Honorable mention goes to Zach Bibeault for “Suing Away Consumer Satisfaction” :What Holt wanted, in a nutshell, was freedom for those being pushed around — freedom from interference by others. But, he wrote in Freedom & Beyond, "few of us really believe in freedom. As a slogan, it is fine. But we don't understand it as a process or mechanism with which or within which people can work and live. We have had in our own lives so little experience of freedom, except in the most trivial situations, that we can hardly imagine how it might work, how we might use it, or how it could possibly be of any use to us when any serious work was to be done."
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You might say that Holt had reasoned his way into a version of Friedrich Hayek's famous insight about spontaneous order in human society and its superiority to order imposed on people from above, by those in power. But he found that most parents, teachers, and school officials were less concerned with the possible benefits of freedom than they were with what they considered the obvious benefits of what they called "discipline."
Yet Holt wondered. "When people talk about their child 'learning discipline,'" he wrote in Freedom & Beyond, "what is it that they really want him to learn? Probably, most or all of the following:
- Do what you're told without questioning or resisting, whenever I or any other authority tell[s] you to do something.
- Go on doing what you're told for as long as you're told. Never mind how dull, disagreeable, or pointless the task may seem. It's not for you to decide.
- Do whatever we want you to do, willingly. Do it without even having to be told. Do what you're expected to do.
- If you don't do these things you will be punished and you will deserve to be.
- Accept your life without complaining even if you get very little if any of what you think you want, even if your life has not much joy, meaning, or satisfaction. That's what life is.
- Take your medicine, your punishment, whatever the people above you do to you, without complaining or resisting.
Living this way is good for your soul and character."...
One thing Holt had definitely decided by the time he wrote Freedom & Beyond in 1972 was that "the fact that we have an institution or condition, be it schools, jails, poverty, cancer, or war, ought not to bar us from asking ourselves, 'Should we have it? Do we want to have it? If not, how might we get rid of it, and what else might we have in its place?'"
By the time I met Holt — it was in Boston, in the late summer of 1978; I was interviewing him for a monthly magazine called The Libertarian Review — he had decided to apply this thinking to schools themselves. "I was a school teacher for quite a number of years," he told me, "and then for a number of years I was a would-be school reformer. What I do now mostly is edit and publish a little magazine called Growing Without Schooling, which is written for, and to a large extent by, people who either have taken their children out of schools altogether or are trying to find ways to do so. The reason I do this is that I've come to believe that learning, the activity of finding out about the world and the people in it, is not something that has to happen inside a school. In fact, most schools are not very good places for it. I also don't believe any longer that in order to have learning you have to have teaching. I think most people, beginning from birth, are extraordinarily capable learners and all they need is questions answered once in a while, and road maps. If they get curious about a particular question, they may need somebody to say, 'well, here's a book about that' or 'here's a magazine.' I think that what children need is access to more of the world and in particular to more adults whose work is not dealing with children."
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One of the reasons Holt gave up on school reform in his later years was that he came to understand some fundamental truths about the school system. "Our schools," he wrote in 1972 in Freedom & Beyond, "are the way they are for many reasons that have nothing whatever to do with children's learning." Therefore, he argued, "convincing people that most of our present schools are bad for learning is not going to do much to change them; learning is not principally what they are for."
What are they for, then? Well, Holt wrote, "society demands of schools, among other things, that they be a place where, for many hours of the day, many days of the year, children or young people can be shut up and so got out of everyone else's way. Mom doesn't want them hanging around the house, the citizens do not want them out in the streets, and workers do not want them in the labor force. What then do we do with them? How do we get rid of them? We put them in schools. That is an important part of what schools are for. They are a kind of day jail for kids."
A firm can exist on the free market only by satisfying consumer desires. Consumers voluntarily give money to firms because the exchange is beneficial to them — consumers have demonstrated by preference that this action is the best possible action they could have taken in that particular situation. Therefore, when you have, in this case, a handful of payday-loan companies that ignore the state's regulations, there is a net increase of consumer satisfaction, which the existence of these firms objectively and apodictically proves.
The much-lamented "outrageous" interest rates that the firms charge, as well as the fees levied when an individual fails to pay back the money, reflect the massive risks that these firms are taking — risks that come in the form of giving more to consumers than the regulated payday lenders do. If firms were not taking substantial risks on the free market, they would be charging less to consumers who failed to pay back loans on time.
If these payday firms end up obeying the legal fiat on interest rates in an attempt to dodge the lawsuit, they will take fewer risks — and hence, offer less — to borrowers, who in this case almost always need the money to make ends meet immediately. Since they will be lending less, more people in the lower and middle class will be hurt because they were borrowing from payday-loan firms for such things as paying rent, buying groceries, feeding their children, etc. We will probably never hear about the poor who couldn't pay the monthly rent or feed their starving children for days because they could not secure a loan. This is a perfect example of the "unseen" effects of government intervention in the economy, which Frederic Bastiat and Henry Hazlitt so brilliantly demonstrated.
Swanson claims that the firms are trapping citizens in debt. Yet, the firms haven't gone completely bankrupt; this objectively and apodictically demonstrates that more consumers have been helped by the existence of the firms. If all or most of the people who borrowed money from the firms could not pay it back, the firm could not stay in business no matter how large a penalty fine it might charge.
The reality is that a certain number of the borrowers ended up making, in retrospect, misguided speculations in regards to their ability to pay back the loan. It is possible that many of them borrowed the money with obvious knowledge that the risk of defaulting might be enormous. Why is this fact supposed to be the fault of the loan companies? The loan companies never forced anyone to borrow money from them.
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The final point to make in regards to this is that the existence of interest-rate limits and registration laws makes the pursuit of business in the payday-loan industry less appealing because it is less profitable for businessmen. Those who are so distraught by the existence of "usurious" interest rates and "exorbitant" fines should be the first ones calling for elimination of the interest-rate/fine regulations.
This elimination would then make the business more appealing from an entrepreneurial perspective, drawing more firms into the business and thus lowering the interest rates and fine levels. Firms would become more competitive, and the increase in the number of payday-loan firms would decrease the net marginal utility to consumers that each payday loan firm could give them. From this analysis we can deduce that the only solution, in terms of legal reform, to solve this problem is the total elimination of regulation of any kind in this industry.
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