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Except that such institutions do exist, and in many cases they do trigger upwards spirals [1]. The high fixed costs of collection relative to the actual loan am

Except that such institutions do exist, and in many cases they do trigger upwards spirals [1]. The high fixed costs of collection relative to the actual loan amounts drive up the incentive to be a bad actor (on both sides of the transaction) and that makes small amounts of debt much more expensive than large amounts. But the existence of bad actors doesn't invalidate the positive impact access to low-cost loans can create. Also, to your question below about poor people's unwillingness to borrow money: this is absolutely a psychological barrier that can be difficult to overcome, and it's a known problem [2]. It's also not irrational: the increasing instability of wages at the bottom rungs of the economic ladder (last week you got scheduled for 29 hours, this week you got 5 hours) further increases the risk of taking on debt [3][4]. Nothing in the real world is as simple as that quote. People like it because it so clearly captures a very real situation - nobody is going to give you a zero interest loan to stock up on toilet paper, and the poorer you are the less liquid capital you have. [1] https://en.wikipedia.org/wiki/Microfinance https://en.wikipedia.org/wiki/Microfinance [2] http://www.ihep.org/sites/default/files/uploads/docs/pubs/factsheets/studentaversiontoborrowingfs.pdf http://www.ihep.org/sites/default/files/uploads/docs/pubs/fa... [3] http://www.res.org.uk/details/mediabrief/4410321/Americans-Face-Growing-Wage-Instability.html http://www.res.org.uk/details/mediabrief/4410321/Americans-F... [4] http://www.nbcnews.com/feature/in-plain-sight/shift-change-just-time-scheduling-creates-chaos-workers-n95881 http://www.nbcnews.com/feature/in-plain-sight/shift-change-j...

SilasX 11y ago
But the Vimes theory was being offered to explain socioeconomic inequality within a society and depends on the "poor" options being more expensive per unit, while the microfinance successes happen mainly via investment of from richer countries into poorer ones, where they have lower prices per unit. (i.e. a dollar buys a lot more stuff in the third world). IOW, to the extent that microfinance has successes, it's in situations that have the opposite dynamic of the Vimes example and do not count as an implication of the theory.
- dangerlibrary 11y ago
  There is nothing about the theory of microfinance that relies on the existence of international borders or differences in purchasing power. You have created a straw man. The fact that "impact per dollar" is greater when one is able to exploit purchasing power differences makes it relatively more attractive as a charitable enterprise, so many charity organizations gravitate there, but it is absolutely not a necessary component of a successful microlending structure.
  - SilasX 11y ago
    >There is nothing about the theory of microfinance that relies on the existence of international borders or differences in purchasing power. But there is about the Vimes theory, which is what I'm criticizing. That theory implies that microfinance should work within a society, where dollars don't go as far for the poor. The fact that microfinance is more effective as you deviate further from that situation, is then a point against that theory (even if not completely opposite). You're responding to a different point than the one I'm making. My point: "Vimes is wrong to attribute poverty to the poor not having access to a loan of $50 to buy longer-lasting stuff, as that would imply intra-society microloans would fix it, which doesn't happen." The point you're criticizing: "Vimes implies microfinance never works." (That, by the way, is how a well-supported accusation of strawmanning would look. "Strawman" means "replied to a wrong argument", not -- as you seem to be using it -- "one fact you relied on is false".)
    - dangerlibrary 11y ago
      > which doesn't happen. My point is that it does, just not as often.
      - SilasX 11y ago
        And we have a term for "a theory which only accounts for a small, unrepresentative subset of phenomenon": it's called a bad theory, which was my original point.

SilasX 11y ago

But the Vimes theory was being offered to explain socioeconomic inequality within a society and depends on the "poor" options being more expensive per unit, while the microfinance successes happen mainly via investment of from richer countries into poorer ones, where they have lower prices per unit. (i.e. a dollar buys a lot more stuff in the third world). IOW, to the extent that microfinance has successes, it's in situations that have the opposite dynamic of the Vimes example and do not count as an implication of the theory.

dangerlibrary 11y ago
There is nothing about the theory of microfinance that relies on the existence of international borders or differences in purchasing power. You have created a straw man. The fact that "impact per dollar" is greater when one is able to exploit purchasing power differences makes it relatively more attractive as a charitable enterprise, so many charity organizations gravitate there, but it is absolutely not a necessary component of a successful microlending structure.
- SilasX 11y ago
  >There is nothing about the theory of microfinance that relies on the existence of international borders or differences in purchasing power. But there is about the Vimes theory, which is what I'm criticizing. That theory implies that microfinance should work within a society, where dollars don't go as far for the poor. The fact that microfinance is more effective as you deviate further from that situation, is then a point against that theory (even if not completely opposite). You're responding to a different point than the one I'm making. My point: "Vimes is wrong to attribute poverty to the poor not having access to a loan of $50 to buy longer-lasting stuff, as that would imply intra-society microloans would fix it, which doesn't happen." The point you're criticizing: "Vimes implies microfinance never works." (That, by the way, is how a well-supported accusation of strawmanning would look. "Strawman" means "replied to a wrong argument", not -- as you seem to be using it -- "one fact you relied on is false".)
  - dangerlibrary 11y ago
    > which doesn't happen. My point is that it does, just not as often.
    - SilasX 11y ago
      And we have a term for "a theory which only accounts for a small, unrepresentative subset of phenomenon": it's called a bad theory, which was my original point.