Here’s a letter to the New York Times:
Appalled by “payday loans” – small amounts of money lent by private creditors charging high interest rates to poor people in need of liquidity – Thomas Edsall concludes that “In the current political climate, there is little prospect for a major initiative to improve life chances for those at the bottom. But there is more we can do: enact restraints on predatory lending” (“Making Money Off the Poor ,” Sept. 18).
Not so. If payday lending really is the stupendous source of easy and unfair profits that Mr. Edsall supposes it to be, Mr. Edsall himself can immediately improve the lot of the poor by entering this line of business. With average loan amounts of $350, Mr. Edsall and his many smart and caring colleagues at the Times can easily scrape up enough money to lend at far lower rates of interest to thousands of grateful customers seeking payday loans.
If Mr. Edsall’s economics is correct, he will not only earn profits from his lending activities (and thereby become able to extend even more loans on less “usurious” terms to the poor), he will also, without any government intervention, kill off with his better financing terms the “predatory” lending practices that he despises. And he’ll achieve these happy outcomes by expanding – rather than by restraining (as he now proposes to do) – the ability of poor people to choose to borrow for short-term financing needs.
Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030
It’s telling that Mr. Edsall’s first and seemingly only instinct for solving problems is to call for government intervention. I’ll bet that it never even dawned on him to pursue a private-sector response to this (perceived) problem. It’s so easy to emote and pontificate and to call on imaginary superheroes to sweep in and save helpless victims from the apparent predations of nasty bad guys. And it’s gratifying, I suppose, to pat yourself on the back for your humanity at doing so. Of course, in fact, your high sense of self-satisfaction is purchased on the cheap.