copias

J Bus Ethics (2012) 106:383–387
DOI 10.1007/s10551-011-1003-x

Money Does Not Grow on Trees: An Argument for Usury
Alyssa Labat • Walter E. Block

Received: 10 June 2011 / Accepted: 9 August 2011 / Published online: 25 August 2011
Ó Springer Science+Business Media B.V. 2011

Abstract Usury, charging a higher interest rate than
thought by some to be ‘‘fair,’’ has had and still has, a badpress. Historically, it was heavily punished. It was then,
and all too often is now, thought to be exploitative. Yet, as
even the most economically unsophisticated must realize,
both sides of these transactions must necessarily gain at
least in the ex ante sense, otherwise one or the other would
refuse to enter into the deal in the first place. The present
paper is an attempt to justify thepractice of charging
interest on loans, at any rate agreeable to both borrowers
and lenders.
Keywords Usury Á Free enterprise Á Economic freedom Á
Borrowing Á Lending
JEL classification

E4 Á E51

Introduction1
My grade school years were filled with many memorable
achievements—and one ‘‘felony’’ my mother will never
stop teasing me about, even to this day. I always had my
schoolsupplies available and was willing to share them
with the other children when they forgot theirs. However,
in fourth grade, I began to realize that some of my peers did
not always care for my school supplies as I did and would
often lose them or simply never return them. I felt bad

A. Labat Á W. E. Block (&)
Economics Department, Joseph A. Butt, S.J. College of
Business, Loyola University NewOrleans, 6363 St. Charles
Avenue, Miller Hall 318, Box 15, New Orleans, LA 70118, USA
e-mail: wblock@loyno.edu
URL: http://www.walterblock.com/

asking my mother for more pencils and pens every week.
So, I spoke with some of my very responsible friends and
we decided to loan our school supplies for a fee. When the
next student asked to borrow something we explained the
new terms: ‘‘Mostitems cost a penny per day, except
scissors which are a nickel a day, and your name will be
kept in a book until payment and return of the school
supplies borrowed.’’ Being young, innocent children, we
did not even have specific consequences and actions of
recourse established for what would happen if the terms
were not met. And luckily, this system worked magnificently. My supplies werereturned more quickly than ever
before and my friends and I made a few extra cents. That
is, until a teacher saw our actions and the exchange of
money. We explained, and she immediately confiscated our
earnings for the day before sending us to the Principal’s
office. This was a day that would forever live in infamy in
my little world. That was the day I was forced to miss
‘‘Good Behavior Day’’ andwas forever branded a loan
shark.
But, what exactly was so wrong with this practice? And
how was the term loan shark even applicable, as we did not
threaten acts of violence? I understand now that as children
the act was illegal, but how can it be when one is a consenting adult? In any case, even as grade schoolers both
parties to these exchanges gained, otherwise one or the
other would haverefused to engage in these deals.
In second section of this paper, we discuss the ‘‘History
of Usury’’. Third section is devoted to ‘‘Payday Loans’’.
The fourth section focuses on ‘‘An objection’’ to our thesis.
Subject of the fifth section is ‘‘Economics’’. Sixth section
discusses the ‘‘Conclusion’’.
1

This introduction was written, mainly, by the first mentioned co
author of thisarticle.

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History of Usury
A brief look at the history of usury reveals that it is a
subject involving religion, morality, conflict, and even
claims that the act should be penalized by death. It is also
an economic contract without clear definition, as some
deem loaning money with low or no interest rates acceptable while others claim ‘‘when gain and fruit is sought,
without...