In Defense of Usury
I’ve written before on the negative consequences of anti-usury laws targeted at Missouri payday lenders. An op-ed in yesterday’s Wall Street Journal has a great defense of these so-called “usurious” practices.
The article cites a new study by Dean Karlan and Jonathan Zinman (two economists from Yale University and Dartmouth College, respectively) which finds that borrowers with poor credit are actually better off (measured by various psychological and economic indicators) when they are provided with high-interest installment loans (in this case, an APR of 200%), compared to similar borrowers who are denied such credit.
If you can’t read the Wall Street Journal article, Reason’s blog also has some good coverage. And the National Center for Policy Analysis summarizes the main findings of the study.
Basically, I believe in freedom of action, and the responsibility for those actions’ consequences. Unfortunately, too many legislators don’t. And that only shows how little faith they have in the individuals they represent.