US

Payday Lending

A ban on very short-term loans at very high annualized interest rates (aka payday lending) would make most people who use or might use them better off.

Responses weighted by each expert's confidence

Participant University Vote Confidence Bio/Vote History
Acemoglu
Daron Acemoglu
MIT
Uncertain
4
Bio/Vote History
There is a demand for these loans, but also miscalculations and longer-term problems for borrowers, including for their families.
Alesina
Alberto Alesina
Harvard
Agree
4
Bio/Vote History
Altonji
Joseph Altonji
Yale
Uncertain
4
Bio/Vote History
Auerbach
Alan Auerbach
Berkeley
Uncertain
5
Bio/Vote History
Autor
David Autor
MIT
Agree
7
Bio/Vote History
You've set the bar high: "very short-term loans at very high annualized interest rates." So I'll say that these loans benefit few people
Baicker
Katherine Baicker
University of Chicago
Uncertain
3
Bio/Vote History
Banerjee
Abhijit Banerjee
MIT
Agree
4
Bio/Vote History
Bertrand
Marianne Bertrand
Chicago
Uncertain
9
Bio/Vote History
Brunnermeier
Markus Brunnermeier
Princeton Did Not Answer Bio/Vote History
Chetty
Raj Chetty
Harvard Did Not Answer Bio/Vote History
Chevalier
Judith Chevalier
Yale
Disagree
8
Bio/Vote History
This does not mean regulation of the sector's practices is unwarranted, but the research on access to credit is pretty clear.
Cutler
David Cutler
Harvard
Uncertain
5
Bio/Vote History
Deaton
Angus Deaton
Princeton
Uncertain
5
Bio/Vote History
Seem like good arguments on both sides
Duffie
Darrell Duffie
Stanford
Disagree
5
Bio/Vote History
Meltzer (2011) finds that payday loans do not alleviate hardship. But banning the market may be dominated by stronger regulation.
-see background information here
Edlin
Aaron Edlin
Berkeley
Disagree
7
Bio/Vote History
Disclosure rules and banning rollover makes more sense. Sometimes people need credit.
Eichengreen
Barry Eichengreen
Berkeley
Uncertain
5
Bio/Vote History
Einav
Liran Einav
Stanford
Disagree
7
Bio/Vote History
Fair
Ray Fair
Yale
Agree
5
Bio/Vote History
Finkelstein
Amy Finkelstein
MIT
Uncertain
8
Bio/Vote History
Goolsbee
Austan Goolsbee
Chicago
Disagree
6
Bio/Vote History
Greenstone
Michael Greenstone
University of Chicago
Strongly Disagree
7
Bio/Vote History
The best evidence (see link) finds sharp welfare declines from interest rate caps in a somewhat similar market.
-see background information here
Hall
Robert Hall
Stanford
Uncertain
9
Bio/Vote History
Some would gain and some would lose—payday loans are not all harmful
Hart
Oliver Hart
Harvard
Agree
6
Bio/Vote History
Holmström
Bengt Holmström
MIT
Agree
5
Bio/Vote History
Hoxby
Caroline Hoxby
Stanford
Uncertain
10
Bio/Vote History
It depends on what would replace payday loans as a source of short-term liquidity. Better information & lending mechanisms need to be tried.
Hoynes
Hilary Hoynes
Berkeley
Agree
6
Bio/Vote History
Better would be to provide some regulation of interest rates.
Judd
Kenneth Judd
Stanford
Agree
5
Bio/Vote History
I generally favor allowing voluntary transactions, but I suspect that demand is usually driven by behavior inconsistent with rationality.
Kaplan
Steven Kaplan
Chicago Booth
Disagree
9
Bio/Vote History
Kashyap
Anil Kashyap
Chicago Booth
Uncertain
9
Bio/Vote History
i doubt it is a generically good idea, but the research is very mixed, despite many, many papers; see the literature review by morgan et al
-see background information here
Klenow
Pete Klenow
Stanford
Agree
2
Bio/Vote History
Levin
Jonathan Levin
Stanford
Uncertain
4
Bio/Vote History
Maskin
Eric Maskin
Harvard
Agree
7
Bio/Vote History
Payday loans at usurious interest rates exploit borrowers' ignorance.
Nordhaus
William Nordhaus
Yale
Agree
5
Bio/Vote History
Obstfeld
Maurice Obstfeld
Berkeley
Uncertain
4
Bio/Vote History
Saez
Emmanuel Saez
Berkeley
Agree
5
Bio/Vote History
Most $ spent are heavy users which does not seem like a good arrangement. Occasional users can benefit. More wealth at bottom would be best.
Samuelson
Larry Samuelson
Yale
Disagree
5
Bio/Vote History
A ban would help those exploited by PD loans, but would harm those for whom such loans are a lifeline. "Most" is difficult to determine.
Scheinkman
José Scheinkman
Columbia University
Uncertain
5
Bio/Vote History
There is evidence that taking a payday loan increases bankruptcy but should first try other measures such as enforcing better disclosure.
-see background information here
Schmalensee
Richard Schmalensee
MIT
Agree
2
Bio/Vote History
On the one hand, some are victimized; on the other, some have no other source of needed credit. Not an easy call without facts.
Shapiro
Carl Shapiro
Berkeley
Disagree
3
Bio/Vote History
A complete ban seems extreme as a way of protecting borrowers from predatory lending.
Shimer
Robert Shimer
University of Chicago
Disagree
3
Bio/Vote History
No evidence of market power in this industry, so this seems to go against revealed preference. What markets arise if this is banned?
Stock
James Stock
Harvard
Agree
4
Bio/Vote History
Thaler
Richard Thaler
Chicago Booth
Disagree
4
Bio/Vote History
Loan sharks may be worse.
Udry
Christopher Udry
Northwestern
Uncertain
6
Bio/Vote History