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The calculated interest rate on payday loans is misleading. Poor people don't think of it that way. When they borrow $300 for a short-term loan and have to pay

The calculated interest rate on payday loans is misleading. Poor people don't think of it that way. When they borrow $300 for a short-term loan and have to pay $30 for the privilege, they're making a rational decision that the $30 later isn't worth as much as the $300 now. There's a recent article on the payday loan industry that confirmed my hunch that the people using them aren't total imbeciles and know what they're doing. I use credit as a management tool, it gives me options I wouldn't have otherwise. Payday loans are the same, they're just more expensive. I would still use credit if it were more expensive, up to a point where it would be more advantageous to just change the way I perceive money. Also payday loans are only available to a certain class of the working poor. People with temp jobs or other kinds of inconsistent income can't avail themselves of this kind of credit. They get a lot of press but are really just a niche in the vast constellation of services, both legal and illegal, legible and illegible, that sustain the poor. I used to use a payday loan business to cash my paychecks when I couldn't get a bank account. The experience struck me as benignly capitalistic, you don't really want to be in the position of having to use these services, but having access to them is way better than the alternative. > every half mile driven Poor people here aren't that constrained, mostly because gas is and will probably forever be really cheap. In other countries that aren't oil-states gas is an order of magnitude more expensive. Keeping gas costs down is a priority, but not as big of one as meeting housing costs. Housing is the biggest expense most Americans, not just the poor ones, have to contend with. Transportation in comparison is treated as a cost of doing business. > Living from paycheck to three days before the next paycheck is not a pain that can be pacified with distraction. What poor people do on their phones constantly is cultivate the relationships that sustain them. It is not a distraction the way we think of playing silly games. They are texting, facebooking, even their game playing is done with their friends / family. Poor people are way more social than the middle / upper class could ever be, because they have to.

SolaceQuantum 11y ago
Being poor is actually not something that can be coped with through consistent social behavior. The chronic stress that defines the experience of poverty have lasting effects on a brain.
- vinceguidry 11y ago
  Depends on what you mean by coping. I was poor, I managed to escape it. The brain effects studied, in my experience, aren't a life sentence fundamentally destroying your ability to survive and be happy. It's absolutely relative, having a $60K a year salary is going to be much better than $30K inconsistent. But it's not like you can't carve out a fulfilling existence with limited resources. I believe that's a way more damaging belief about the poor than the (wrong) belief that the poor are only poor because they are inherently incapable of being rich. Which is how I see people interpreting those recent research results.
  - TheOtherHobbes 11y ago
    The poor are poor at least in part because they're prevented from being rich by a combination of poor education, media distraction, and lack of access to working capital. A few individuals can always break out of the ghetto. But the ghetto is a human trash heap - the graveyard of much raw talent and potential collective prosperity. It really shouldn't exist in the first place.
  - drumdance 11y ago
    $30k is not poor. Most definitions of poverty are $28k for a family of four.
- enraged_camel 11y ago
  Poverty also has significant negative effects on the physical, mental and social development of children.
crdoconnor 11y ago
>Poor people don't think of it that way. When they borrow $300 for a short-term loan and have to pay $30 for the privilege, they're making a rational decision that the $30 later isn't worth as much as the $300 now. They're not making a rational decision. It's an amygdala based decision. The same part of your brain that deals with panic, fight / flight, etc. The resource constraints they are under make it impossible to think long term the same way that you stop thinking about your pension plan when you're running away from a bear. This is why it's such a profitable business (non-rational decisions -> profit), and why, when you take payday loans away, poor people actually end up better off (there have been studies on this that I know for a fact you will not attempt to research).
- vinceguidry 11y ago
  Again, it sounds like you believe poor people cannot actually make any decisions at all. It's true, their options are limited by lack of means. But they are not automatons that have their every choice made for them by greedy capitalists. > It's an amygdala based decision. That's utterly silly. To be eligible for a payday loan, you have to have a paycheck. One cannot hold down a job long enough to qualify for a payday loan if you are constantly in fight-flight mode. Again, there's a recent article you should read about payday loans. The vast majority of people use them in the same way and for the same reasons we use a credit card, to handle unexpected expenses, and pay them off within a few weeks. The number of people carrying balances is only a few percent. Obviously, they would be better off if you could just give them credit cards, maybe, but that's not an option. You're allowing your beliefs about what it's like to be poor override the glaringly-obvious fact that 99% of all the people in the entire world are poor. If it were really the mind-crushingly awful thing you're portraying it as, then we never would have built civilization at all because none of us would have any long-term thinking at all. I'm not going to go look the payday loan studies you point to because it's a side-show to the main disagreement we're having about what it's like to be poor.
  - crdoconnor 11y ago
    >Again, it sounds like you believe poor people cannot actually make any decisions at all What you said to yourself in your head while reading my words is immaterial. >> It's an amygdala based decision. >That's utterly silly. Because the limbic system does not engage if one has a job? What's utterly silly is the firmly held and unquestioning assumption that you hold that decisions made by humans under extreme pressure are always rational. Despite the evidence to the contrary. Nonetheless, I suppose it is a convenient assumption to make should one wish to engage in exploitation of the poverty stricken for profit.
6502nerdface 11y ago
> There's a recent article on the payday loan industry that confirmed my hunch that the people using them aren't total imbeciles and know what they're doing. You may be thinking of this recent article: http://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday-lending.html http://libertystreeteconomics.newyorkfed.org/2015/10/reframi...
- vinceguidry 11y ago
  Thanks, yes, that's the article.

SolaceQuantum 11y ago

Being poor is actually not something that can be coped with through consistent social behavior. The chronic stress that defines the experience of poverty have lasting effects on a brain.

vinceguidry 11y ago
Depends on what you mean by coping. I was poor, I managed to escape it. The brain effects studied, in my experience, aren't a life sentence fundamentally destroying your ability to survive and be happy. It's absolutely relative, having a $60K a year salary is going to be much better than $30K inconsistent. But it's not like you can't carve out a fulfilling existence with limited resources. I believe that's a way more damaging belief about the poor than the (wrong) belief that the poor are only poor because they are inherently incapable of being rich. Which is how I see people interpreting those recent research results.
- TheOtherHobbes 11y ago
  The poor are poor at least in part because they're prevented from being rich by a combination of poor education, media distraction, and lack of access to working capital. A few individuals can always break out of the ghetto. But the ghetto is a human trash heap - the graveyard of much raw talent and potential collective prosperity. It really shouldn't exist in the first place.
- drumdance 11y ago
  $30k is not poor. Most definitions of poverty are $28k for a family of four.
enraged_camel 11y ago
Poverty also has significant negative effects on the physical, mental and social development of children.

crdoconnor 11y ago

>Poor people don't think of it that way. When they borrow $300 for a short-term loan and have to pay $30 for the privilege, they're making a rational decision that the $30 later isn't worth as much as the $300 now. They're not making a rational decision. It's an amygdala based decision. The same part of your brain that deals with panic, fight / flight, etc. The resource constraints they are under make it impossible to think long term the same way that you stop thinking about your pension plan when you're running away from a bear. This is why it's such a profitable business (non-rational decisions -> profit), and why, when you take payday loans away, poor people actually end up better off (there have been studies on this that I know for a fact you will not attempt to research).

vinceguidry 11y ago
Again, it sounds like you believe poor people cannot actually make any decisions at all. It's true, their options are limited by lack of means. But they are not automatons that have their every choice made for them by greedy capitalists. > It's an amygdala based decision. That's utterly silly. To be eligible for a payday loan, you have to have a paycheck. One cannot hold down a job long enough to qualify for a payday loan if you are constantly in fight-flight mode. Again, there's a recent article you should read about payday loans. The vast majority of people use them in the same way and for the same reasons we use a credit card, to handle unexpected expenses, and pay them off within a few weeks. The number of people carrying balances is only a few percent. Obviously, they would be better off if you could just give them credit cards, maybe, but that's not an option. You're allowing your beliefs about what it's like to be poor override the glaringly-obvious fact that 99% of all the people in the entire world are poor. If it were really the mind-crushingly awful thing you're portraying it as, then we never would have built civilization at all because none of us would have any long-term thinking at all. I'm not going to go look the payday loan studies you point to because it's a side-show to the main disagreement we're having about what it's like to be poor.
- crdoconnor 11y ago
  >Again, it sounds like you believe poor people cannot actually make any decisions at all What you said to yourself in your head while reading my words is immaterial. >> It's an amygdala based decision. >That's utterly silly. Because the limbic system does not engage if one has a job? What's utterly silly is the firmly held and unquestioning assumption that you hold that decisions made by humans under extreme pressure are always rational. Despite the evidence to the contrary. Nonetheless, I suppose it is a convenient assumption to make should one wish to engage in exploitation of the poverty stricken for profit.

6502nerdface 11y ago

> There's a recent article on the payday loan industry that confirmed my hunch that the people using them aren't total imbeciles and know what they're doing. You may be thinking of this recent article: http://libertystreeteconomics.newyorkfed.org/2015/10/reframing-the-debate-about-payday-lending.html http://libertystreeteconomics.newyorkfed.org/2015/10/reframi...

vinceguidry 11y ago
Thanks, yes, that's the article.