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Has the Obama Administration Retreated From Behavioral Economics?

TOTM The WSJ implies that the answer is yes in an interesting article describing the Obama administration’s changing views on behavioral economics and regulation.  The theme . . .

The WSJ implies that the answer is yes in an interesting article describing the Obama administration’s changing views on behavioral economics and regulation.  The theme of the article is that the Obama administration has eschewed the “soft paternalism” based “nudge” approach endorsed by the behavioral economics crowd and that received so much attention in the blogs — especially as it related to Cass Sunstein’s appointment to OIRA, the Consumer Financial Protection Agency and a few other issues — in favor of harder paternalism and “shoves” including recent proposals for “regulating health-insurance rate increases, separating commercial banking from investing on behalf of their own bottom lines, and prohibiting commercial banks from owning or investing in private-equity firms or hedge funds.”  The article also points to a proposal for new regulations (that I had not heard of prior), that “would require retirement counselors to base their advice on computer models that have been certified as independent” as a precondition that must be satisfied before advisers can push funds with which they are affiliated.

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Antitrust & Consumer Protection

The problem with paper payments

TOTM Jim Van Dyke (who contributed to our interchange symposium) has an interesting post up today recounting a brief glimpse of life without payment cards… Read . . .

Jim Van Dyke (who contributed to our interchange symposium) has an interesting post up today recounting a brief glimpse of life without payment cards…

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Financial Regulation & Corporate Governance

Gretchen Morgenson Calls for Greater Protection (?) of High-Risk Consumers of Credit

TOTM Gretchen Morgenson doesn’t want poor people to have access to consumer credit. At least, that’s what I think she’s saying in her rambling NYT column . . .

Gretchen Morgenson doesn’t want poor people to have access to consumer credit. At least, that’s what I think she’s saying in her rambling NYT column this week.

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Financial Regulation & Corporate Governance

David Evans Makes the Case Against Revamping Consumer Protection

TOTM Economist, co-author, and sometimes TOTM guest David Evans (UCL, University of Chicago School of Law) has an excellent note on “Why Now is Not the . . .

Economist, co-author, and sometimes TOTM guest David Evans (UCL, University of Chicago School of Law) has an excellent note on “Why Now is Not the Right Time To Revamp Consumer Protection,” based on remarks made at the New York Federal Reserve Board-New York University Conference on Regulating Consumer Financial Products yesterday in New York.  Evans makes some of the points we discuss in our joint work criticizing the intellectual basis for the Consumer Financial Protection Agency, but also offers a concise and powerful case against “revamping” consumer protection too hastily, or without attention to the institutional details or the economic evidence.  Geoff’s post the other day on credit card regulation, for example, points out precisely the types of harmful errors that can be made on “behalf” of consumers when invoking the behavioral economics literature without analyzing it (or the related empirical evidence) closely. Evans makes six essential points — and I’m excerpting here — but I suggest readers check out the whole thing…

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Financial Regulation & Corporate Governance

Credit card annual fees and the self-appointed consumer protectors

TOTM Adam Levitin has a blog post up responding to Todd Zywicki’s recent WSJ editorial on credit card interchange fees.  As most readers know, this is . . .

Adam Levitin has a blog post up responding to Todd Zywicki’s recent WSJ editorial on credit card interchange fees.  As most readers know, this is a topic of significant interest around here, and Josh blogged about Todd’s op-ed just yesterday.  I’m on vacation so I’ll be brief, but I thought Adam’s post was so wrong it necessitated my getting off the beach for a reply.  Adam writes…

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Financial Regulation & Corporate Governance

Will Congress Take Another Swipe at Credit Cards?

Popular Media Fresh off of its enactment this summer of new regulations on consumer credit card terms, some in Congress want to go further—to impose a national . . .

Fresh off of its enactment this summer of new regulations on consumer credit card terms, some in Congress want to go further—to impose a national usury ceiling on credit card interest rates and limits on interchange fees (the price that credit card issuers charge to merchants that accept their cards). That caps on interest rates harm consumers is well understood. But price controls on interchange fees would also result in consumers paying more and getting less.

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Financial Regulation & Corporate Governance

Symposium Wrap Up

TOTM Thanks to all of our participants and readers for the blog symposium–both the posts and the comments were engaging and thoughtful, and I hope these . . .

Thanks to all of our participants and readers for the blog symposium–both the posts and the comments were engaging and thoughtful, and I hope these entries will be helpful in the ongoing debate over credit cards and interchange fees.

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Antitrust & Consumer Protection

The Law and Economics of Interchange Fees and Credit Card Markets

ICLE Issue Brief A blog symposium hosted by Truth on the Market (www.truthonthemarket.com) and sponsored by the International Center for Law and Economics (www.laweconcenter.org).

A blog symposium hosted by Truth on the Market (www.truthonthemarket.com) and sponsored by the International Center for Law and Economics (www.laweconcenter.org).

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Financial Regulation & Corporate Governance

The Institutional Dynamic: Understand First, Act Second—If At All

TOTM I have now had a chance to review the excellent posts on the second day, all of which have a common flavor.  They expand the . . .

I have now had a chance to review the excellent posts on the second day, all of which have a common flavor.  They expand the universe of relative considerations that need to be taken into account to decide whether imposing caps on interchange fees enhances or reduces overall social welfare.  The narrow perspective on this issue, which is difficult enough, is to master the dynamics of two-sided markets to figure out where the fixed costs of running the overall system should be allocated.

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Financial Regulation & Corporate Governance