IMO, data brokering is what should be illegal, not the cookie .
You hit the nail on the head with the first statement. It required humans in the loop. It scaled linearly. Local branch managers had relationships with the people in their community, and knew who could and couldn't be trusted.
It was an imperfect system, where a human could be prejudiced against another human, and deny them access to credit.
Sometimes that would get discovered, and the human was held accountable for their actions, or had their actions upheld by a (org-chart-superior) human.
Similar to the imperfect system today, where the models a computer uses could be prejudiced against a human, and deny them access to credit. Dissimilar in that the model or the computer is rarely, if ever, held to account. "Computer says no" is a meme for a reason.
A good number of European countries have only half the poverty rates - the dirt floors and carts you're talking about - of the US yet barely use credit cards.
> we solved the problem with ramshackle one-room buildings with dirt floors,
there is a fallacy here. People with access to debt bid up the price of an asset, like a house, against other peoples’ similar access to debt. Sans debt access, the solution was not necessarily a small ramshackle house. The fallacy is the belief that the same asset price - whether opulent or ramshackle house, wouldn’t adjust to the reduced level from the bidding environment. The differential cost of construction for a nicer house can be countenanced in the access-to-debt case, but that is second order.
Illustrative straw-man example: Suppose, once one had a parcel of land, that it was trivial to construct one’s ‘starter home’ the ramshackle house if you like. Get one’s family and friends to help build in exchange for future return favors. As one advances in life, rebuild to have something more opulent. The rub is in the parcel itself. Unlike the would-be house, it had no cost built-in, just whatever price the previous owner was willing to accept to release their parcel. That parcel’s (and those around it) price reflects the market’s access to debt, or lack of access to debt. In the market without access to debt, parcel pricing reflects which buyers have accrued more savings vs other buyers. In the market with access to debt, parcel pricing reflects who can access more debt (through the various means we know of today - down payment ability yes, which parallels the non-debt’s savings case, someone co-signing, long term expected future earning potential vs someone retired, the parcel itself put up as collateral, perhaps other non-immobile assets put up as collateral, like the family oxcart).
The point is that there isn’t necessarily a 1:1 coupling between market’s debt vs non-debt access and whether the construction is opulent vs ramshackle.
That might be true now, but it would not mean house prices would go down, it just means more people would rent.
Think about how these loans work right now... people with money they don't need right now loan that money to people who want a house but don't have the cash right now. The reason they loan that money is they want to earn a return, which they get in interest on the loan.
Let's say all consumer lending is banned, and you can't loan money to people to buy a house. Well, the people with that money still want a return, so they will invest it somewhere else. Where can they invest it?
Well, one option is they could buy houses and rent them out. Since they only have to compete with other people with money (since poorer people can't get a loan for their house), the price is going to be much lower than it is today, which means they can get a better return by buying the house and renting it out.
So now you are still in the same situation with house prices, but there is no way for you to get any part of that return.
When I grew up I was told to not make debts if not needed. So many older people did indeed save up until they could afford a car or a house. Education was always mostly free where I lived.
Nowadays it seems like ordinary people would need to pay off a house their whole life and thus also need to keep income high enough to keep paying installments. This takes away so much freedom from people as they are trapped in their high paying jobs...
And every now and then we have to rescue banks that are too big too fail at the cost of everyone else, because someone dreamed up a way to increase short term profits that involves giving loans to people who will never pay them back.
> neither your car,
Praising a trillion dollar GDP, but can't afford a used car.
I don’t think there is any rational argument that ALL lending is evil (there are certainly many categories of lending that have lots of arguments for its evilness)
If we don’t have credit, then the only people capable of starting a business, for example, are those who are already wealthy.
It feels onerous as an idea because bank statements, monthly bills, payslips, will bequests, stock vests and trades, bank robberies*, and investment income each have different ways of being tracked. At least most of these records of individual financial activity come with a PDF these days. It wasn’t that long ago that applying for a loan meant scanning in papers for your lender to review.
Computers are smarter now. Not only can they read documents (or at least match the shapes against shapes they’ve been told are real) but they can also understand the contents too (or at least match the words against ideas they’ve been told are real.)
There may well yet be a future Data Valhalla where individuals hold their life.zip themselves, and upload whatever bits of it are needed to get that Nordstrom store card / car financing / cheeseburger loan without having an intermediate credit agency.
*I feel there’s a kernel of a joke there about a bank robber asking for a receipt with the loot in anticipation of declaring it on their tax return.
Credit isn't like insurance where these things can be checked later during a claim (which can then be denied) - you need to know the person is a bad-payer before you send them the ten thousand dollar loan as that affects the terms, not afterwards when they default and you can't get your money back.
Potentially, with loans or other things, some kind of technical solution could work. You could have a personal document that you control, and you give permission for companies to write to the document.
With a loan, for example, if I give you a loan, I can also append to your document that I've loaned you the money; for every payment you make, I write to the log to say you've made a payment. If you stop making payments, I stop writing to the log. This would be cryptographically signed by me, so it can't be forged.
When you want to take out another loan, you can proactively share your document, the bank can see everything written on the log, and make a decision based on that.
i.e. if I am a bad actor, and had just defaulted on a loan, why would the next document I send not be my copy of the previous 'clean' record before I got that loan?
Or what prevents me from sending out the same copy of the document to 10 other parties and getting 10 loans concurrently?
These are the sort of scenarios that the existing credit agencies prevent.
Then we follow it through and get to some sort of decentralised ledger to protect against these attacks, but that's then vulnerable to not being able to be expunged (how do we make sure it's possible to correct the record, as the CRA's are legally required to do when information has been written incorrectly).
So we end up with some sort of central authority.
For the latter it’s whether you’ve had a judgment against you, which is a matter of public record.
For the former it’s based on how much money you have and what you spend, including on servicing existing debt. Lying about this would be fraud. In that sense, my proposal does indeed open up a new avenue for fraud but I don’t think that’s the same as it being unworkable!
* The majority of missed payments and defaults don't end up as CCJ's, as often these are settled or just happen without going to court.
* Fraud being illegal doesn't stop people committing fraud on you. The idea is to prevent yourself from getting frauded.
The Western governments have horribly failed of caring for their people - cost of living are exploding, and at the moment way too many people are papering over that with unsecured credits backed by their data being free to exploit, and everyone else not willing of doing that is increasingly locked out of existence.
That does mean banks can't know if you lie by omission and hide some unpaid bills, but they can raise the evidence requirements to compensate and I think everyone deserves a second chance.
Suddenly the credit report was no longer a prerequisite to the mortgage.
Not asking polemically, I just have never studied economics and wonder if my intuition here is flawed
Some societies prefer huge risks for huge benefits, in those one (might) need a more detailed credit reports because everything is faster, people accept huge risks and the situation can suddenly change.
Some societies prefer more stability. Lower risks, lower surprises. Less opportunities, everything is slower, people can't even take that many risks, simpler histories will do th trick.
From what I notice though, housing seems to be a problem in both types of societies, irrespective on how credits are given, because there are other things involved (regulation, NIMBY, housing used as value, airbnb, geography, etc).
But for real. You say you no longer live there, so I'm assuming you left for more opportunities. My wife and I are interested in countries with opportunities for engineers and privacy. Bonus points if there is engineering research opportunities.