The Economic And Distributive Effects Of Credit Regulation

This paper deals with three basic types of consumer credit legislation and the likely effects that regulations implementating this legislation may have had. Before proceeding further, it is important to say something about the criteria to be used in evaluating what can be generally characterized as social legislation--legislation designed with some social objective in mind. The standard tool of the economist for evaluation of economic performance is the normative competitive model. Many question the applicability of this model in the role of evaluation since the legislation being examined more often than not will have come about because of a dissatisfaction with what is perceived to be a market result. More fundamentally, the market results that the legislation seeks to change are those that result from the distribution of income or wealth (broadly conceived) that is viewed as being less than satisfactory. By altering prices (broadly conceived), the legislation seeks to alter :his distribution. Thus, it is argued, the effects of the legislation can only be interpreted as "bad" since the benchmark for evaluation assumes, implicitly or explicitly, the original distribution of income (and the resulting set of market prices).