Financial Inclusion without Finance? The Misguided Quest to Limit Choice in Consumer Credit
Diego ZuluagaOn October 21, I had the pleasure to give the research keynote address at the annual conference of the Financial Services Centers of America (FiSCA) in Miami. The below is a transcript of my speech, in which I critiqued some policymakers' attempts to promote financial inclusion by restricting consumer choice and giving the government a larger role in credit allocation. In light of historical experience in the U.S. and elsewhere, I offered market competition as a more effective policy to ensure all Americans can achieve financial security.*****The legislator, who knows nothing, nor can know any thing, of any one of [the borrower ’s] circumstances, who knows nothing at all about the matter, comes and says to him—"It signifies nothing; you shall not have the money: for it would be doing you a mischief to let you borrow it upon such terms."—And this out of prudence and loving-kindness!—There may be worse cruelty: but c an there be greater folly?Jeremy Bentham, "Defense of Usury," 1787Thank you for the opportunity to speak to you this morning.Winston Churchill is said to have complained that two economists in a room could have as many as three opinions.[1] But there are a few matters on which economists have managed to reach a near-universal agreement. One is that price ceilings, limiting how much suppliers can charge, cause shortages. Another is that restricting production volume raises prices. Both interventions generally make consumers worse off.This profes...
Source: Cato-at-liberty - Category: American Health Authors: Diego Zuluaga Source Type: blogs
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