Historical Survey of Interest Rates Across Ancient and Medieval Civilizations

Investors as to interest means lenders, not borrowers. Interest rates published historically are rates borrowers are contracted to pay. Interest rates realized by lenders are less for two reasons. There are friction costs of due diligence, contracting and collection. Default costs, slight when times are good, can be catastrophic when times are bad. Homer and Sylla describe normal contracted rates, not realized rates net of those costs, as 10% — 40% in Sumer and Babylonia, 6% - 18% in ancient Greece, 5% — 24% in Egypt, and 4% — 12+% in Rome and the Byzantine Empire.* After higher rates in the dark ages, European mortgages and commercial loans found the range 7% — 25% in the thirteenth and fourteenth centuries. The range settled down to 4% — 14% in the sixteenth century,° and to 3% — 10% by the seventeenth and eighteenth’. The authors comment:® “...interest rates declined during much of the later Middle Ages and Renaissance. The earliest short-term rates quoted were somewhat higher than the last and highest of the western Roman Legal limits. They were not too different from early Greek rates and were within the range of Babylonian rates... The later Renaissance rates were well within the range of modern rates and the lowest were far below modern rates in periods of credit stringency.” Merchants of Venice in Shakespeare’s time and long before borrowed from banks, not from Shylocks, and at rather lower cost than merchants of the twentieth century. Economics and Biology Bioeconomics has meant economics informed by biology. I argued that this describes much or all of classical economics from Petty through Mill, then lapsed when the marginalists preferred to do without any explanations or justifications of tastes, and revived a century later to explore Hamilton’s rule. 4A History of Interest Rates, Rutgers, 1996, Table 4. 5 Ibid. Tables 6 and 7. 6 Thid. Table 9. 7 Tid. Tables 10 and 14. 8 Ibid. Chapter 10. Chapter 7 Petty’s Idea 2/3/16 26 HOUSE_OVERSIGHT_011085