Yesterday I asked why there is a risk-free rate at all. Today I shall ask whether we have a moral entitlement to it. You might say that we don't, arguing syllogistically as follows.
1. Getting a risk-free profit is consistently getting something for nothing.
2. You are not morally entitled to consistently get something for nothing.
3. Therefore, you are not morally entitled to a risk-free profit.
In a comment on the previous post, Brandon questioned 2*. Perhaps there are circumstances when you are morally entitled to receive something for nothing, on a consistent basis? I shall not discuss this here. I shall simply assume that premiss 2 is correct. It is the first premiss I am concerned with today.
In defence of the first premiss, it might be argued that investing money at the risk free rate, so that you are guaranteed to get your money back after a period of time, plus an extra component corresponding to the risk-free return, seems like a consistent way of getting something for nothing. You haven't done anything to get the return, and you ran no risk in doing so. The only thing that got you the return was the ownership of the principal amount. Thus you have earned something for nothing.
I reply: premiss (1) is trivially false. In the previous post, I argued that the root cause of the risk-free rate is mere time preference. A farmer wants to sell £100 worth of crop in a year's time. He sells that future crop to someone now for £95. Time preference explains the discounting, and the discounting explains the risk-free rate. And so you are not getting something for nothing. In earning the discounted amount (i.e. the £5) you have to wait for one year. Thus, the £5 pays you for the waiting. In lending at the risk-free rate, you are getting something (the risk-free return) for something (waiting until the loan matures).
As to whether there is a non-trivial sense in which the first premiss is true (perhaps by qualifying 'nothing' in some way - perhaps mere waiting is not a genuine 'something'), I will leave that for Brandon to comment, and I may say something about it later.
Note that modern financial theory only allows two kinds of interest rate, namely the risk-free and the risky rate. The other kinds that Brandon mentions in his original post (administration charges, social value) are not interest rates at all, at least not in the modern sense. We should not confuse the various charges and costs built into a loan, with an interest charge itself.
* Or rather, he questioned something like 2. I'll leave him to comment here if he disagrees.