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Proudhon vs Bastiat on Justice of Charging Interest

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Anenome Posted: Sat, Jan 26 2013 4:23 PM

Freakin' Proudhon man.

You can see the divide here that will widen into the left and right camps of later libertarians and anarchs, the one with sound economic theory ala Bastiat, and the other where questions of social justice combine with unsound economic assertions and "glossilizations" (to coin a term, meaning to simply gloss over the details) to produce bad economic prescriptions, ala Proudhon.

"Overview of the Debate

The debate covers a lot of ground, sometimes ranging rather far afield, but the core points may be summarised as follows:

Bastiat’s position is that lending is a useful service to the borrower; from the standpoint of justice, then, it deserves to be paid, while from the standpoint of utility it had better be paid if we don’t wish to suppress the incentive to keep providing such services. Interest is the payment for the service provided by the lender.

Moreover, in addition to the direct benefit represented by the loan, the borrower receives a further, indirect benefit: the payment of interest contributes to the accumulation of capital; as the total amount of capital increases, its price falls, and so the interest rate likewise falls and the financial position of the borrowers improves, enabling them in the longer term to acquire capital themselves.

Proudhon thinks Bastiat has exaggerated the indirect benefits of interest; look around at the actual plight of debtors, he suggests, and this ever-rising status is difficult to detect. Moreover, according to Proudhon, if the price of goods is Wages plus Interest, but workers receive only Wages, then workers can never buy all the goods they produce – which is not only unfair to the workers, but means the system is inherently unstable, implying eventual starvation for the workers and bankruptcy for the employers.

Nevertheless, Proudhon agrees with Bastiat that the practice of charging interest has historically been, on the whole, beneficial. But this concession comes with two qualifications...."


Autarchy: rule of the self by the self; the act of self ruling.
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cab21 replied on Sat, Jan 26 2013 5:53 PM

if people are just going to take the point of view of the deptor, why pay back a loan at all? surely that helps someone if they just get free money.

that someone should lose wealth by lending does not seem reasonable.

a fee can be much higher than a interest payment, so the only way to counter that is to ask the lender to not charge anything at all and lose wealth in the deal.

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Bogart replied on Sun, Jan 27 2013 3:18 PM

The whole point is that money like any other good, in fact more so than any other good, has time value.  Money now is worth more than money in the future.  So if you buy money now from me, I am either giving you a gift or charging interest.  Then Bastiat's argument make more sense as a transaction to take place at all must make both parties better off otherwise it will not happen.  The other fellow attempts to argue against this using absurd circumstances that most people will never face that are either instances of fraud or instances where social convention would deem the agreement immoral.  And if both were true anarchists then any agreement to be valid would be up to social norms and what not.  These determinations would best be done by an arbitrator versus some agent of force.

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thelion replied on Fri, Feb 8 2013 3:38 PM

Proudhon: Y'know the bible says you mustn't charge interest ... or you go to hell. People who charge interest are no good that's what I think. Look the bible agrees with me too.

Bastiat: Who cares?

Proudhon: I thought you did, being Catholic and all that. It says right here: blah blah blah you can't interest blah blah blah. You disagree with the bible!

Bastiat: Yes.

Proudhon: You can't disagree with it, because you're not a socialist ... and if you were, then you'd agree with socialists that interest is not allowed!

Bastiat: You don't have any arguments, and neither does the bible in this case. So why should I agree? And economics DOES explain that interest is payment for time. I thought we were having a debate.

Proudhon: Payment for time ... that's USURY!

Bastiat: Yes. What about it? Are you saying time foregone is not valuable?

Proudhon: ... I HATE YOU!   :(   end of correspondance

Bastiat: So much for people without arguments. They get angry when contradicted.


There is no such thing as right and left libertarians. Just economists and socialists of different kinds. Some left libertarians who actually do know economics mislabel themselves for whatever reason.

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