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Debt-Financed Consumption Sprees: Regulation, Freedom and Habits of Thought

  • Martha A. Starr

Debt-financed consumption sprees can be socially costly. Easy access to credit can push economic activity above sustainable levels, eventually requiring cutbacks in spending, lay-offs from over-grown sectors, and write-downs of bad debts. This paper investigates problems of over-borrowing, emphasizing two key insights from institutional economics. First, tendencies toward over-borrowing have roots in consumers' predispositions to conform to rising consumption norms. Second, following Commons, regulation should be confined to >i>bona fide>/i> public problems not better solved via private means. These insights imply that reregulation of consumer-credit markets by itself is not the right way to tackle problems of debt-financed consumption sprees.

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Article provided by M.E. Sharpe, Inc. in its journal Journal of Economic Issues.

Volume (Year): 44 (2010)
Issue (Month): 2 (June)
Pages: 459-470

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Handle: RePEc:mes:jeciss:v:44:y:2010:i:2:p:459-470
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