Loan Sharks May Owe Some State Lawmakers a Big ‘Thanks’
7th March 2014
Let me note that some pundits insist that choking off the legal availability of this particular service somehow defies the laws of supply and demand and doesn’t breed an illegal market. Robert Mayer, in an oft-cited law review article conflates high-interest loans in the early, unregulated market with illegal loans in the regulated market in a way that seems deliberately obtuse (he gets away with this because the term “loan shark” was originally little more than an epithet for a lender borrowers resented, and then evolved). He also seems ignorant of how illegal markets develop, and that it may take time to evolve the infrastructure for them. Go read his piece and decide for yourself.
I find those pundits unconvincing, though. Supply and demand are universals. It seems unlikely that thwarting demand in the legal market won’t drive it to the illegal market, and I have yet to be persuaded otherwise.
High-interest rate loans suck. But if there’s demand for them, somebody will offer supply. Better that the debts are collected over the phone or by nastygram than by somebody like my cousin.
Markets work, even when you don’t want them to.