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Ethics and Morality

Why Lending With Interest Is Felt to Be Immoral

Repayment with interest might violate an ancient sense of fair exchange.

Clearly there is a range of attitudes about lending with interest. Lenders obviously find nothing wrong with charging interest on loans. (At least not wrong enough to abstain from doing it.) Many people distinguish between "reasonable" and "unreasonable" rates of interest (the latter sometimes called "usury" or "loan-sharking.") And then there are those who feel that it is wrong to lend money at any interest rate greater than zero. What explains the unease that people feel about lending with interest, especially at higher rates of interest?

An Internet search on the morality of lending will first turn up a number of essays on the topic authored by Christians. It turns out that many Biblical verses disparage the practice of lending with interest. This might lead one to the conclusion that negative attitudes about this practice are cultural, something instilled through Old Testament teachings. But a continued search of the Internet will show that the earliest references to the evil of lending with interest can be found in much older Hindu and Buddhist texts. Criticisms of lending with interest can also be found in Islam and in the writings of Plato and Aristotle.

The cross-cultural negativity about lending with interest indicates that this attitude is not specific to one culture. Furthermore, "explaining" the negative attitudes as something learning from religious teachings does not tell the full story. Evolutionary science teaches us that we are most receptive to learning practices that are consistent with evolved moral sentiments. The wrongness of exploiting those in need by demanding that they give us more than we give them is something that is easy to feel. The authors of religious texts that prohibit lending with interest were simply writing down what virtually everyone felt was wrong.

But if cultural injunctions against lending with interest merely reflect an evolved aversion to the practice, how did this aversion evolve in the first place?

Analyses of the evolution of morality often consider the social dynamics of the relatively small hunter-gatherer bands that constitute 99% of our species' history. Many of the individuals in these bands were biologically related. Evolutionary scientists use the concept of kin selection to explain cooperation among biological relatives. Because, for example, parents and children share about 50% of the same genes, helping two of my children is equivalent to helping myself. Anthropologist Alan Fiske (1992) used the term Communal Sharing (CS) to describe the share-and-share-alike relationship among biological relatives.

The most widely-accepted explanation for cooperation among non-relatives in these bands is Robert Trivers' (1971) theory of reciprocal altruism. Reciprocal altruism holds that people are willing to extend help to others when they are likely to receive roughly equal benefits in return. Fiske (1992) coined the term Equality Matching (EM) to refer to social relationships wherein biologically unrelated individuals directly exchange goods and services of equal value.

Reciprocal exchanges on the ancient African savannah were limited to a few simple "services" (e.g., protecting each other from predators) and material resources such as food and tools. Mathematical models indicate that tendencies to extend services and goods to others could have evolved only if the exchanges were roughly equal. If individuals had been willing to give more than they received, they would have been at a reproductive disadvantage, and their genes would have been selected against. Research by Cosmides and Tooby (2008) has led them to hypothesize the evolution of a "cheater detection mechanism" that allows individuals to identify people who take benefits from others without reciprocating. Social mechanisms such as shunning or expulsion from the troop helped to insure that individuals did not take more than they gave.

Fiske (1992) identified another type of human relationship he called Authority Ranking (AR). AR occurs in hierarchies where more dominant individuals have preferential access to resources. In an AR relationship, dominant individuals use force or threat of force to obtain more resources than they return. Although AR can be seen in many modern social animals, including humans, Christopher Boehm (2001) has presented arguments that our ancestors suppressed tendencies toward dominance and therefore lived in relatively egalitarian societies.

Modern times (the past 10,000 years) differ considerably from the days of hunting and gathering. With the advent of agriculture, it became possible to store surpluses of food. At the same time, hierarchies of power meant that higher-ranking authorities could live comfortably while the underclass starved. The development of currencies and banking systems led to what Fiske (1992) called Market Pricing (MP) social relationships. MP involves transactions of abstract symbols (coins, bank notes, numbers in a ledger) representing cost/benefit values. In ancient times, if I was unable to catch enough fish to feed my family, I could count on other members of the tribe sharing some of their catch with me, with the understanding that I would pay them back with the same amount of fish later. I was not asked to repay with extra fish (interest). If extra fish had been required for the repayment, the social relationship would not have been Equality Matching (EM). But if I lack resources in a modern society based on MP, I must give back more to the lending institution than what I was given. There is no longer equality in the exchange. I submit that negative attitude toward the modern requirement of repaying loans with interest violates our evolved sense of fairness in economic relationships. And I predict that negative attitudes toward our lending system and other financial "products" (especially complex financial products) will increase as the wealth gap between the 1% and the 99% continues to increase.

Today, the 1% elite at the top of society's hierarchy can use their disproportionate wealth to control the economic and political system that helps to maintain their wealth and power. Perceptions that these individuals are violating an ancient injunction about taking more than one gives back are creating anger in populist movements across the political spectrum in the United States. Time will tell whether anger about the unfairness of certain economic practices will lead to significant social change.

Boehm, C. (2001). Hierarchy in the forest: The evolution of egalitarian behavior. Cambridge, MA: Harvard University Press.

Cosmides, L., & Tooby, J. (2008). Can a general deontic logic capture the facts of human moral reasoning? How the mind interprets social exchange rules and detects cheaters”, in W. Sinnott-Armstrong (ed.), Moral psychology: The evolution of morality: Adaptations and innateness (Moral Psychology, volume 1), Cambridge, MA: MIT Press, pp. 53–119.

Fiske, A. P. (1992). The four elementary forms of sociality: Framework for a unified theory of social relations. Psychological Review, 99(4), 689-723. DOI: 10.1037/0033-295X.99.4.689

Trivers, R. L. (1971). The evolution of reciprocal altruism. The Quarterly Review of Biology, 46(1), 35-57. Stable URL:

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