In defense of usury laws
Coco, G. & de Meza, D.
(2009).
In defense of usury laws.
Journal of Money, Credit and Banking,
41(8), 1691-1703.
https://doi.org/10.1111/j.1538-4616.2009.00274.x
(2009).
In defense of usury laws.
Journal of Money, Credit and Banking,
41(8), 1691-1703.
https://doi.org/10.1111/j.1538-4616.2009.00274.x
Usury law is often criticized by economists for curtailing lending and thus creating deadweight costs. This paper shows that if moral hazard leads to credit rationing, a just-binding usury law creates a deadweight gain. This property also holds in most market-clearing equilibria. Independent of social insurance benefits, or curbing present-biased preferences, interest rate caps have merit.