“Are Usurious? Another New Argument For the Prohibition of High Interest Loans?” by Matt Zwolinski
A COMMENT ON Robert Mayer (2012), “When and Why Usury Should be Prohibited,” J Bus Ethics OnlineFirst (September), http://dx.doi.org/10.1007/s10551-012-1483-3
Abstract: Robert Mayer argues that certain kinds of high-interest payday loans should be legally prohibited. His reasoning is that such lending practices compel more solvent borrowers to cross-subsidize less solvent ones, and thus involve a kind of negative externality. But even if such cross-subsidization exists, I argue, this does not necessarily provide a ground for legal prohibition. Such behavior might be a necessary component of a competitive market that provides opportunities for mutually beneficial transactions to willing customers. And the alternative of a government-mandated interest rate faces severe problems of its own.
To download the full PDF, click here: Zwolinski on Mayer.
Update! Now see also Mayer’s response to Zwolinski.