Why I think people should be able to do stupid shit...

Consumerist has an article about a gadget that car dealers are using to make sure risky buyers pay their bills. The device is attached to the car, and when the buyer makes a payment they get a code they enter in the device. If they don't pay, they don't get a code, and the unit beeps at them - and then eventually disables the vehicle. It's had a dramatic effect on the number of people who default on car loans.

I think it's a great idea. It gets rid of one of the biggest problems of car loans - the fact that your collateral is on wheels and easy to move and hide. Repos are expensive and dangerous. This device makes them unnecessary. More importantly, it lets the marginal borrower - the person who otherwise wouldn't be able to get a car loan - get one, because the lender feels more secure about the collateral.

The comments section is full of people discussing it - while some see it the way I do, many others think it's horrible - an invasion of privacy, an embarrassment, and that if people can't qualify for a car loan without a black box in their car, they shouldn't get a car loan at all.

I'm a big believer that humans are for the most part rational - that they enter into contracts voluntarily because they feel they are better off with them than without them. I think this is one of those cases. If people choose to get a car loan that involves the device, clearly they feel that it's a better choice than not having a car. And given how car-dependent our society tends to be, it's not surprising that some people would make that decision. A car is often freedom - a chance to get to a better job, live in a better neighborhood, to be able to shop at better and cheaper stores. It's easy to understand why some people would be willing to put up with a device for that freedom, and it's arrogant of people who don't have to make that choice to try to pass laws preventing people from making those choices.

I feel the same way about the other popular whipping boy of consumer movements - payday loans. Yes, when you take a two week payday loan and break it down into an annual APR, they often have stupidly high APR's. But that's because they are short-term loans, and they have high fixed costs for origination and servicing, plus high default rates. And yes, they are often misused as long-term loans instead of short-term loans. Yes, they are often used to buy stupid, useless shit like rims or stereos. But for someone who has the choice of a high-interest payday loan or no money at all to pay bills or take their kids to the doctor, they are better than nothing, and regulating them removes that option. The alternatives can be even worse - loan sharks, turning to crime. Restricting choices because we don't like the reasons some people choose them is still a restriction on freedom, and it also means that some people will be worse off.