal contracts with each other. He thought it was up to those who wanted to prevent or “fetter” such contracts and transactions to show how they were exceptions to the general principle of freedom contract. Otherwise he thought, “that no man of ripe years and of sound mind, acting freely, and with his eyes open, ought to be hindered … from making such bargain … as he thinks fit.”