The legal [interest] rate ought not be much above
the lowest market rate. If the legal rate of interest
in Great Britain, for example, was fixed so high as
eight or ten per cent, the greater part of the money
which was to be lent would be lent to prodigals and
projectors, who alone would be willing to give this
high interest. A great part of the capital of the
country would thus be kept out of the hands which were
most likely to make a profitable and advantageous use
of it, and thrown into those which were most likely
to waste and destroy it.

When the legal rate of interest, on the contrary is
fixed but a very little above the lowest market rate,
sober people are universally preferred, as borrowers,
to prodigals and projectors. The person who lends
money gets nearly as much interest from the former
as he dares to take from the latter, and his money is
much safer in the hands of the one set of people than
in those of the other. A great part of the capital
of the country is thus thrown in the hands in which
it is most likely to be employed with advantage.

        -- Adam Smith