 In the early 1670s, Shaftesbury, who had become chancellor of the Exchequer, encouraged Locke to oppose a measure that would set a legal ceiling of four percent on the interest rate. Locke revisited the debate in 1692, and in both cases, persuaded the government to keep a higher ceiling. Locke argued that in a world of perfectly competitive banking a “natural” rate of interest would override the legal one (see Vaughn 1980). Ironically, he made his arguments before the monopolistic Bank of England was formed in 1694. Jeremy Bentham’s Defence of Usury (1787), in opposition to Smith, restored Locke’s position that the interest rate ought to be unregulated and hence subject solely to market forces (see Sigot 2001). Smith’s position has remained a puzzle, since for the most part, interest rates were low and hence non-usurious, and because Smith in general embraced laissez-faire thinking (see Hollander 1999). Both Hume and Smith recognized the longterm tendency of the interest rate to fall, from ten percent under Elizabeth I to three or four percent in their day, and they arrived at the more profound understanding that this was due to capital accumulation and sophisticated commerce and trade. They did not articulate the principle of zero profits, but they understood that in a perfectly competitive world, the profit rate would equal the interest rate, the cost of borrowing capital.