English Theories of Interest in the Seventeenth Century reconsidered

During the two centuries since Adam Smith launched his attack on the Mercantile system, outstanding contributions to our knowledge of seventeenth-century thought on problems of money, trade and interest, have been made by historians of economic thought of the neo-classical school, for instance Viner and Heckscher. Explicitly or implicitly they have considered the work of the seventeenth century in the light of their correctness according to classical and neo-classical theory. The Keynesian revolution neessarily required a re-assessment in the light of new criteria and Keynes himself provided an initial and highly controversial essay in re-assessment in Chapter 23 of The General Theory of Employment, Interest and Money. I am not concerned in this study directly with these questions; rather it is a tentative attempt to look at English seventeenth-century theories of interest, for there were more than one, in the light of two facts. The first is that discussions of problems both of money and foreign trade had been going on intermittently over some centuries without reference to the possible role of the rate of interest as an economic phenomenon, except to a limited extent in connection with the concealed interest-payments on loans made through foreign exchange bills, the so-called ‘dry exchange’.