A Conservative Talks About Credit Cards

Yesterday Professor Charles Fried, the elegant, eridite former Solicitor General of the US and former Supreme Court Massachusetts Supreme Court Justice, sparred with eminent philosopher and law professor Cass Sunstein and Harvard economist Ed Glasser in a faculty forum over "the Nanny State."

The discussion was lively and engaging, but Fried's remark on credit cards stopped me in my tracks. Fried was aggressive in his defense of unregulated consumer choice. He poo-poo'd the idea of regulating much of anything in order to protect people from themselves, following the classical conservative position that people should be free to make as many choices as possible. But Fried made a point of mentioning why current credit card practices are morally reprehensible. I'm not a perfect reporter, but I tried to scribble down what he said:

"Credit card issuers make a profit from trying to get people to hurt themselves. That isn't about consumer choice. That's just reprehensible."

With this remark, Fried takes the discussion over credit cards in a different direction. Sunstein defends libertarian paternalism--a light touch regulatory approach designed to help overcome the cognitive biases, self-control problems, and lack of stable preferences that prevent people from meeting the necessary prerequisites for libertarianism to function. To reframe Sunstein as I think he would deal with credit card issuers: regulate no tricks, no traps, and no taking advantage of customers' cognitive biases to diminish their welfare.

Even an anti-regulator like Fried might agree to the no tricks and traps rules as diminishing consumer choice, but he goes a step further with the credit card example. He points out the immorality of businesses that profit by encouraging people to slit their own throats. Even if the decision is a well-informed one, free of cognitive biases, Fried says he does not support the businesses that "make a living helping people hurt themselves."

I've taught Fried's Contract as Promise for years in my own contract law class, in part to inject a moral dimension into our discussions of breach and remedies.  Now Fried--and Sunstein--on credit cards will be part of my class as well. 

Comments

[credit card assistance]

Well, i personally think that both are to put blame on - credit card companies and credit consumers. It's just market and all want to profit through it in the most. The creditor offers the best in their opinion credit card deals and you, as a credit consumer should define if it is really profitable for you the first turn. Your choice mustn't be hasty and thoughtless. To make the best deal and not to become victim to your creditor, you really need to learn much about credit and only then - apply for it.

[anon]

is this talk on the web somewhere?

[Robert]

"Fried was aggressive in his defense of unregulated consumer choice."

Does this extend to other choices like prescription medications and narcotics? Would he permit people to earn income as sex workers? Should the state get out of the business of regulating marraige? At what age should a person get to make all of these choices?