The Morality of Moneylending: A Short History - The Objective Standard

Author’s note: This essay is partially based on my lecture “Money-Lending: Its History and Philosophy,” delivered at Second Renaissance Conferences, Anaheim, California, July 2001.

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It seems that every generation has its Shylock—a despised financier blamed for the economic problems of his day. A couple of decades ago it was Michael Milken and his “junk” bonds. Today it is the mortgage bankers who, over the past few years, lent billions of dollars to home buyers—hundreds of thousands of whom are now delinquent or in default on their loans. This “sub-prime mortgage crisis” is negatively affecting the broader financial markets and the economy as a whole. The villains, we are told, are not the borrowers—who took out loans they could not afford to pay back—but the moneylenders—who either deceived the borrowers or should have known better than to make the loans in the first place. And, we are told, the way to prevent such problems in the future is to clamp down on moneylenders and their industries; thus, investigations, criminal prosecutions, and heavier regulations on bankers are in order.

Of course, government policy for decades has been to encourage lenders to provide mortgage loans to lower-income families, and when mortgage brokers have refused to make such loans, they have been accused of “discrimination.” But now that many borrowers are in a bind, politicians are seeking to lash and leash the lenders.

This treatment of moneylenders is unjust but not new. For millennia they have been the primary scapegoats for practically every economic problem. They have been derided by philosophers and condemned to hell by religious authorities; their property has been confiscated to compensate their “victims”; they have been humiliated, framed, jailed, and butchered. From Jewish pogroms where the main purpose was to destroy the records of debt, to the vilification of the House of Rothschild, to the jailing of American financiers—moneylenders have been targets of philosophers, theologians, journalists, economists, playwrights, legislators, and the masses.

Major thinkers throughout history—Plato, Aristotle, Thomas Aquinas, Adam Smith, Karl Marx, and John Maynard Keynes, to name just a few—considered moneylending, at least under certain conditions, to be a major vice. Dante, Shakespeare, Dickens, Dostoyevsky, and modern and popular novelists depict moneylenders as villains.

Today, anti-globalization demonstrators carry signs that read “abolish usury” or “abolish interest.” Although these protestors are typically leftists—opponents of capitalism and anything associated with it—their contempt for moneylending is shared by others, including radical Christians and Muslims who regard charging interest on loans as a violation of God’s law and thus as immoral.

Moneylending has been and is condemned by practically everyone. But what exactly is being condemned here? What is moneylending or usury? And what are its consequences?

Although the term “usury” is widely taken to mean “excessive interest” (which is never defined) or illegal interest, the actual definition of the term is, as the Oxford English Dictionary specifies: “The fact or practice of lending money at interest.” This is the definition I ascribe to the term throughout this essay.

Usury is a financial transaction in which person A lends person B a sum of money for a fixed period of time with the agreement that it will be returned with interest. The practice enables people without money and people with money to mutually benefit from the wealth of the latter. The borrower is able to use money that he would otherwise not be able to use, in exchange for paying the lender an agreed-upon premium in addition to the principal amount of the loan. Not only do both interested parties benefit from such an exchange; countless people who are not involved in the trade often benefit too—by means of access to the goods and services made possible by the exchange. . . .


Buchan, James. Frozen Desire: The Meaning of Money. New York: Farrar, Straus & Giroux, 1997.

Cohen, Edward E. Athenian Economy and Society. Princeton: Princeton University Press, 1992.

Davies, Glyn. A History of Money. Cardiff: University of Wales Press, 1994.

Ferguson, Niall. The Cash Nexus. New York: Basic Books, 2001.

Grant, James. Money of the Mind. New York: The Noonday Press, 1994.

Homer, Sidney. A History of Interest Rates. New Brunswick: Rutgers University Press, 1963.

Le Goff, Jacques. Your Money or Your Life. New York: Zone Books, 1988.

Lewis, Michael. The Money Culture. New York: W. W. Norton & Company, 1991.

Lockman, Vic. Money, Banking, and Usury (pamphlet). Grants Pass, OR: Westminster Teaching Materials, 1991.

Murray, J. B. C. The History of Usury. Philadelphia: J. B. Lippincott & Co., 1866.

Sobel, Robert. Dangerous Dreamers. New York: John Wiley & Sons, Inc., 1993.

von Böhm-Bawerk, Eugen. Capital and Interest: A Critical History of Economical Theory. Books I–III. William A. Smart, translator. London: Macmillan and Co., 1890.


Acknowledgments: The author would like to thank the following people for their assistance and comments on this article: Elan Journo, Onkar Ghate, Sean Green, John D. Lewis, John P. McCaskey, and Craig Biddle.

1 Aristotle, The Politics of Aristotle, translated by Benjamin Jowett (Oxford: Clarendon Press, 1885), book 1, chapter 10, p. 19.

2 Plutarch, Plutarch’s Morals, translated by William Watson Goodwin (Boston: Little, Brown, & Company, 1874), pp. 412–24.

3 Lewis H. Haney, History of Economic Thought (New York: The Macmillan Company, 1920), p. 71.

4 Anthony Trollope, Life of Cicero (Kessinger Publishing, 2004), p. 70.

5 William Manchester, A World Lit Only by Fire (Boston: Back Bay Books, 1993), pp. 5–6.

6 Glyn Davies, A History of Money: From Ancient Times to the Present Day (Cardiff: University of Wales Press, 1994), p. 117.

7 Ezekiel 18:13.

8 Deuteronomy 23:19–20.

9 Luke 6:35.

10 Jacques Le Goff, Your Money Or Your Life (New York: Zone Books, 1988), p. 26.

11 Edward Henry Palmer, A History of the Jewish Nation (London: Society for Promoting Christian Knowledge, 1874), pp. 253–54. And

12 Byrne is here quoting Jacob Twinger of Königshofen, a 14th-century priest.

13 Joseph Patrick Byrne, The Black Death (Westport: Greenwood Press, 2004), p. 84.

14 Sidney Homer, A History of Interest Rates (New Brunswick: Rutgers University Press, 1963), p. 71.

15 Sermon by Jacques de Vitry, “Ad status” 59,14, quoted in Le Goff, Your Money Or Your Life, pp. 56–57.

16 See Thomas Aquinas, Summa Theologica, part II, section II, question 78, article 1.

17 Ibid.

18 Frank Wilson Blackmar, Economics (New York: The Macmillan Company, 1907), p. 178.

19 Le Goff, Your Money Or Your Life, pp. 33–45.

20 Jeremy Rifkin, The European Dream (Cambridge: Polity, 2004), p. 105.

21 Le Goff, Your Money Or Your Life, p. 30.

22 Davies, A History of Money, p. 154.

23 Ibid., pp. 146–74.

24 Robert Burton, Sacred Trust (Oxford: Oxford University Press, 1996), p. 118.

25 Ibid., pp. 118–20.

26 Homer, A History of Interest Rates, p. 73.

27 As Blackstone’s Commentaries on the Laws of England puts it: “When money is lent on a contract to receive not only the principal sum again, but also an increase by way of compensation for the use, the increase is called interest by those who think it lawful, and usury by those who do not.” p. 1336.

28 Homer, A History of Interest Rates, pp. 72–74.

29 Le Goff, Your Money Or Your Life, p. 74.

30 Ibid., pp. 47–64.

31 Dante Alighieri, The Inferno, Canto XVII, lines 51–54.

32 Dorothy M. DiOrio, “Dante’s Condemnation of Usury,” in Re: Artes Liberales V, no. 1, 1978, pp. 17–25.

33 Davies, A History of Money, pp. 177–78.

34 Paul M. Johnson, A History of the Jews (New York: HarperCollins, 1988), p. 242.

35 Eugen von Böhm-Bawerk, Capital and Interest: A Critical History of Economical Theory (London: Macmillan and Co., 1890), translated by William A. Smart, book I, chapter III.

36 Charles Dumoulin (Latinized as Molinaeus), Treatise on Contracts and Usury (1546).

37 von Böhm-Bawerk, Capital and Interest, book I, chapter III.

38 Sir Simonds d’Ewes, “Journal of the House of Commons: April 1571,” in The Journals of all the Parliaments during the reign of Queen Elizabeth (London: John Starkey, 1682), pp. 155–80. Online:

39 Francis Bacon, “Of Usury,” in Bacon’s Essays (London: Macmillan and Co., 1892), p. 109.

40 Davies, A History of Money, p. 222.

41 Ibid., p. 222, emphasis added.

42 James Buchan, Frozen Desire (New York: Farrar, Strauss & Giroux, 1997), p. 87 (synopsis of the play).

43 William Shakespeare, The Merchant of Venice, Act 1, Scene 2.

44 Ibid., Act 3, Scene 2.

45 Ibid., Act 1, Scene 3.

46 von Böhm-Bawerk, Capital and Interest, book I, chapter III.

47 Ibid., book I, p. 56.

48 Ibid., book I, chapter IV.

49 Jeremy Bentham, A Defence of Usury (Philadelphia: Mathew Carey, 1787), p. 10.

50 Jeremy Bentham, The Works of Jeremy Bentham, edited by John Bowring (Edinburgh: W. Tait; London: Simpkin, Marshall, & Co., 1843), p. 501.

51 Ibid., p. 493.

52 Anonymous, Letters on Usury and Interest (London: J. P. Coghlan, 1774).

53 Ibid.

54 Adam Smith, The Wealth of Nations (New York: Penguin Classics, 1986), p. 456.

55 Ibid.

56 For a thorough rebuttal of Marx’s view, see von Böhm-Bawerk, Capital and Interest, book I, chapter XII.

57 Gabriel Le Bras, quoted in Le Goff, Your Money Or Your Life, p. 43.

58 Johnson, A History of the Jews, p. 351.

59 Fyodor M. Dostoevsky, The Brothers Karamozov, translated by Constance Garnett (Spark Publishing, 2004), p. 316.

60 James Grant, Money of the Mind (New York: Noonday Press, 1994), p. 79.

61 Ibid., pp. 91–95.

62 Ibid., p. 83.

63 John Maynard Keynes, “Economic Possibilities for our Grandchildren,” in Essays in Persuasion (New York: W. W. Norton & Company, 1963), pp. 359, 362. Online:

64 Franklin D. Roosevelt, First Inaugural Address, March 4, 1933,

65 To understand the link between 1930s regulations and the S&L crisis, see Edward J. Kane, The S&L Insurance Mess: How Did it Happen? (Washington, D.C.: The Urban Institute Press, 1989), and Richard M. Salsman , The Collapse of Deposit Insurance—and the Case for Abolition (Great Barrington, MA: American Institute for Economic Research, 1993).

66 “Mayday for Payday Loans,” Wall Street Journal, April 2, 2007,

67 “U.S. Moves Against Payday Loans, Which Critics Charge Are Usurious,” Wall Street Journal, January 4, 2002,

68 “Mayday for Payday Loans,” Wall Street Journal.

69 Christine Pelisek, “Shylock 2000,” LA Weekly, February 16, 2000,

70 Wall Street Journal, August 2, 2007, p. A4.

71 For an excellent presentation of this theory of interest, see von Böhm-Bawerk, Capital and Interest, book II.

72 For a discussion of the productive nature of financial activity see my taped course, “In Defense of Financial Markets,”

73 For more on Objectivism, see Leonard Peikoff, Objectivism: The Philosophy of Ayn Rand (New York: Dutton, 1991); and Ayn Rand, Atlas Shrugged (New York: Random House, 1957) and Capitalism: The Unknown Ideal (New York: New American Library 1966).

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