The Turgot Collection

Extracts from
“Paper on Lending at Interest”

The next selection shows Turgot’s strong opposition to laws that limit or prohibit interest on loans. Anti-usury laws show no awareness of the importance of risk. In order to have economic progress, enterprises requiring large amounts of capital are necessary. Many of these enterprises are risky; if lenders are not allowed to derive a profit, they have no incentive to lend. The very fact that usury laws are always evaded shows their necessity. An activity that invariably takes place cannot reasonably be said to be wrong. Further, since lenders own the money they lend, they have the right to come to whatever terms they are able to secure. In the course of arguing against usury, Turgot defends an unusual interpretation of the then-common view that an exchange involves an equality of value. He takes this “equality” to be the fact that each person in an exchange values what he gains more than what he gives up. Although he retains the term “equality,” he in fact abandons its usual interpretation.