Here’s my reply to a critic who insists it is a mortal sin [!] to charge any level of interest on a loan. I’m leaving out the obvious reasons for allowing interest, based in justice: the possibility of nonpayment, the temporary illiquidity of the lender, etc.
“The Austrian School takes no position one way or the other whether to allow interest on a loan; I’m frankly rather surprised at your misunderstanding of the nature of Austrian claims. After all, you’re eager to excommunicate people for reading certain economists, so I would think you’d have researched this first. What the Austrians do is try to explain and analyze the phenomenon. Whether to allow it is a separate question.
“In my book The Church and the Market I provide a lengthy discussion of usury and have no intention of repeating that here. I cite the Holy Office from the 19th century as saying that interest rates, like any other price, must be free to fluctuate. This view comes after centuries of development as the idea of interest became better understood.
“Mr. X, do you consider an apple one hundred years from now to be equally serviceable as an apple today? I assume not. I assume, further, that you agree that it would be an extremely vulgar mistake to claim that the two things should be valued equally because their physical properties are the same. A glass of wine enjoyed in a revolving restaurant at the top of a skyscraper is the same glass of wine enjoyed in a back alley, but we surely recognize a premium one might place on the enjoyable surroundings. A fruit tree in an easily accessible location is more highly valued than a fruit tree one would have to cross a rain forest to reach, even though in crude physical terms the trees are indistinguishable.
“Why, then, if we may place a different value on things just because they are located in different places, may we not likewise place a different value on things as a result of where they are located in time? Unless you expect people to value an apple one hundred years from now and an apple today equally, you can expect a premium to be placed on the more serviceable good. This is a phenomenon observable all throughout human existence, and one you yourself would find harmless if the difference between the good involved physical location rather than temporal location.
“Can you address my argument on the merits, please? I would genuinely enjoy seeing someone explain to me why it is a mortal sin to value an apple today more highly than an apple one hundred years from now.”