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A Credit Market à la David Hume

Author

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  • Menahem E. Yaari

    (Department of Economics, Hebrew University of Jerusalem)

Abstract

In Book III of his Treatise of Human Nature, David Hume considers the following simple interaction: "I suppose a person to have lent me a sum of money, on condition that it be restor'd in a few days, and also suppose, that after the expiration of the term agreed on, he demands the sum" and Hume asks: "What reason or motive have I to restore the money?" [1740, p. 479] The answer, he concludes, must be "that the sense of justice and injustice [which is the motive for repaying the loan] is not deriv'd from nature, but arises artificially, tho' necessarily, from education and human conventions." [p. 483] It is my purpose in this essay to offer formal (and modern) underpinnings for Hume's argument. I shall do so in the context of Hume's own example, cited above, where the interaction being considered is one between lender and borrower.

Suggested Citation

  • Menahem E. Yaari, 2001. "A Credit Market à la David Hume," Economics Working Papers 0001, Institute for Advanced Study, School of Social Science.
    • Handle: RePEc:ads:wpaper:0001
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    References listed on IDEAS

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    1. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
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    More about this item

    Keywords

    lending; borrowing; credit market;
    All these keywords.

    JEL classification:

    • A1 - General Economics and Teaching - - General Economics
    • N0 - Economic History - - General

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