ry to make up his gains on his own capital to the ordinary rate.
It is, of course, competition, which brings about this limitation.
Whether competition operates by lowering the rate of interest, or by
dividing the business among a larger number, it is difficult to decide.
Probably it operates in both ways; but it is by no means impossible that
it may operate in the latter way alone: just as an increase in the
number of physicians does not lower the fees, though it diminishes an
average competitor's chance of obtaining them.

It is not impossible that the disposition of the lenders might be such,
that they would cease to lend rather than acquiesce in any reduction of
the rate of interest. If so, the arrival of a new lender, in the person
of a banker of deposit, would not lower the rate of interest in any
considerable degree. A slight fall would take place, and with that
exception things would be as before, except that the capital in the
hands of the banker would have put itself into the place of an equal
portion of capital belonging to other lenders, who would themselves have
engaged in business (e.g., by subscribing to some joint-stock company,
or entering into commandite). Bankers' profits would then be limited to
the ordinary rate chiefly by the division of the business among many
banks, so that each on the average would receive no more interest on his
deposits than would suffice to make up the interest on his own capital
to the ordinary rate of profit after paying all expenses.

2. But if the circumstances of society render it difficult and
inconvenient for persons who wish to live upon the interest of their
money, to seek an investment for themselves, the bankers become agents
for this specific purpose: large as well as small sums are deposited
with them, and they allow interest to their customers. Such is the
practice of the Scotch banks, and of most of the country banks in
England. Their customers, not living at any of the great seats of money
transactions, prefer entrusting their capital to somebody on the spot,
whom they know, and in whom they confide. He invests their money on the
best terms he can, and pays to them such interest as he can afford to
give; retaining a compensation for his own risk and trouble. This
compensation is fixed by the competition of the market. The rate of
interest is no further lowered by this operation, than inasmuch as it
brings together the lender and the borrower in a safe and expe