August 31, 2010

Moving Forward: A Legal/Economic Analytic Framework for the Regulation of Consumer Credit Transactions

Duncan Kennedy

MF10-11: Consumer transactions of all kinds are heavily regulated in the US (and all other developed capitalist countries) but debates on regulation in the US are dominated by de-contextualized argument-bites, such as "you are hurting the people you are trying to help" and "free markets are presumptively best for growth." This paper presents, schematically, some typical responses. There are efficiency arguments for regulating transactions that impoverish consumers, because of cognitive deficits, competitive races to the bottom, and/or price discrimination. There are arguments for the distributive desirability of regulation, first as between consumer and supplier, then as between consumers (the important domain of cross-subsidies) and finally as between suppliers and the victims of negative neighborhood effects of non-regulation. Regulatory decisions are made with inadequate or non-existent data and are heavily influenced by the political orientations of decision-makers...

Category: Working Papers

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