Prodigals and projectors: An economic history of usury laws in the United States from colonial times to 1900

With a few notable exceptions, such as Friedman (1963) and Glaeser and Scheinkman (1998), historians and economists writing about the financial history of the United States have ignored usury laws. Many of the classic financial histories of the United States do not even mention them. Yet there are several good reasons for studying usury laws. For one thing usury laws have been, arguably, the most common form of economic regulation. Usury is mentioned in the Bible and the Koran. There were usury laws in ancient Rome, although not in classical Athens (Finley 1953). And, the medieval canonists developed a detailed theory of usury. Usury laws have not been confined to countries influenced by European cultural traditions. In India, during the Buddhist period, it was recommended that interest be limited to 15 percent per year on secured loans and to 60 percent per year on unsecured loans (Seth 1955, 6). In traditional China the maximum rate was 3 percent per month, and the penalty for charging more was 40 to 100 blows with the light cane (Alabaster 1899, 550–51). Usury laws, moreover, have been the subject of classic works of literature, such as The Merchant of Venice. The usury laws in England were repealed in 1854 (although legislation protecting borrowers was reinstated at the turn of the century), but in the United States they were continued in many U.S. states down to the present day.