Usury laws

Once upon a time, I would have agreed with the libertarian position that the government shouldn’t interfere with the free market with respect to high-interest and/or short-term loans.

But these days, I have a much more sophisticated understanding of how the world works.

For starters, the vast majority of people taking out these loans are too stupid and/or have such low future time orientation that they don’t realize what a bad deal they are getting and that these loans are not good them. Libertarianism only works between people who are smart enough to understand the contract they are getting into and have equal bargaining power.

Futhermore, this type of lending is a value transference activity and not a value creation activity. Lending activities can create value if they allow capital to be used in a manner which will create real value, but in this case, the losers borrowing the money will buy some crap they don’t need, which was probably manufactured in China, and some will default and be passed on to debt collectors, and I’ve previously written about how debt collection is a negative sum activity.

Comments

[Peter]

One argument in favor of banning payday loans on a federal level is that they're already illegal in about 15 states. I've not seen any evidence that life for low-income people is any worse in these states.

Peter

[Doug]

The loans may be a "bad deal" for the consumer but they are definitely not any good deal for the lender. If you look at buy here pay here used car loans it is very difficult for the lender to make any money. Almost 100% of people default, which is fine if you can recover the car, but a lot of them skip town with the car, destroy the car, hide the car for months, destroy it when they know it's being repossessed, etc. The high interest rates are necessary to earn any rate of return because the loss is so high.

If poor people as a group behaved better and more responsibly the sub-prime rates would be far lower. Irresponsible poor people make life a lot worse for responsible poor people.

[Peter A]

Good post. This encapsulates nicely the tension between libertarianism and HBD. As our Victorian ancestors understood better than we do - we can't give the smart and strong license to simply prey on the weak and stupid. The problem is that writing laws and creating regulatory bodies is insufficient and sometimes counterproductive - we need a change in values.

[Tim of Angle]

Think of it as evolution in action. This is how we weed out the stupid from the gene pool -- or would, if the government allowed anybody to fail in these degenerate modern times.

[DaveinHackensack]

A sophisticated analysis of payday lending would note that borrowing from a payday lender is usually the best option available to poor people in a pinch; other options are more "usurious" but less transparantly so (e.g., credit card late charge fees, bounced check fees). Also, a payday loan that enables someone to fix his car so he can get to work creates real value, as it enables the worker to continue working and earning money.

[HS: If you believe that people respond to incentives, then you would believe that in the absence of available payday loans, people would change their behavior such that they wouldn't be in the position of needing such a loan to get to work.

An yes, it's possible to imagine a scenario where a payday loan would create value, but 99% of such loans are the opposite, enabling bad negative-sum behavior.]

[Hughman]

And that, is the problem with libertarian thinking.

FB of In Mala Fide pointed out libertarians are highly likely to be nerds. They are smart, not terribly socially savvy (or manipulative) and generally law abiding and sensible people. Hence they can work without the big bad stick of Father Government looming over them.

And as you've pointed out, many people are idiots. I don't trust anyone to make important decisions with a rough IQ of 1 SDV above norm or below. That's what, 75% of people can't be depended upon?

[Deckin]

It's odd that as someone with views deeply informed by evolutionary theory, you miss the obvious argument. In a libertarian system, one that doesn't reward short future orientation, there will be less opportunities to accrue the resources needed to produce offspring. Women typically don't mate gladly with low resource losers, no matter what their background. In fact, this would seem to be the underpinnings of the whole HBD movement. In the past long time orientations have garnered greater resources, etc., which lead to more offspring and on and on. Why isn't the way forward to return to the adaptational pressures that generated the result in the first place? Surely that's better than subsidizing and ensuring that those preferences continue in the germ line, no?

[HS: Modern society won't let people die in the streets as punishment for their low future time orientation, and nothing you write about Darwinism is going to change that.]

[Wesley]

Half Sigma,
I think that you and I have gone down the same intellectual path.

I used to be a strict libertarian, but now that I understand HBD, I think that the government needs to protect our low IQ bretheren against being victimized by high IQ people like you and me.

I would suspect that a true libertarian / complete free market can work well if you have a society that consists only of people with IQ over 110. I think that the more people with IQ under 110 you have, the worse that libertarianism / free market systems work.

I wonder if anyone else out there agrees with me, we need a two tiered economy with complete free market for high IQ people and severe restrictions on people with IQ under 110, just to protect them from themselves and also to protect them from the predators that take advantage of them.

I would welcome more thinking along these lines

[Peter A]

In a libertarian system, one that doesn't reward short future orientation, there will be less opportunities to accrue the resources needed to produce offspring.

This statement is not categorically true. A free market can appear to reward short term future orientation - especially to people of lower IQ. People can do a lot of breeding between the ages of 16-25, well before it's clear who's going to win the long term resource game.

[Nooncy Wrinkle]

I recall seeing a show on the pay day loans, and they mentioned the high interest rate being necessitated by the short term of the loan and the credit risk of those using them. There is a transaction cost with establishing a loan, that is relatively independent of the length of the loan. So if you normally deal with loans a month or less long, you can't generate enough interest to make a profit (after you factor in all the costs of doing business), unless you charge high interest rate.

So the high rates aren't taking advantage of dumb people, they are an outcome of the business model.

Now, an argument can be made that only dumb people would take out such loans, and it is the government's job to protect dumb people from themselves, but that kind of omniscient holier-than-thou stance to social engineering is usually only found in modern liberals (and other fascists). Personally, I can't find such provisions in the US Constitution.

[DaveinHackensack]

"If you believe that people respond to incentives, then you would believe that in the absence of available payday loans, people would change their behavior such that they wouldn't be in the position of needing such a loan to get to work."

If you believe that poor people have low future time orientation, then why would you expect them to never get strapped for cash? You're back to thinking about the world like a libertarian, who, as you noted in your post, have an unsophisticated view of how the world works. Most poor people (and even many middle class people) live paycheck to paycheck. That was true before the advent of payday lending, and it would be true if you eliminated payday lending.

And because poor people are poor credit risks, absent subsidies, they will always pay high interest rates when they borrow, whether it's from a payday lender, pawnshop, regular bank (when you factor in their bounced check fees), micro lender, loan shark, etc. To the extent that they respond to APR disincentives (and probably only a minority do), the high interest rate ought to be an incentive to use payday lenders sparingly.

[Peter]

Doug -
Buy Here Pay Here used car dealers help get around high default rates not merely through charging high interest rates, but also by selling their cars at enormous markups. In some cases the down payment is enough to cover their costs of buying the car and any interest collected it just gravy. Finally, when a BHPH dealer repossesses a car it will just turn around and sell it to another customer, sometimes this cycle will repeat itself.

[Deckin]

HS: 'Dying in the streets' as the alternative to a more libertarian system whereby people bear the consequences of their choices is a completely false dilemma. Removing artificial incentives for stupid choices can have the full effect of dampening the abilities of those who make those choices to reproduce prolifically without leaving them in the gutters wanting food. There may well be a few who meet that fate, but then there are now. If history is any guide, the majority of those with bad ideation will spend much of their time just trying to survive, but they will--just without producing a brood.

[Dan Morgan]

I bet if you went to a place where people are getting payday loans you might be surprised to find that their reasoning is better than you might expect. People in the 90-100 IQ range can still reason their way through life pretty well. A person with an IQ of 95 makes $34,985/yr and a person with an IQ>125 makes $55,555. The extra brain power for better decision making only gives a 1.6x income boost.

IQ____Net worth______Income
125___$133,250______$55,555

[tehag]

The problem with usury laws is our desperately unwise parliamentarians, who, isolated from the need to honestly make a living and motivated by false empathy (noblesse oblige), decide to set the usury rate too low which "protects" the middle class from useful credit instruments, or, importuned by bribes, set the usury too high to serve the purpose of protecting the poor and stupid.

At the moment, the government isn't doing enough to protect the poor and stupid (many states run lotteries and have legalized gambling), but simultaneously issues uncountable regulations that prevent sensible behavior, fiscal and otherwise.

There is no happy middle. Any technocratic attempt to scientifically measure the burden on the poor falls to corruption by moralizing elites. Even if the measurements succeeded, situations change so rapidly that legislation must be out-of-date. The usury rate will never stabilize, because it can't.

The wish that the state set a usury rate, then, is a symptom longing for a perfectible, stable society: feudal, fascist, whatever, but certainly not free.

[Thomass Mann]

"I would suspect that a true libertarian / complete free market can work well if you have a society that consists only of people with IQ over 110. I think that the more people with IQ under 110 you have, the worse that libertarianism / free market systems work."

_____________
If all the people with IQs of 109 and under suddenly died, then the IQ distribution will be renormed with 100 being the mean. IQs have been increasing throughout the century, and if you were to compare the mean IQ of today to that of 1900, the average IQ of today would be over 110 in 1900 and the average IQ of 1900 would be under 90 today.

[HS: I don't buy into this explanation of the Flynn Effect, and neither did Arthur Jensen.]

[Thomass Mann]

A change in values is more important than a change of laws. If society sees little wrong with loan sharks, and if society sees little wrong with easy access to loaned money that will eventually leads to economic bubbles where one has has to either borrow money or are priced out, which then further leads to defaulting of loans because there's just not enough money floating around to repay these loans, then changes in laws aren't going to do much.

[Alex]

"Futhermore, this type of lending is a value transference activity and not a value creation activity. Lending activities can create value if they allow capital to be used in a manner which will create real value, but in this case, the losers borrowing the money will buy some crap they don’t need, which was probably manufactured in China, and some will default and be passed on to debt collectors, and I’ve previously written about how debt collection is a negative sum activity. "

I can't agree with this. People get real utility from having consumer goods and a decent house.

Now, bogus colleges are pure value transference enterprises since all but the most intelligent students go through their education so that they can get a high paying job. If the college doesn't offer its promised value, then the student has paid exorbitant amounts of money to go through a process that they do not enjoy. They are exploited twice.

[Lugo]

"Think of it as evolution in action. This is how we weed out the stupid from the gene pool -- or would, if the government allowed anybody to fail in these degenerate modern times."

Are you kidding? It is the stupid and improvident who are breeding like mad, not the thrifty and responsible. Having a lousy credit score, bad debts, inability to pay bills or no job is not going to stop a loser from breeding like it would a responsible person.

"Modern society won't let people die in the streets as punishment for their low future time orientation"

It ought to! And in fact, it is likely to come to that whether modern society wants it or not.

"the government needs to protect our low IQ bretheren against being victimized by high IQ people like you and me"

No, we need to protect the productive high IQ people from the low IQ useless idiots, who can vote for the government to extract wealth from the productive.

"we need a two tiered economy with complete free market for high IQ people and severe restrictions on people with IQ under 110"

We need a two-tiered political system as well - i.e., stupid people don't get to vote.

[DT]

It's not just stupidity or low future time orientation at work. There are other factors involved.

* An education system that fails to teach anything of value about economics and finance, even to many people with 4 year degrees.

* A consequence of the above is that the average person relies on those he perceives to be experts. If a loan officer tells the average person the loan is good, he will believe the loan officer without ever stopping to think about the incentives at play.

* It's a bad habit in our society, but you would be shocked at how many people sign contracts without reading them. Worse, those unfamiliar with legal terminology can skim right past dangerous sections never knowing what they missed.

* I don't have a link to the paper off hand, but I recall reading a study that demonstrated a positive bias in the majority of people in regard to the future. It seems natural for people to think they will be earning more or be in a better situation in the future.

* Absent usury laws and a tax system that favors value creation and punishes value transference, lending leads to speculative bubbles which reinforce the positive future bias in humans. "It doesn't matter how bad this loan is because I can flip this house within 5 years at a massive profit just like that guy did!"

I'm in the same boat HS. At one time I would have agreed with libertarians. I'm still very libertarian when it comes to most laws, but I'm fast coming to the conclusion that finance must be tightly regulated to minimize value transference and the potential for devastating damage both to individuals and to society.

[Winston Smith]

Without big government this type of thing would happen to high iq libertarian nerds every day.

http://www.youtube.com/watch?v=zrX9Ca7LSyQ

[The Secret of NAM]

This leads immediately to a black market for short-term credit.

This idea is so tired and wrong that I can't believe even an adherent of Marx is espousing it. It's like prohibiting prostitution, drugs, alcohol, etc. Unlike with theft or murder, both parties want to make the exchange, so no one raises a fuss. And people like me who think people should make their own mistakes don't care if your stupid laws get enforced.

Prohibition of "usury" guarantees that real loan sharks will prosper and deform society, just as giant Mexican drug gangs have used the power that prohibition has given them to shit on their societies. Recommended: wiki bootleggers and Baptists. Liberal ideas always fail.

[Joshua Holmes]

Ban payday loans, the poor go to the mob. It's the best of a bad situation.

[DaveinHackensack]

Re: http://www.youtube.com/watch?v=zrX9Ca7LSyQ

John Stossel deserved that. I like some of his more recent commentary, now that he's moved to the right, but asking whether wrestling is fake was such a condescending and stupid question. The wrestlers are real athletes who risk serious injuries doing what they do. Of course the matches are scripted, but everyone in the arena knows that and has known that since they were kids.

[Jaymthegenius]

"* An education system that fails to teach anything of value about economics and finance, even to many people with 4 year degrees."

-It depends on the school. Moreover, the parents should be teaching economic and financial values and principles in the first place.

"* A consequence of the above is that the average person relies on those he perceives to be experts. If a loan officer tells the average person the loan is good, he will believe the loan officer without ever stopping to think about the incentives at play."

- But the loan officer obviously has much to gain from such a negotiation and is also obviously not an impartial party in the agreement. Of course, Coca-Cola will try to do everything to assuage their bad reputation for a product that has a detrimental effect on one's health, to reference an interdisciplinary example with the same basic principal.

"* It's a bad habit in our society, but you would be shocked at how many people sign contracts without reading them. Worse, those unfamiliar with legal terminology can skim right past dangerous sections never knowing what they missed."

Then the signing party should have consulted a contract lawyer to make sense of the document.

"* I don't have a link to the paper off hand, but I recall reading a study that demonstrated a positive bias in the majority of people in regard to the future. It seems natural for people to think they will be earning more or be in a better situation in the future."

- Obviously, measures needed to be taken to reach that point. One will never magically improve their future and/or condition, one must take responsibility for their future.

"* Absent usury laws and a tax system that favors value creation and punishes value transference, lending leads to speculative bubbles which reinforce the positive future bias in humans. 'It doesn't matter how bad this loan is because I can flip this house within 5 years at a massive profit just like that guy did!'"

People should learn not to make other people's mistakes.

"I'm in the same boat HS. At one time I would have agreed with libertarians. I'm still very libertarian when it comes to most laws, but I'm fast coming to the conclusion that finance must be tightly regulated to minimize value transference and the potential for devastating damage both to individuals and to society."

It shouldn't be too tightly regulated; those after hours trading restrictions by the SEC can be annoying.

[Mike Hunt]

Burns: Are you acquainted with our state's stringent usury laws?
Homer: [slowly] use-your-ee?
Burns: Oh, silly me! I must've just made up a word that doesn't exist.

The Simpsons
"Lisa's Pony"

[William Barghest]

The problem isn't with usary, the problem is with personal bankruptcy. If as with any corporate bankruptcy proceeding all debt is converted to equity in the going concern, the debtor that is, then the debtors problem with lack of intelligence and forsight can be solved. Simply, after bankruptcy the debtor's new owners will either hire a competent supervisor, or sell their interest in the debtor to a party who can turn a profit with the debtor's labor. Any bankruptcy proceeding which returns personal liberty to the debtor is just passing the problem along.

[Scoop]

Support for usury laws assumes that they do, indeed, stop the poor from foolish borrowing. If this is true, then I'm all for them. But they might make the problem worse by turning the poor from taking small collateralized loans from regulated businesses to borrowing larger amounts from loan sharks.

I have no idea to how much usury laws increase loan sharking, though there may be a study on it. All I'm saying is that even when you recognize that people shouldn't do something, you can't necessarily stop them by illegalizing it. Sometimes, you actually make the problem worse.

[sabril]

"I bet if you went to a place where people are getting payday loans you might be surprised to find that their reasoning is better than you might expect."

I deal with this type of person and I can tell you that they are (for the most part) irresponsible screwups. It's not do much that they cannot reason, it's more that they don't have any future time orientation.

A lot of the time, they have problems with drugs or alcohol.

[Dave]

Bringing back usury laws will only result in an increase in broken legs.

Remember HBD'ers, people who take out loans at ridiculous rates can't help themselves-its in their nature. 'Laws' won't help.

Also a lot of businesses will get around usury laws (when they can).

SIX YEARS NO INTEREST ON NEW CARS!

(see that I mean)

[John]

HS, you can't use a teleological arguement to disprove a deontological one. You say that libertarianism doesn't "work" because some people aren't smart enough to take care of themselves. As a libertarian, my response is, "So what?"

If I were a Benthamite utilitarian, then that argument would be persuasive to me, but since I'm not, it isn't. Libertarianism is the belief that I don't have the right to tell you what to do. Whether or not you can take care of yourself is completely irrelevant.

[dk]

I think most people would have no idea how to find a loan shark. Remember most loan sharking opps are/were run by the mob which has been mostly broken. Its not like its the kind of business you can advertise.

People who take out loans at ridiculous rates are looking for the easy way out. Finding a real life loan shark would take work. For instance...where would you start?

[Tim Livingston]

I believe you have stumbled into an application of what is known formally as the "nirvana fallacy".

The typical use is to compare some ridiculous ideal hypothetical marxist system with a real-life sorta-free market.

I believe that lots of low-intelligence people would be taken advantage of in a libertarian system, sure. But they are now, too, and often with government aid.

And I also believe that in a libertarian system, their opportunities to recover and their overall standard of living would make their lives better. The increased freedom alone would make for a better life.

Society would adapt to minimize the chance of poverty and suffering. It's hard to predict, but hey, girls might actually start getting married before having children. It is only since 1960 that things changed .. gee .. I wonder why?

[Maciano]

"Think of it as evolution in action. This is how we weed out the stupid from the gene pool -- or would, if the government allowed anybody to fail in these degenerate modern times."

Besides a heartless, also a stupid comment.

Do you really think, even for a minute, that these people wouldn't get bailed out by government programmes and/or that such indebting wouldn't have negative externalities for the wider world us?

[WRB]

"girls might actually start getting married before having children. It is only since 1960 that things changed .. gee .. I wonder why?"

You have it backwards, in the old days marriage often was a consequence of pregnancy. Shame, religion, hypocrisy and all that.

[Jaymthegenius]

"I believe that lots of low-intelligence people would be taken advantage of in a libertarian system, sure. But they are now, too, and often with government aid."

Isn't fleecing the proletariat and protecting the owning class from the working class the system's actual raison d’être? The constitution is actually an elitists document meant to protect the owning class' property rights. But, protection from whom? The very individuals that have had their wealth transferred from their hard work and energy. In Pennsylvania, for instance, to vote you needed 50 pounds of lawful money and own over 50 acres of land in order to vote. Additionally, soldiers were oftentimes not paid, thus the reason for Shays' Rebellion, and soldiers were oftentimes imprisoned under terrible conditions for not being able to pay their loans. Shays went to prison for being unable to repay debts; yet, how can one pay their debts when they aren't being justly compensated for their work? Also, Massachusetts put the tax burden onto the farmers, instead of those who could actually afford to pay, and actually benefit from the taxes. The excuse was: "It would be better for commerce".

[Insider]

The problem is the market is one of information. Even though consumers have 'access' to all pertinent information, it is presented in a manner that someone without any education or natural intelligence cannot understand.

Why not set up a mandatory education process before anyone applies/gets a credit card? It will be a simple computer program or piece of software that explains the pertinent info in a low-intelligence friendly manner. Every credit card company would be required to make one and have it approved.

Instead of the credit card companies sending you piles of papers, they can just send you a free cd of the software as it applies to their program.

I believe in letting people, even the dumb ones, making their own decisions with as little government intervention as possible.

[John Vorster]

HS:

"I have a much more sophisticated understanding of how the world works"

Perhaps some day your understanding will be even more sophisticated and you'll give hereditarian fundamentalism.

Twin studies don't mean what you think they mean.

You've still not posted on the Redlegs.

[carl]

Sig,

I have some personal experience with this type of lending, in my case the outfit was a title loan operation which means that in addition to paying 300+% APR you run the additional risk of losing your vehicle if you default.

I won't go into the details of why, but I needed the money and had no other source for it. So I handed over my car title for $1200. I read the paperwork and saw the APR (listed on the last page of 10-15 pages of docs that I needed to initial or sign) and fully understood what I was getting myself into.

The problem is that this loan outfit mostly services Mexicans and dumb people. I had to do walk-in business with them several times and and the other "borrowers" mostly exclusively spoke Spanish -- I live in Austin. The non-immigrant borrowers were a motley group of ghetto blacks and people with obvious drug problems.

The most disgusting praactice of this title loan outfit is the manner in which they explain their interest rates. They told me over the phone that the interest rate is 10% (and I also overheard tellers telling very poor folks that this is the rate that they would be charged). They use a system (fuzzy math) that bases the interest on a weekly (i think) recalculation so what they are saying to customers is technically correct. On the formal paperwork, law requires that they annualize the rate. They never verbally tell you the APR. In fact, I could give you the name of the business and you could call and ask what interest they charge on their loans and, without hesitation, they'd say "10% that's all!"

Anyway, I know how to read and understand what 369.99% means. I knew I was getting screwed and did it anyway. I REALLY needed the money.

You end up paying ~$1600 for a $1200 loan, if you can repay in full within 30 days. This seems to never happen with these borrowers. Typically, the loans are rolled over month after month and the principal isn't touched. If I simply refie'd my loan each month it would have cost me over $400 yet my balance ($1200) would never decrease. A person will often pay over $3k in a year to clear a $1000 loan (which is secured with their vehicle appraised at at least 3x value of the loan -- they will loan you up to $500 if you hand over a title to a $1500 car).

Obviously, this is a terrible deal. Title loans are illegal or strictly regulated in many states. In some cases, poor people end up having their vehicles repossessed, but this generates bad press so I think it happens rarely. But it does happen and is regularly threatened

In my case, I was in dire straits. Why I found myself in such a position is immaterial. The point is that, singularly I suspect amongst your readership, I have recently been a consumer of a "predatory" loan outfit.

I would have suffered terribly had I not had access to this loan. I was willing to pay 300% because the situation warranted it.

Should I be deprived of the right to take on a bad-rate loan in an emergency because of the general dullness of the population? I should not be able to make that choice because YOU (not you personally) are too stupid to read and comprehend the contract?

Just something to think about.

ps - it probably reflects unfavorably on me at a site such as yours (that I love) to admit to such a prolish thing. But, whatever. I had my reasons.

[carl]

Just one more comment on this matter.

Quite a bit of political theorizing occurring in the comments above. Nothing wrong with that. But the facts on the ground...

Sometimes a poor, stupid person takes out a 30-day loan against some asset or future asset (like a tax refund) to buy bread and milk or 'iced out' T-shirts made in China. Sure, sometimes.

I've lived an interesting life. And I've had reason to be on the periphery of a certain "crowd" in the past. I am aware that many Mexican immigrants use these services and I know nothing of them. But for simple, broke, ghetto folk... short term loans (or pawn advance) serve, pretty much, one function: fast cash for fast drugs -- typically cocaine or a derivative thereof.

Prostitution, fraud and theft are the methods used to payback (slowly) these loans. Or the borrowers just forfeits their collateral. Or, in some cases, they can just default because they have nothing to lose.

They don't care about debt collectors. Most of them can't even get a bank account because of excessive previous charge-offs. They are not aware of their credit score as a general rule -- other than a vague sense that their credit probably isn't good. The shadiest loan companies know this and make a point to advertise that they loan regardless of credit score or profile.

Your typical quickloan consumer occupies a world ruled by cash and prepaid debit cards. They don't realize these are bad deals on the percentage. They have WAY more serious dysfunction dominating their day-to-day lives.

Debt collectors can wreak no havoc on a person like this, a collector can only harass them -- until they get a new prepaid phone with a new number.

As someone else said, this is the reason the interest rates are so ridiculous. Title loan companies' primary customers are crackheads and their ilk. So defaults and disappearance and incarceration before repayment are common. Most accounts are losers. So to make a margin, rates have to be astronomical.

With typical unsecured payday loans the situation is a bit different as you need proof of employment to get the loan. But there are even ways around this. Though you can only screw them once or twice before you are blacklisted by a monitoring service all the companies employ.

This doesn't describe ALL high interest borrowers, but certainly a good portion. And if you doubt me, go to a car title loan office and hang out in the lobby for an hour and see who walks in. Or try a pawn shop which is really a secured high interest loan operation as well. It won't take you long to see the jig.

Again, I sully my name by confessing such gutter knowledge.

[DroleProle]

Speaking of future-time orientation, I think social-class has a lot to do with one's future-time orientation. I know many high IQ people of lower-classes, and they tend to work as contractors or in upper-management in dirty manual intensive type jobs. These types of jobs expose workers to incredible amounts of toxins (endocrine-disruptors, carcinogens, teratogens,etc) and are quite high-risk -- manual labor jobs have the highest mortality rates per capita out of all the other job categories. Oftentimes, in spite of having a high IQ. they will forgoe the use of earplugs, dust masks, etc and just expose themselves to all kinds of crap. This proves that IQ doesn't necessarily = high future time orientation and that class has a significant impact on one's survivability. A low class person with an IQ of 130 is likelier to be a plumber or asbestos remover than an upper class person with an IQ of 110, and thus, the low class higher IQ person is likelier to die earlier and is likelier to have deformed children via exposure to teratogens and various toxins than the upper class lower IQ person.

Sigma's suggestion that middle class values be taught in schools is a good idea, as it may save the lives of many high IQ proles from working high risk jobs that shorten their lives.

[DroleProle]

"Whether or not you can take care of yourself is completely irrelevant."

It may be "completely irrelevant" to you in theory, but in reality, the actions of other people affects everyone in numerous ways. What should be done with the numerous defaulters? If there isn't enough money in the economy for the debtors to repay their debts, what should be the punishment for the dead beat debtors? If you say impprisonment, well then, who will pay for the prisons in your libertarian society? Private prisons can't make a profit, so they won't exist. Perhaps you may say it's okay for the government to build the prisons. Well then, imagine the millions of people who will be imprisioned for being unable to repay their debts. Imagine the social cost of imprisioning so many millions of people. How about when they are released? These people will have an impossible time finding employment or housing and will have to resort to crime to survive.

[DroleProle]

"Think of it as evolution in action. This is how we weed out the stupid from the gene pool -- or would, if the government allowed anybody to fail in these degenerate modern times."

This is how neighborhoods and cities become crime-ridden crap holes where the super wealthy live behind high-security estates and the tiny middle classes cry like babies about crime.

[An Unmarried Man]

You do realize that in the absence of pay day loan outlets, Rent-A-Rim businesses will step in and gladly devour the dwindling resources of the irresponsibly stupid, right?

[Insider]

Carl-
http://www.americanprogress.org/issues/2009/03/pdf/payday_lending.pdf

According to this, that proportion you're talking about probably isn't that large. Now sure, we find more minorities in that group, but that may mostly be due to IQ/educational differences.

DroleProle-
'If there isn't enough money in the economy for the debtors to repay their debts, what should be the punishment for the dead beat debtors?'

I'm no full libertarian, but I believe the response would be that the punishment would actually be to the creditors, who would establish more rigorous lending standards once they realized where the 'lifetime profitable indentured servant' poverty line was, and they would try to maintain it. Their own wealth would be destroyed when they made mistakes like that.

It's also not true that private prisons just 'can't' make a profit. Why not? A private police force surely can build a private prison and charge fees for their services, can they not?

When they are released, certain employers will realize that no one else will hire them and will take a risk in doing so at a cheaper rate. So no, they won't necessarily have to resort to crime.

Like I said, I'm not a full libertarian, but I imagine those would be the responses.

[Jaymthegenius]

"I won't go into the details of why, but I needed the money and had no other source for it. So I handed over my car title for $1200. I read the paperwork and saw the APR (listed on the last page of 10-15 pages of docs that I needed to initial or sign) and fully understood what I was getting myself into."

I don't care who anyone is; nothing is so bad of an emergency where one would take out a %300+ APR loan. You could have asked friends or family if there was a far better option as far as borrowing is concerned.

"The problem is that this loan outfit mostly services Mexicans and dumb people. I had to do walk-in business with them several times, and the other 'borrowers' mostly exclusively spoke Spanish -- I live in Austin. The non-immigrant borrowers were a motley group of ghetto blacks and people with obvious drug problems."

Because, according to some transferring the wealth from the working class to the owning class is acceptable; the owning class wants the wealth it paid out in wages back, after all. Even if said wealth was paid out to a sub-minimum wage migrant worker.

"The most disgusting practice of this title loan outfit is the manner in which they explain their interest rates. They told me over the phone that the interest rate is 10% (and I also overheard tellers telling very poor folks that this is the rate that they would be charged). They use a system (fuzzy math) that bases the interest on a weekly ([I] think) recalculation so what they are saying to customers is technically correct. On the formal paperwork, law requires that they annualize the rate. They never verbally tell you the APR. In fact, I could give you the name of the business and you could call and ask what interest they charge on their loans and, without hesitation, they'd say '10% that's all!'"

That is how many get away with their actions, by being technically correct. If they need to legally tell an individual pertinent information, then they will omit to do so in their interactions with the customer, but hide the clause somewhere in an obscure part of the contract, which the average layman wouldn't be able to correctly understand. The target demographic for this operation needs to keep its borrowing in check.

"Anyway, I know how to read and understand what 369.99% means. I knew I was getting screwed and did it anyway. I REALLY needed the money."

Remember that time your parents told you to delay gratification? This is one of those situations where it should have been put into practice.

"You end up paying ~$1600 for a $1200 loan, if you can repay in full within 30 days. This seems to never happen with these borrowers. Typically, the loans are rolled over month after month and the principal isn't touched. If I simply refie'd my loan each month it would have cost me over $400 yet my balance ($1200) would never decrease. A person will often pay over $3k in a year to clear a $1000 loan (which is secured with their vehicle appraised at at least 3x value of the loan -- they will loan you up to $500 if you hand over a title to a $1500 car)."

Invading principal is considered foolish, since not as much interest would be generated. However, this principle is typically applied to trust funds. Nevertheless, it is terrible how they overcharge in that manner. Don't forget that it is a ploy to transfer bargaining power away from the working class. There are more sophisticated ways of transferring bargaining power (i.e.: capital) away from the middle class, since the middle class individual typically isn't as easy to fool than the working class individual. Also, keep in mind that the working class student is typically tracked into classes that work with saws and other dangerous tools with nary a protest, because it does not know that a class sorting paradigm is taking place. The blue-collar student's ivy ambitions, and even good SAT and SSAT scores would be but a dream. From a moral viewpoint I think that such tracking is dishonorable, but from a realist perspective I understand that someone needs to maintain the infrastructure and enforce the laws. In summery, it isn't enough to have people with MBA's from Babson or Dartmouth, or J.D.'s from Yale; there also needs to be individuals to do the hand work. When one invests in base metal mining company after checking for insider ownership (after all, if the CEO isn't willing to go down with the company, why should a prospective shareholder?) and whom they supply to there needs to be people who mine the metals out of the ground, transport them, etc.

The working class has fought for the eight hour work day, safety regulations, and higher pay, and the owning classes feel like they are "owed" "their" money back.

"Should I be deprived of the right to take on a bad-rate loan in an emergency because of the general dullness of the population? I should not be able to make that choice because YOU (not you personally) are too stupid to read and comprehend the contract?"

One can always use the objective voice to avoid the "you" confusion. In a public forum the word "you" is more often than not considered bad form. For instance, when addressing the article's author a person could quote the author and address them as "you", but better would be to address them in the third person. I was going to suggests that Half Sigma make it a rule (or at least a suggestion), but I felt that this would be in bad form.

"Think of it as evolution in action. This is how we weed out the stupid from the gene pool -- or would, if the government allowed anybody to fail in these degenerate modern times."

I blame improved healthcare over the generations. When science makes great strides it saves lives, even the lives of society's poorest segment. These people would pass down their genes and exacerbate a dysgenic trend. The problem with science is that when discoveries are made people will find excuses to use them, excuses more often than not with a purely utilitarian function. Why does America have miles upon miles of ugly tar roads? Why do many houses have tar driveways instead of those brick ones? Because people will consider the economical reasons and not realize the aesthetic damage they are doing. If there is a vaccine that will save many lives, then people will use it.

"and they tend to work as contractors or in upper-management in dirty manual intensive type jobs."

Type isn't an adjective; "jobs that are dirty and manual intensive" would have been sufficient.

" the low class higher IQ person is likelier to die earlier and is likelier to have deformed children via exposure to teratogens and various toxins than the upper class lower IQ person."

And I thought that the working class' acatalepsy regarding soft drinks and fast foods was bad enough!

[James Franklin]

I suppose the real Libertarians would also abolish bankruptcy laws? Then idiots could really get away from the nanny state and sell themselves into debt slavery.