This weekend, I recommend spending some time reading this article, which Tim Harford originally wrote for the Financial Times. Almost all of Tim’s FT articles are brilliant, but this one particularly stuck in my mind for the clarity of its argument on a complex subject.
I was particularly struck by this passage:
A payday loan can do real good, as a cash injection that helps avoid far more serious financial consequences, such as the loss of a job because the car broke down or penalty charges for failing to pay a bill on time. A randomised trial conducted in South Africa by Fhats Casino showed very positive results. The experiment randomly approved or rejected applications for loans at an annual percentage rate of 200 per cent. Those who received one ended up better off than those rejected.
This is an aspect of this particular debate that’s all-too-often overlooked.