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Source link: http://archive.mises.org/7629/the-payday-interest-rate-controversy/

The Payday Interest Rate Controversy

January 8, 2008 by

I never quite understood the Payday interest rate controversy until today when, like clockwork, I felt the first rumble of my daily, late-afternoon hunger pangs.

In Pavlovian fashion, I hastened over to the vending machine and began depositing change. Then it hit me: I was about to pay almost twice the price for a Payday bar now than I would have had to pay for a Payday bar in two hours. You see, the drugstore on my route home sells the whole suite of vendible goodies, and the drugstore charges a price much lower than the vending machine.

Since originary interest is merely a reflection of “the ever fluctuating ratio between values assigned to want satisfactions in the immediate future and those assigned to want satisfactions in the more distant future,” I willingly accept an apparently onerous rate of interest in order to satisfy a passing desire for sugar. Or, I should say that I am forced to accept an onerous interest rate by a vending business that takes full advantage of my current desire. And, amazingly, government and its minions allow this to happen.

Where is my do-gooder advocate? Where is my politician stumping to end unfair Payday interest? Can’t these folks remove the vending machines and end this interest rate nonsense?

Yes, that’s the solution: legislate in order to stop the voluntary exchange, as if legislation and the strong arm of government can change time preference with the stroke of a pen. Huh!


Inquisitor January 8, 2008 at 9:42 pm

Is it wise to tempt evil? :)

IMHO January 9, 2008 at 2:25 am

Why don’t you buy an entire box of Payday bars at Costco, Sam’s or some other superstore and keep them in your desk drawer. This way you could save even more money AND annoy the liberals for patronizing “big box” stores. :)

Glen A. Pearce January 9, 2008 at 5:23 am

>Why don’t you buy an entire box of Payday bars
>at Costco, Sam’s or some other superstore and
>keep them in your desk drawer.

Not feasable in all workplaces, he may not have
a “regular desk” (some companies tend to shuffle
staff around a lot ^_-) or even if he does it
may not be a sufficiently secure location to
store something others might find too tempting.
Someone really need to make a high security
lunchbox that can be chained to a building pillar
for some workplaces. ^_-

John Reed January 9, 2008 at 7:08 am

Silly me. I thought you were talking about payday loans.

Christian January 9, 2008 at 9:16 am

I used a payday loan to get one of those payday bars from the vending machine. I am calling my congressman.

Person January 9, 2008 at 9:33 am

John_Reed: Jim_Fedako was making a play on …

Nah, screw it.

gene berman January 9, 2008 at 10:06 am


Hate to throw cold (or even tepid) water on the tongue-in-cheek stretch. But it bears pointing out that the two pay-off satisfactions differ by more than a matter of time preference: essentially, it’s a comparison of two different things.

And, by the way, IMHO, your solution sounds great–but it just won’t wash. I know from personal experience. Fifty years ago, I worked in a tourist attraction that offered candy for sale in the souvenir shop. And I’d could buy (5 cents in those days but we sold ‘em at 10 cents because of our remoteness)) Reese’s peanut butter cups (by the 24-count box–96 cents) from our wholesaler each week. But because of my “high time preference,” I’d usually polish ‘em all off the same day. C Northcote Parkinson wrote that “work expands to fill the time alloted for its completion” and I’m sure that, if he’d thought about it, he could’ve come up with something equally weighty with regard to consumption of “Reesies.” They’re great frozen, too.

IMHO January 9, 2008 at 1:17 pm

“Someone really need to make a high security lunchbox that can be chained to a building pillar for some workplaces. ^_- “

Not secure enough. A good pair of boltcutters would make short work of a chain. I suggest one of those miniature safes that can be bolted to the floor from the inside of the safe. That should do it! :)

“But because of my “high time preference,” I’d usually polish ‘em all off the same day.”

Hmmmmmmm. “High time preference” as a factor in gaining weight. I’ve never thought of it that way. That would make for an interesting study… :)

Alla January 11, 2008 at 2:14 pm

Please, don’t legislate anything else :) Opportunity Cost , Voluntary exchange and Subjective value are key. For some its more expensive to spend extra time in the grocery store and some have no time constraints. So each can choose if they want to spend hours in line parking and gas at Costco. Some will buy a candy bar. Some also wait for price of meat to go down and buy it spoiled. Some cant buy a box of a 100 bars as they have no self control and eat the whole box. You get the point… Subjectivity.

Iris Elldrege July 6, 2011 at 8:34 am

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