As for 1, the whole article is arguing a case where that is not true. They are illustrating a case where Mary's $130 is not worth much of anything: it doesn't

As for 1, the whole article is arguing a case where that is not true. They are illustrating a case where Mary's $130 is not worth much of anything: it doesn't pay half of her $250 liability and get her out of half of the downside. It's useless. But doubled, it has some utility. Granted it's an oversimplification, because that $130 could be used for something, and yes, #2 and #3 are probably better. (Though with fees and multiple rollovers, the payday loan could be ouchy). Still - declining marginal utility is not always the case. There are plenty of situations like this one, (especially for a corporation) where having half of the money necessary gets you nothing. Of course, there are also almost always better ways of securing that financing, unless you're the only person that perceives the odds that way. Here's an interesting example in my life - if I get a windfall, the marginal value starts off low (I don't change my lifestyle), rises somewhat (it becomes enough for me to take a breather from my job and spend more time working on my startup), and eventually declines as I no longer need more to work. Or in other words, I can't retire because I got $10k. Not useful. But if I can make that $50k, I can survive for a year+ and try to launch a company - that's useful. The value of that $50k is more than 5 times as much as the $10k. (Though the $10k does get me that much closer to having enough...)