Good economics view of payday loans and price control

Mark Schug is professor emeritus and former director of the Center for Economic Education at UW-Milwaukee. He is a national consultant on economic and financial education. Here is something that really resonated with me:

“Anyone who has taken high school economics should see how this artificial price control would cause problems, but it seems that many have forgotten the lessons of Econ 101. A recent poll found that a large percentage of Americans actually support federal price controls on everything from sports cars to cups of coffee.

What price-control supporters don’t understand is that when a new price level is imposed by legislation, consumers will want more of the product than suppliers can provide. So in the case of short-term loans, the result of a legislative price control will be shortages in the market. At a number as low as 36 percent, those shortages will be severe.”

You can read the full article in the Janesville Gazette.

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