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Yeah, your reading is very different from mine, also.

You're assuming things about the liquidity of the market, regulatory environment, and external situations that simply aren't true. Toy models can be useful, but don't take them for reality. The point of this article is to tear down simplistic assumptions like yours. I guess it failed.

Any time you say "this can't be true, because otherwise..." you had better take a hard look at your mental model and 1) make sure it's saying what you think it is, and 2) is backed up by evidence, not just an idealized version of the world. I think politics and economics are most bedeviled by these simple models, which tends to elicit this knee-jerk kind of response.

The article does absolutely nothing to "tear down simplistic assumptions." For example, with respect to the trailer park. The article says nothing about the guys return on investment, which you would need to know in order to determine whether he was earning some sort of abnormally high return by having a captive audience. The article also talks about the unfortunate situation faced by people who are evicted, but says nothing about the kinds of returns earned by those landlords.

And studies have looked into this issue and confirmed the view I expressed above. For example, studies have found that competition in the payday loan market is intense. Interest rates are high because the default risk is high, not because people don't have choices between lenders that compete on interest rates.

I'm not sure what point you are making. Even if competition in the payday loan market is so fierce that there's zero margin, it still remains that the rates will be high enough to help trap people in poverty, and having people need to take out payday loans is the solution the capitalist system has devised for this situation.

To pretend that this is not a failure of the capitalist system seems very narrow-minded.

The folks attacking payday lending (i.e. mainstream American liberals) aren't suggesting replacing those options with minimum basic income or a comprehensive welfare state. They're simply ignorant, and think that poor people will be helped if the government sets lower rates by fiat. In reality, it will simply remove another option from people who have very few.

Well, I am attacking payday lending, and I am for replacing it with a comprehensive welfare state.

I don't know if I'm a "mainstream American liberal", I'm barely American, but maybe it would behoove you to be a little more open to the fact that maybe you don't in fact know what everyone else is thinking and whether they are ignorant or not.

That's great, but I wasn't talking about you. I'm talking about the mainstream American liberals (i.e. the main constituency of the Democratic Party), which is pushing for heavily regulating payday lending but certainly doesn't embrace a European-style welfare state or basic income.

> The folks attacking payday lending (i.e. mainstream American liberals) aren't suggesting replacing those options with minimum basic income or a comprehensive welfare state

"Mainstream American liberals" would love to be pushing for a comprehensive welfare state more aggressively except that they are then beset upon with screeches of the socialisms and the death panels.

But we are pushing.

Well, hold on. I'm familiar with the libertarian argument in favor of deregulated payday lending and I believe the figures that suggest rates are high because default rates are high.

But the actual product being sold might be harmful, in the same sense as cheap revolving credit can be. The availability of payday loans leads to bad discretionary spending decisions (not just "flat screen TV" bad, but "accepting financial risks that are best not accepted" bad) which leaves people trapped --- and then you start getting interested in how much the returns in the payday loan business are subsidized by poor people who made understandable-but-ill-advised financial decisions and are now trapped under fees and interest from a payday loan.

Your points about low-income housing are well taken. But I think the comparison to payday loans, and the subtext that all services offered to poor people are intrinsically beneficial, kind of falls apart.

There are other problems here too. For instance, we tend to believe that renters are have worse upkeep incentives than owners, who directly benefit from improved property values. Similarly, people who let out trailers to the poorest people in society may also disincentivize upkeep. After all: they've pegged their business to the very bottom segment of the market. That's a real market phenomenon too: "the race to the bottom".

> In reality, it will simply remove another option from people who have very few.

Their argument is that this is a good thing, because taking a payday loan is usually not a rational economic decision, and therefore overall welfare is improved by forbidding people who stand to lose a lot from poor economic decisions from making those decisions. It's the same logic behind investor accreditation requirements.

Now there are legitimate arguments to the contrary, like some of the ones you've made upthread. But let's state both views accurately.

> The capitalist system writ large would much prefer that these people made $40,000 a year instead of $20,000, because then it could sell those people iPhones and whatnot.

Only if the marginal cost of getting there is outpaced by the marginal return. If that wasn't the case, no volume-but-cheaper business could work. When you can have a ton of poor people, they are an exploitable resource for people who aren't selling iPhones (and if you pay attention to the description of eviction as a social problem maybe you'll catch a little more of the "exploitable resource" part). And it's nothing surprising--the historical examples abound of captive, poor populations who are used as revenue generators with no real recourse of their own. I get nothing out of the article that's "trading entirely on the ickiness" of selling goods and services to poor people. But I do get a lot of "poor people have basically no options because of systematic economic incentives to keep them there."

> But I do get a lot of "poor people have basically no options because of systematic economic incentives to keep them there."

Poor people might not have good options, because they have no money, but they have options. If the check cashing place on your block charges too much, you can go to the one down the street. The barrier to entry in these markets is so low that there is no argument that they are "gouging" customers who have no other options.

...Dude. The usurious, bullshit check-cashing places are one of the parts of the system that profits from keeping poor people where they are. The charges at all of them are effectively too much to not be a severe burden on folks who are too down to afford a bank account. You're not covering yourself in glory here with this sort of lack of empathy.

If banks could make a profit giving poor people bank accounts, they'd do it. Moreover, there is tremendous competition in the check-cashing market. Walk down a street in Baltimore and you'll hit one every few blocks. If one of those shops could get more of the market by charging lower fees than their competitors, they'd do it.

Focusing your ire on check cashing places is the archetypal example of a bullshit solution crafted based on emotions rather than rational analysis. Forcing check-cashing fees below the market price is just going to reduce the number of check cashing places, taking away options from people who need them. Any real solution is going to either require the government writing a check e.g. by subsidizing bank accounts for poor people, or reducing regulation to lower the transaction costs in check depositing and withdrawals.

Again (maybe I can say this more succinctly):

These are businesses that survive by making lots of irresponsible loans to people who have no business taking out loans, funding them out of the enormous fees and interest payments charged to the subset of their customers who aren't total write-offs.

The "capitalist system writ large" might prefer it, but entirely too many individual capitalists — that is, the folks with, give or take, all of the capital — probably prefer things more as they are.

Which, I believe, was the article's point.

EDIT: phrasing.

Except the small potatoes capitalists mentioned in the article have zero control or influence over the larger political system.

>The capitalist system writ large would much prefer that these people made $40,000 a year instead of $20,000

The captialist system finds local maximums, not global ones. This is a classic coordination problem. As a business, your path to profit maximization from poor people is to keep them impoverished (make the poor part with the most money possible).

Of course, if every business adopted models that were less predatory, overall wealth would increase, poor people make 40k a year, more stuff is sold, and everyone profits more, poor and businesses alike.

But as a single business, if you adopt less predatory business practices, you are not maximizing profit, AND you are opening yourself to be out-competed by a business that does.

The regular customer-satisfaction competition does still apply, of course. But the power of the consumer is significantly blunted if the consumer has limited choice, which is what happens to the poor when they have limited options caused by low economic security. Perhaps, the poor have so few options, businesses are allowed to create predatory cycles of poverty.

> But it's not a problem created by business owners providing housing to poor people (or ones evicting poor people who cannot pay). It's a problem created by state and municipal governments that make it illegal to build dense housing, housing on small lots, housing that isn't to code, etc.

I concur -- awful zoning laws are a root cause of the undersupply and overpricing of housing for poor people. Criminalising the sheer act of dwelling (or renting to people who dwell) in any sprinklered building is utter depravity, especially given how many people are homeless or live in warehouses that are deadly firetraps.

However, currently-existing residential landlords/property-owners have extremely strong reasons to preserve the currently-existing legal regimes that limit housing supply. After all, if it suddenly becomes legal to {build,live in, rent out} dense housing / housing on small lots, there'll be people who indeed will do so, which will increase supply and lower prices.

That's the profitable element in the current state of affairs -- all the current landlords who can charge higher than they would be able to if the government wasn't making lots of potential competition illegal.