Consumerist: Ignorant of Basic Economics (A Defense of Payday Loans)

Posted on January 17, 2013 by Dude Where's My Freedom?

Consumerist always makes for some fun reading.  Usually they spend their time over-hyping the most trivial (and occasionally fraudulent) customer complaints and simply vilifying corporate America for having the audacity to offer us products that we may choose to buy.  They have a particular hatred for short-term, unsecured loans, commonly referred to as “payday loans.”

In this post, they attempt to discredit an obviously thoughtful article produced by two men with some pretty thorough credentials (Harvard and UVA to be precise).  Consumerist, as usual, seems to completely ignore the main thesis of the article and rather substitute some rather off-topic fallacies in an attempt to try and convince the reader that payday loans are in fact totally evil.

The very first argument they attempt to make is a pretty blatant and unapologetic appeal to authority.  Many states (as well as the greatest source of wisdom and common sense in the known universe:  The U.S. military) have made them illegal (largely thanks to special interest agitators like Consumerist), therefore they must certainly be bad.  This is what passes for a well-constructed argument on this website.  The possibility that the government might ever make a mistake and actually do something that doesn’t result in sunshine and rainbows for everyone is not considered.  The fact that many states have not in fact made it illegal for poor people to get loans is not considered particularly relevant.

They then go on to quote someone named Gina Green from something known as the “Center for Responsible Lending” as an authority on these matters.  A biography for Ms. Green is not available, nor is a link (or any background information whatsoever) provided for this center.  Ms. Green responds by bringing up different legislation for some reason, and then relying on the only argument these people ever have:  pointing out that payday loans charge exorbitant levels of interest as measured by the annual percentage rate (APR).  For some reason, the left is absolutely obsessed with APR and considers it to be the only legitimate form of measuring interest.  Of course, percentage-based APRs mean very little to the average poor person who is in need of a payday loan.  This person is quite likely to have little or no banking experience or financial expertise.  They don’t know (and likely don’t care) what an “appropriate” (a completely subjective term, as an “appropriate” level of interest can only be truly determined by market transactions) level of interest is.  They do not consider the APRs of various car loans, mortgages, and credit cards to be particularly relevant to their payday loan transaction, probably because they aren’t.  The payday loan customer is interested in three things:  How much money am I getting?  When do I have to pay it back?  How much do I have to pay back?  These are three very simple questions that are easily answered and easily understood.  By answering these simple questions, the typical payday loan is arguably much more transparent, when measured by the criteria that their customers actually care about than your typical auto loan or credit card.  As far as the assertion that these high interest rates would “make loan sharks blush,” that statement assumes that interest rates are the only criteria consumers care about when seeking loans, which is obviously not the case.  Loan sharks are unsavory fellows, and the penalty for defaulting on one of their loans is significantly more severe than for defaulting on a payday loan.  Because payday loans are more preferable to loan sharks in any number of other ways, they can charge a higher rate of interest.

Anyway, Consumerist continues to make an irrelevant and nonsensical comparison to subprime mortgage loans (an odd comparison in that many poor people did in fact benefit from sub-prime lending, and it was the banks the taxpayers who ended up footing the bill).  They then cite a letter by a Democratic Senator (truly a friend of the working poor, who only wants to help them by eliminating some of their choices!) demanding that banks not engage in payday loans.  Nevermind the fact that the vast majority of payday loans do not in fact originate in banks.

They then throw in a quote from “Consumer’s Union senior policy counsel Pamela Banks” (once again, no biographical information is provided) that completely misses the point and isn’t even worth reproducing and refuting.  They save the worst of all for the end of the article though…

“When stripped of its academic pretense, the Zywicki and Sarvis article is effectively saying that bad loans help people.”

No, actually the article is saying that payday loans help people.  Whether a loan is good or “bad” is a completely subjective question that can only be answered by the individual who seeks out the loan.  While political elites and professional bloggers may live a lifestyle that allows them easy access to cheap, low-interest credit, much of America’s working poor does not.  To these people, payday loans offer a convenient way of meeting obligations.  The loans are obviously not “bad” for them, because they choose to get them.  The mere fact that they seek these loans out in such large numbers is proof positive that the loans are in fact good for consumer.  Ultimately, the Consumerist argument comes down to same argument always offered by the elitist nanny-staters and central planners:  That the poor are simply too stupid to manage their own affairs.  That if trusted to run their own lives, they will make “bad” decisions, therefore it is the role of the government to limit their choices and deprive them of what they believe their best alternatives are.  Contrary to what the elites believe, making payday loans illegal will not mean that the poor will now magically have low-interest credit cards and receive favorable, low-interest loans from banks.  It means that they will either resort to even less reputable methods, such as loan sharks, or that they will simply be unable to obtain credit at all, in which case the consequences could be devastating, and include all sorts of nightmarish scenarios.  They might have their electricity turned off.  They might not be able to afford transportation to get to work.  Their children might go hungry.  They might resort to crime to meet their obligations.

But at least they won’t have to pay an APR that is “too high,” right?  It is absolutely impossible to help the poor by making a list of all of their options and then crossing off the option that they actually chose, and this is exactly what payday loan prohibition hope to accomplish.  Payday loans are a good thing for society.  They provide short-term financing for desperate individuals who otherwise would go without it.  They are a completely moral and honorable instrument of modern finance that should no longer be vilified.  By seeking to eliminate them, the Consumers Union shows astounding ignorance, combined with a complete and utter disdain for America’s working poor.

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The Free Market Triumphs Over Crabs

Posted on January 16, 2013 by Dude Where's My Freedom?

Brazilian Bikini Waxes Make Crab Lice Endangered Species :: Bloomberg

Human progress continues unabated!  It would seem that we are now close to eradicating pubic lice – a parasite that has plagued humanity for centuries.  It’s really an amazing achievement – surely it could not have been brought about by random individuals engaging in voluntary trade with only their own self-interests in mind, could it?  Something this impressive has to have been due to large government research grants, and social welfare programs, right?

Well, no.  Not at all.  The eradication of crabs is not due to some advanced medical procedure, but rather, to the growing trend worldwide of removing pubic hair, the habitat for the lice.  I’m no expert in social welfare programs, but as far as I know, no government anywhere has ever paid for people’s bikini waxes.  There are no hair removal stamps you can collect to subsidize this procedure, despite the fact that it could now be considered medically beneficial.  No, the bikini wax is one of the rare items you can purchase in today’s society that is almost completely unregulated.  The FDA does not have to approve waxing techniques.  You don’t need a prescription.  Customers pay in cash or cash equivalents, no complicated insurance forms are necessary.

And yet somehow, despite no government assistance whatsoever, the industry has grown from virtually nothing to thriving to an extent that it has single-handedly wiped out a harmful (and socially embarrassing) parasite.  Truly an impressive achievement for the free market, and more proof that humanity can accomplish great things if only the meddling statists would just get out of the way.

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Creative Commons and the Anti-IP Crowd

Posted on January 14, 2013 by Dude Where's My Freedom?

I created this logo.

Intellectual property restrictions represent one of the most divisive issues of the day, even among the libertarian community.  These days, it seems as if the anti-IP crowd is in the majority, and gaining ground.  I fall in the pro-IP camp myself, although it isn’t a very big issue for me.  Generally, I agree with Rothbard’s famous defense of patents and copyrights, that they represent conditions that buyers agree to when purchasing a work, and thus are a form of contract.  As he explains in Man, Economy, and State:

“Let us consider copyright. A man writes a book or composes music. When he publishes the book or sheet of music, he imprints on the first page the word “copyright.” This indicates that any man who agrees to purchase this product also agrees as part of the exchange not to recopy or reproduce this work for sale. In other words, the author does not sell his property out­right to the buyer; he sells it on condition that the buyer not reproduce it for sale. Since the buyer does not buy the property outright, but only on this condition, any infringement of the con­tract by him or a subsequent buyer is implicit theft and would be treated accordingly on the free market. The copyright is there­fore a logical device of property right on the free market.”

Of course, the anti-IP crowd doesn’t see it this way, and many, in an attempt to prove just how serious they are, advocate the free sharing of their own work.  One of the most commonly used devices for this end is the Creative Commons licensing system.  As far as I can tell, the most commonly used creative commons license is also the least restrictive, in that it allows free sharing, distribution, and use, only requiring attribution.  From the Creative Commons website:

“This license lets others distribute, remix, tweak, and build upon your work, even commercially, as long as they credit you for the original creation. This is the most accommodating of licenses offered. Recommended for maximum dissemination and use of licensed materials.”

Seems significantly different from a traditional copyright, doesn’t it?  However, if you look closely, you might see that is based upon the same logic as Rothbard’s contract theory.  The creative commons license does not give completely unrestricted access to one’s work, ideas, or “words on a page.”  It too imposes a condition, namely, attribution.  So what happens if someone chooses not to attribute?  If they pass the work off as their own?  Presumably, the original author is prepared to use force against them in order to rectify the situation, much as the holder of a copyright uses force to prevent someone from copying their work.

Any author, musician, or artist who truly believes that ideas should be free and that intellectual property restrictions are illegitimate should not bother to utilize a Creative Commons license, as this license operates under the same logic and legal framework that a copyright does.  If you would like your work to truly be free, simply release it to the public domain (Creative Commons has a resource for that as well).  To attach the pre-condition of attribution to a work simply shows that you agree with Rothbard’s principle of a contract between the buyer and seller that the buyer agrees to abide by the seller’s preconditions.  If I am expected to honor your condition of attribution, then you should be expected to honor the pre-condition of not copying or sharing materials that is required by most copyright holders.

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The Swiss Sell Out

Posted on January 11, 2013 by Dude Where's My Freedom?

FATCA Cliff:  Tax Evasion And Guilty Plea For Oldest Swiss Bank :: Forbes

I don’t know nearly enough about international law and banking regulations to offer any real intelligent commentary about this.  Perhaps someone who does know a little bit about these things could enlighten me as to how American courts have any jurisdiction over a bank that does not have any physical presence within the U.S.

But putting that aside, the message is clear.  If you are an American, your money is not safe from the greedy paws of the looters.  Not here, not offshore, and certainly not in Switzerland.  After centuries of banking independence, they have officially sold out to the globalized statists.

Bitcoin is looking better and better every day.

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Glenn Beck: Ignore News From Sources You Don’t Agree With

Posted on January 9, 2013 by Dude Where's My Freedom?

Glenn Beck’s reaction to the Piers Morgan/Alex Jones showdown was typically hilarious.  He simply couldn’t help himself.  He devoted the entire first segment of his radio show to running down Alex Jones, making great effort to avoid even so much as mentioning his name (oddly enough, he never has any problem name-dropping leftists with whom he is not in direct competition).

Now, criticizing Alex Jones is fine.  I am not a fan of Alex Jones.  I don’t listen to his show.  Occasionally, on very rare occasions, I may watch a video on Youtube produced by Infowars, and that’s about it.  I do listen to Glenn Beck regularly, and consider myself a fan of his.  So just know that those are my biases going in.

But I think that Glenn is 100% wrong on this one, and in a very important (and somewhat ironic) way.  Late in the segment, Glenn claims that you cannot trust anything you get from Infowars because Alex Jones is in charge of it.  He also throws in RT (generally the only cable news network that is willing to allow true libertarians to have a voice) in there for good measure, claiming you cannot believe anything they say because they are Russian state media.  Now don’t get me wrong, I am somewhat skeptical of Alex Jones and I am incredibly skeptical of Vladimir Putin’s personal propaganda network.  I always try to keep in mind that the reason RT allows libertarians to speak is because they know we will insult the U.S. government, which is all they really care about.

The irony here is that Glenn Beck has his own website, The Blaze, which has grown very quickly and is trying to position itself as a completely legitimate source of news.  However, the success of this site hinges entirely on the willingness of people who don’t necessarily agree with Glenn Beck’s politics to be willing to judge news articles based on the facts contained in the stories, rather than the alleged sanity of the owner of the website, or whether or not they agree with the owner’s political agenda.  I can’t even tell you how many times I’ve posted a link to an article on The Blaze only for a leftist to immediately come in shouting, “Oh, that’s The Blaze!  That’s GLENN BECK’S website!  Everything on it is obviously a lie!”  To me, that seems like a pretty unfair conclusion to draw, so I always insist that they specify exactly what facts in the article they are disputing and why, which they never bother to do.

It is a shame that Glenn is not willing to extend this same reasonable courtesy to Infowars or to RT.  Rather than point out specifically what they are getting wrong, he is simply demonizing the messenger, a tactic that he vehemently opposes when it is used against him.  If Americans followed his advice, and immediately disregarded news from any source where they thought the owner was insane (his reason you can’t trust Infowars) or where they disagreed with the owners political motivations (his reason you can’t trust RT), his own website would be in shambles, and the media empire he has built would not exist.

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Statists in Steubenville

Posted on January 7, 2013 by Dude Where's My Freedom?

statists in training

The case of the alleged rape of a teenage girl by members of the high school football team in Stubenville, Ohio has many different dynamics in play that have created some quite vitriolic debate on message boards across the Internet.  Questions surrounding the legal definition of consent, the duty of bystanders to stop or report crimes, and the potential for sports stars to receive preferential treatment seem to be the most hotly debated topics.  But I’d like to focus the debate on the alleged cover-up.  Many seem quite convinced (and I find it quite likely myself) that school district officials, local law enforcement, and the various football coaches and boosters have gone out of their way to sweep this incident under the rug and attempt to diminish the severity of the charges.

Many people find this to be shocking or outrageous, but I do not.  In fact, I find it to be entirely predictable.  Such actions are completely and totally in line with collectivist political philosophy, and nearly all the parties involved work for the government and worship at the altar of statism on a regular basis.

The article in the New York Times describing the incident refers to the Steubenville football team as a source of pride in the local community.  It brings entertainment, excitement, and likely a pretty decent amount of money to an area that is slowly decaying in both material wealth and cultural relevance.  Meanwhile, in the local high school, teachers and administrators reinforce and affirm the principles of collectivism in young minds.  The local police force is available to mete out swift and brutal “justice” to any who would dare live outside the rules that the state has set for them.

Under the philosophy of statism, the needs of the collective are considered superior to the needs of the individual.  I would guess that in the ranks of employees within the Steubenville education system and police force (and indeed, among American society at large), this principle is accepted as self-evident, and without controversy.  Given such a mindset, the actions of these parties in the aftermath of such an event is entirely consistent.  I have to ask:  If the statists are right, and the collective is superior to the individual, why shouldn’t Steubenville officials cover up this crime?  After all, the continued success and positive image of the football team benefits the collective.  Regardless of one’s personal opinion of the merits of competitive sport, it seems indisputable that this particular football team provides joy and comfort to thousands.  The victim, meanwhile, is just an individual.  Just one girl who had an act of aggression committed against her by a protected class of individuals, the high school football team.  A class of individuals that is protected specifically because of the benefits they provide to the collective.

I’d like to challenge anyone who thinks that the behavior of the school officials and local law enforcement was wrong to re-consider their political and philosophical premises.  Why were they wrong?  Why is it wrong, in this specific case, to put the needs of the collective above the needs of the individual, but it supposedly isn’t wrong to do that in other cases?

Ultimately, this tragedy is just another example of the failures of statism and collectivism, and exposes the inconsistencies of many who hold those tenets in high regard.  The only truly moral system of values is, of course, strict adherence to the non-aggression principle.  The right of an individual to not have acts of aggression committed against them is paramount, regardless of whether the act of aggression comes from one individual, multiple individuals, a group of individuals protected by the state, or the state itself.  What happened to the alleged victim in Steubenville is, unfortunately, the logical conclusion of the statist philosophy that dominates our society.  Until we win the war of ideas and change this philosophy, we should expect it to continue happening, and we should not be shocked with results like these.

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Planning for Failure (Latest Greek Edition) :: The Circle Bastiat

Posted on January 4, 2013 by Dude Where's My Freedom?

Planning for Failure (Latest Greek Edition) :: The Circle Bastiat

The Circle Bastiat (the official blog of the Ludwig Von Mises Institute) draws attention an interesting phenomenon taking place in Greece.  As traditional fuels become more and more difficult for the average person to obtain (due to a mixture of general impoverishment and government price controls), the citizens of Greece are, of course, adapting.  Contrary to what the government might prefer, they are not simply rolling over and freezing to death.  Rather, they are substituting the burning of heating fuel (which itself was being used as a substitute for diesel fuel) with the burning of wood.  This has resulted in a dramatic reduction in the air quality in the city of Athens.

Contrary to what many environmentalists would have you believe, oil and coal are not the dirtiest sources of energy.  That honor falls to the burning of biomass, such as wood.  Burning wood is so unbelievably less efficient than coal or oil, that the amount of fuel required to obtain an equivalent amount of energy is staggering.  It results in greater air pollution, greater carbon emissions, and greater damage to natural resources.  Dirt poor citizens of rural China do not have the option of windmills or solar panels.  The burning of coal and oil in the developing world generally results in improvements to the environment, because it typically is replacing the burning of biomass.

So the good little socialists who dominate Greece, in their efforts to save the environment, are actually making things far worse.  They’re also dramatically reducing the quality of life for the average Greek citizen (not that they care about such trivial matters).  If access to efficient sources of energy is a sign of economic development, the Greek government is quite literally de-developing its nation.  They are intentionally moving backwards.  A sad, if not entirely predictable state of affairs.

Note:  The premise behind the “coal vs biomass” argument is adopted from the book Power Hungry by Robert Bryce, a very informative read that dispels the numerous myths surrounding “green energy.”

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Thought Controllers Wrong Again / Is Being Overweight Actually Healthy?

Posted on January 2, 2013 by Dude Where's My Freedom?

A few extra pounds may be healthy

I came across this story while browsing Google News.  It wasn’t at the top of the page under “Top Stores,” or in the “Editor’s Picks.”  It also wasn’t featured in the “Spotlight” or “Most Popular” sections.  It was at the very bottom of the page, the third of three stories in the “Health” section (a section that most people probably have disabled entirely).

Why would this be the case?  The potential ramifications of this study are enormous.  If accurate, it could refute nearly everything we assume about proper nutrition and health.  It could impact decision making among individuals, corporations, and governments to an enormous extent.  It would certainly impact the average person’s everyday life infinitely more than the latest bipartisan spending bill nonsense that is currently dominating the headlines.

So why isn’t this story a bigger deal?  Could it have anything to do with the fact that, if true, it would mean that the collective governments of the world, nearly all of the medical establishment, and nearly all of the media were completely and totally wrong on a massive scale?  It would mean that all the money we’ve spent and all the draconian policies we’ve implemented “fighting obesity” were not actually doing any good towards improving human health and happiness whatsoever.  In fact, they’ve likely caused harm.  In an era where public schools send notes home to parents telling them that their children are too fat, based solely on their BMI, it would be fairly significant to find out that what the BMI considers to be overweight is actually healthier than what it considers to be normal, would it not?  Contrast this to the treatment of studies that re-enforce the media and the state’s current preferred information, which typically receive front-page treatment and are shouted from the rooftops.

What amazes me the most about this article is that there doesn’t seem to be any real case against it.  They weren’t able to find someone to denounce the study or declare it obviously incorrect.  The closest thing to criticism they provide is the director of the CDC basically giving a non-answer and saying “We still have a lot to learn.”  What a ridiculous response that is.  If true, this study would essentially change everything we know about how someone’s weight relates to their health, a topic that seems to be a pretty big deal to a lot of people.  And that’s the best the establishment can do?  Shrug their shoulders and say whatever?

It’s entirely possible that this study is wrong.  I don’t claim to be an expert on health or nutrition; in fact, it’s probably one of the things I’m least informed about.  However, this study should be a huge eye-opener to anyone who blindly trusts the government to provide correct information on vital topics such as health.  Sometimes, they get it really really wrong, and if they find out they’re wrong, they’d much rather continue being wrong than admit to a mistake.

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Defending the State: Drunk Driving Laws

Posted on December 31, 2012 by Dude Where's My Freedom?

I’m about to do something pretty rare for me and disagree with a prominent pro-liberty writer.  In this article, Jeffrey Tucker (who’s writing I am generally a huge fan of) tackles a common theme in the libertarian world, laws against drunk driving.  The typical argument goes that driving while intoxicated in and of itself is not an act of aggression, and therefore should not be subject to draconian punishment.  This is quite a reasonable assertion, and in a perfect world, I would stand ready to agree with it.

However, at some point we must concede that the world we live in is quite imperfect.  One of the most obvious imperfections is the presence of a rather large and rather meddlesome state.  I am more than willing to engage in the occasional theoretical debate about how we might structure society in the absence of a state, but for the moment the state is here, and we must take that into consideration when discussing exactly how societal order should be maintained.

The primary factor that I believe Mr. Tucker and others are overlooking in this matter is the burden of proof for alleged offenses.  Blanket statues such as “No driving with a BAC over 0.08” or “No texting while driving” offer one huge advantage over more general laws such as “Do not drive recklessly.”  They can be measured objectively, and as such, they take a great deal of power away from individual law enforcement officers.  Current punishments for DUI can be quite draconian and nearly always include immediate arrest, at least one night in prison, fines and legal fees in the thousands of dollars, a suspended license, and lengthy mandatory courses.  Certainly no laughing matter.  Fortunately, there is no major concern that many people are falsely convicted of DUI, because there is a standard blood test that is not subject to the individual bias of a certain police officer.  While the officer uses his discretion in deciding who to pull over, being actually convicted of the crime typically requires a positive result from a scientific test.

Let us imagine if that were not the case.  Would Mr. Tucker and other pro-liberty activists favor putting the power to destroy someone’s life completely into the hands of individual law enforcement officers?  Certainly if the crime of DUI were replaced with a vague “reckless driving” law, but the punishment remained the same, every case of reckless driving would come down to a “he-said, she-said” argument between the accused and the law enforcement officer.  Officers could claim anyone was driving recklessly, and it would be rather difficult for the accused to prove otherwise.  This opens up the doorway to huge potential abuses.  Officers could accuse minorities, they could accuse randomly to attempt to meet a quota, they could even start pulling over people with Ron Paul bumper stickers and arresting them on the spot for driving dangerously.

Ultimately, this issue, like many others in our society, comes down to whether (in terms of legal statues) we prefer subjective laws or objective laws.  Subjective laws, such as “reckless driving” are certainly more targeted towards actual acts of aggression and, if implemented perfectly, more fair.  However, objective laws are certainly far easier to measure, enforce, and adjudicate properly.  I would suggest that replacing a subjective statute such as “do not drive dangerously” with an objective statute such as “do not drive with a BAC over 0.08” actually enhances individual freedom, as it creates an objective standard that we can all measure and take great care to maintain, rather than being at the mercy of the arbitrary whims of the government’s so-called peacekeepers.

As a final point of comparison, I would ask Mr. Tucker and other like-minded libertarians how they would feel if we replaced all speed limits with “officers are free to ticket whoever they deem to be driving too fast.”  I cannot imagine that any self-respecting libertarian would prefer such a change.

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Branson Becomes Face of U.K. Health Flap – WSJ.com

Posted on December 28, 2012 by Dude Where's My Freedom?

Branson Becomes Face of U.K. Health Flap – WSJ.com.

Why yes, yes I do.

While America starts running towards socialism, Europe is slowly realizing that it doesn’t work.  This article explains how Britain’s failing National Health Service is turning to millionaire business mogul Richard Branson to help pick up some of the slack.

As you might imagine, the left is absolutely outraged.  Branson is, after all, a businessman who seeks a profit, which is obviously evil.  This is easily confirmed by the fact that his company has instituted evil policies such as extending service hours, offering more flexible walk-in appointments, and showing a previously non-existent interest in customer satisfaction.

My favorite part of this article is actually one of the pictures, where a protester holds up a sign with a picture of Branson saying, “Do you want this man in charge of your health care?”

My answer?  If the alternative is a faceless government bureaucracy, yes, I absolutely do.  Branson, as a successful businessman, has proven over decades that he is able to deliver quality products to consumers at reasonable prices.  He understands concepts such as scarcity, supply and demand, and competition.  These concepts are real restraints on all human activity, and they are restraints that government likes to pretend do not exist.  He is eminently more qualified to provide a critical good like health care to the masses at large than any government ever could be.

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