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> But the morality of the credit card executive is a morality of autonomy: If I’m giving people choices, that’s a good thing. “How could I be making this custom

> But the morality of the credit card executive is a morality of autonomy: If I’m giving people choices, that’s a good thing. “How could I be making this customer worse off,” a credit card executive asks herself, “if nobody is forced to use this product?” I guess I'm an evil executive, because I do think that the default assumption is that people are better with more choices. There are obviously exceptions, but I'd want some evidence to the contrary before I started blaming others for offering them choices. And I'd want especially strong evidence if banning those choices is damn near impossible (since loan sharks will just appear), so that unilaterally deciding to not offer choices makes people even worse off (because they go to the loan shark instead). I went searching in this article for evidence, but couldn't find much. This seems to be the extent of it (am I missing something substantive?): > As Scott Schuh and Scott Fulford have shown in a paper for the Federal Reserve of Boston, people who get credit limit increases tend to keep their “utilization” constant. In other words: If a person is carrying a $1,500 balance when they have a $3,000 credit limit, you’d expect them to start carrying a $4,000 balance if the limit is raised to $8,000. If most people use the full credit-limit increases they are offered, the thinking goes, that must mean that most people want to borrow more money. Isn't this consistent with poor people needing loans, and yet them also wanting to make keep some of their credit limit in case things get even worse? The author's main argument seems to be that Capital One has a lot of research resources, and if they were making their subprime customers better off they would be able to prove it with data, but they can't so they must not be. > If [CEO] Fairbank cared to know the answer to any question—such as, “How many of the loans that we give out actually make the borrower’s life better?” or “What are the consequences of raising our credit card interest from the prime rate plus 19 percent to the prime rate plus 23 percent on child hunger in America?”—he could have gotten thoroughly researched answers. But those are the kinds of questions that the entire Capital One workplace was designed to drive out of view. The author concludes > When I was at Capital One, I wanted to understand if it was possible to keep loans as an option for the people who have exhausted all their better alternatives—without also causing suffering for those who would be better off forgoing purchases or borrowing money from friends and family. After five years, I concluded it was more or less possible to achieve that goal—to do the good loans without doing the bad loans. But I can't see why she thinks that.

JohnFen 7y ago
> I do think that the default assumption is that people are better with more choices The problem is that the default assumption is not a universal truth. It's a rule of thumb. If someone is in bad financial shape and I offer a loan to them, they'll probably take it because they have immediate pain that they want to fix. They are not likely to consider that the loan may ease their immediate problem, but will cause the problem to come back, but worse, later on. This is basic human behavior -- we care more about what is real right now than what will become real later on. Lenders, however, know this (or should), and to give such people the "choice" of making their situation worse later on in exchange for temporary relief right now is simply inhumane. I don't think it's unfair to characterize that lending behavior as "predatory".
- _bxg1 7y ago
  Exactly. Hardline capitalism assumes that everyone is a rational actor, and that therefore nobody offering a product or service can be at fault for harm coming to their customers. The problem is that people are often not able to be rational actors: - People can have bad or incomplete information: misleading advertising, lack of expertise in every subject area that affects their decisions, etc. - People can lack freedom to act: monopolies, lock-in, etc. - People can have their rationality itself undermined through desperation, emotion, or addiction Some of these problems have been patched over with laws. False-advertising law, nutrition labels, terms/agreements. Many have not. The third, and to a lesser degree the first, are the most relevant to the OP.
  - thwarted 7y ago
    Hardline capitalism assumes rational actors act with the information they have and assumes information asymmetry. The only way a price is agreed upon is with information asymmetry and rational actors: the buyer values obtaining an item in a certain way and the seller values getting rid of the same item a certain way. It matters not what those reasons are, nor that each side know the details of what leads to a narrow spread, only that the desired price itself be made public, shared with the other party. Hardline capitalism assumes the only important piece of shared information is the price. Rational actors and own-self-best-interest isn't about common, specific, long-term positions that an entire population might share (like increasing debt load is bad, or that having the most cash saved is good), only that the choice of price is set based on a number of variables, both internal and external to the actor. A desperate buyer might set their offer price high in order to attract sellers when there are none, despite not being able to pay (which is handled, positively or negatively, in other ways). A desperate seller might set their ask price really low because they have to get rid of inventory. Getting something "for a good price" is about the utility that comes about from having the exchange takes place vs not having the exchange takes place and each party being worse of. An addict might not be making the best decision for themselves and their livelihood but is making a rational decision if their goal is to get high. But hardline capitalism isn't necessarily the thing we want, because of the chance for abuse of the information asymmetry and that, while everything is encoded in the price, extracting and understanding those details and position of the other side is impossible.

JohnFen 7y ago

> I do think that the default assumption is that people are better with more choices The problem is that the default assumption is not a universal truth. It's a rule of thumb. If someone is in bad financial shape and I offer a loan to them, they'll probably take it because they have immediate pain that they want to fix. They are not likely to consider that the loan may ease their immediate problem, but will cause the problem to come back, but worse, later on. This is basic human behavior -- we care more about what is real right now than what will become real later on. Lenders, however, know this (or should), and to give such people the "choice" of making their situation worse later on in exchange for temporary relief right now is simply inhumane. I don't think it's unfair to characterize that lending behavior as "predatory".

_bxg1 7y ago
Exactly. Hardline capitalism assumes that everyone is a rational actor, and that therefore nobody offering a product or service can be at fault for harm coming to their customers. The problem is that people are often not able to be rational actors: - People can have bad or incomplete information: misleading advertising, lack of expertise in every subject area that affects their decisions, etc. - People can lack freedom to act: monopolies, lock-in, etc. - People can have their rationality itself undermined through desperation, emotion, or addiction Some of these problems have been patched over with laws. False-advertising law, nutrition labels, terms/agreements. Many have not. The third, and to a lesser degree the first, are the most relevant to the OP.
- thwarted 7y ago
  Hardline capitalism assumes rational actors act with the information they have and assumes information asymmetry. The only way a price is agreed upon is with information asymmetry and rational actors: the buyer values obtaining an item in a certain way and the seller values getting rid of the same item a certain way. It matters not what those reasons are, nor that each side know the details of what leads to a narrow spread, only that the desired price itself be made public, shared with the other party. Hardline capitalism assumes the only important piece of shared information is the price. Rational actors and own-self-best-interest isn't about common, specific, long-term positions that an entire population might share (like increasing debt load is bad, or that having the most cash saved is good), only that the choice of price is set based on a number of variables, both internal and external to the actor. A desperate buyer might set their offer price high in order to attract sellers when there are none, despite not being able to pay (which is handled, positively or negatively, in other ways). A desperate seller might set their ask price really low because they have to get rid of inventory. Getting something "for a good price" is about the utility that comes about from having the exchange takes place vs not having the exchange takes place and each party being worse of. An addict might not be making the best decision for themselves and their livelihood but is making a rational decision if their goal is to get high. But hardline capitalism isn't necessarily the thing we want, because of the chance for abuse of the information asymmetry and that, while everything is encoded in the price, extracting and understanding those details and position of the other side is impossible.