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In Act IV, Scene I of The Merchant of Venice, Portia says to Shylock these lines (rendered in blank verses)

The quality of mercy is not strained
It droppeth as the gentle rain from heaven
Upon the place beneath. It is twice blest:
….
His scepter shows the force of temporal power,
The attribute to awe and majesty,
Wherein doth sit the dread and fear of kings;
But mercy is above the sceptred sway.

What does the line “But mercy is above the sceptred sway” mean? Sceptre is a kind of long stick with cross at its ends, but its role in the line is quite hard to guess.

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In order to understand "scepter", one should first look at the few lines that have been left out (quoted from the MIT Shakespeare):

It blesseth him that gives and him that takes:
'Tis mightiest in the mightiest: it becomes
The throned monarch better than his crown;

Portia says that the quality of mercy is strongest (or has the strongest effect) in the mightiest and that it suits a king better than his crown. The lines that follow develop a contrast between temporal or earthly power and heavenly power. The theme of heavenly power has already been introduced by the words "[the quality of mercy] droppeth as the gentle rain from heaven". The king's sceptre here represents earthly power and as something that can inspire "dread and fear". To sway the sceptre means to wield power. In a worldview that sees God as above the king, mercy, coming from heaven, is almost literally above the king's earthly power, represented by the sceptre.

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