If it be then allowed, that the loan upon interest is a good political institution, relative to the present situation of European societies, the next question is, to determine a proper standard for it, so as to avoid the oppression of usurers, on one hand, and on the other, to allow such a reasonable profit to the lender, as may engage him to throw his money into circulation for the common advantage. This question leads us directly to the examination of the principles which regulate the rate of interest; and if we can discover a certain rule, arising from the nature of things, and from the principles of commerce, which may direct a statesman how to establish a proper regulation in that matter, we may decide with certainty concerning the exact limits, between unlawful and pinching usury, exacted by a vicious set of men, who profit of the distress of individuals; and that reasonable equivalent which men have a right to expect for the use of their money, lent for carrying on the circulation of trade, and the employment of the lower classes of a people, who must subsist by their industry or labour. ------------------------------------------------------------------------ CHAP. IV. _Of the_ Principles _which regulate the Rate of Interest_. We must now recal to mind the principles of demand and competition, so fully deduced in the second book, in order to answer the following question, viz. What is the principle which regulates, at all times, the just and adequate rate of interest for money, in any particular state? I answer, That at all times, there is in every state a certain number of persons who have occasion to borrow money, and a certain number of persons who desire to lend: there is also a certain sum of money demanded by the borrowers, and a certain sum offered to be lent. The borrowers desire to fix the interest as _low_ as they can; the lenders seek, from a like principle of self-interest, to carry the rate of it as high as _they_ can. From this combination of interests arises a double competition, which fluctuates between the two parties. If more is demanded to be borrowed, than there is found to be lent, the competition will take place among the borrowers. Such among them who have the most pressing occasion for money, will offer the highest interest, and will be preferred. If, on the contrary, the money to be lent exceeds the demand of the borrowers, the competition will be upon the other side. Such of the lenders, who have the most pressing occasion to draw an interest for their money, will offer it at the lowest interest, and this offer will be accepted of. I need not launch out into a repetition of what has been said concerning the influence of double competition, in fixing the price of commodities: I suppose those principles understood, and well retained, by those who read this chapter; and confine myself here to what is peculiar to the demand for money.