In Medio Stat Virtus: An Alternative View of Usury in Adam Smith's Thinking
History of Political Economy 35:1, 2003
Posted: 17 Dec 2008
Date Written: jan 15, 2003
How can Adam Smith, lover of markets, be in favor of usury laws? The answer is in The Theory of Moral Sentiments. Smith's view of the world is consistent: extremes are dangerous because they are too far away to be seen and known; a middle position is preferred to an extreme. Moreover, Smith's working hypothesis is systematic biased information, which leads to systematic errors. By using the preference toward the median position and systematic bias, it is possible to make sense of Smith's position on usury and the market: they both are ways to follow the general rule 'in medio stat virtus', and to maintain an orderly good society.
Keywords: Adam Smith, Usury Laws, Systematic Bias
JEL Classification: B12
Suggested Citation: Suggested Citation