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u·su·ry

[Ë?yoÍ?oZH(É?)rÄ?]

NOUN

the illegal action or practice of lending money at unreasonably high rates of interest.

Why would there be laws against excessive interest rates?

  1. I loan you money. you pay me many times the original amount. and you can’t catch up, ever…..
  2. I loan you money, you cant pay, I take your house….
  3. I loan you money, you can’t pay, you have to resort to crime, others are harmed….

In each of these circumstances the public is now carrying you as a burden, while the usurer is free riding on the public because he succeeded in baited you into moral hazard. As such it breaks the prohibition on negative externality.

It breaks productivity by benefitting disproportionately from the suffering of others.

It breaks asymmetry of information by asymmetry of incentive (taking advantage of the moment).

The actor has no material skin in the game and no warranty. So we say instead the usurer has a negative due diligence.

It’s “baiting into moral hazard.”

TEST OF RECIPROCITY (Morality):

Productive, (fail)

Fully Informed (baited into optimism)

Warrantied, (fail)

Voluntary Transfer (“under duress”)

Free of Negative Externality (fail)