CH. 23

NOTES ON MERCANTILISM, ETC. 351

the sway of the classical school of economic theory andthat of certain religions. For it is a far greater exerciseof the potency of an idea to exorcise the obvious than tointroduce into men’s common notions the recondite andthe remote.

v

There remains an allied, but distinct, matter wherefor centuries, indeed for several millenniums, en-lightened opinion held for certain and obvious adoctrine which the classical school has repudiated aschildish, but which deserves rehabilitation and honour.

I mean the doctrine that the rate of interest is not self-adjusting at a level best suited to the social advantagebut constantly tends to rise too high, so that a wiseGovernment is concerned to curb it by statute andcustom and even by invoking the sanctions of the morallaw.

Provisions against usury are amongst the mostancient economic practices of which we have record.The destruction of the inducement to invest by anexcessive liquidity-preference was the outstanding evil,the prime impediment to the growth of wealth, in theancient and medieval worlds. And naturally so, sincecertain of the risks and hazards of economic life dim-inish the marginal efficiency of capital whilst othersserve to increase the preference for liquidity. In aworld, therefore, which no one reckoned to be safe, itwas almost inevitable that the rate of interest, unless itwas curbed by every instrument at the disposal ofsociety, would rise too high to permit of an adequateinducement to invest.

I was brought up to believe that the attitude of theMedieval Church to the rate of interest was inherentlyabsurd, and that the subtle discussions aimed at dis-tinguishing the return on money-loans from the returnto active investment were merely jesuitical attempts tofind a practical escape from a foolish theory. But I