This short article about credit card companies getting rid of customers
doesn't say anything new, but it catalyzed an interesting analogy for something I've been thinking about for a while:
Free Marketeers like to talk about the tragedy of the commons. Suppose 100 people live in a village and their local pasture can support 220 cows. Everyone can graze two cows and things will be fine. But then some clever fellow realizes he can get ahead by grazing an extra cow that slips under the radar. But then everyone does that and the pasture can't support that many cows, the grass dies, and then the cows have nothing to eat. Free Marketeers say that the solution to this problem is to privatize the commons so that an individual has an incentive to ensure the pasture survives.
Now suppose we replace "pasture" with "American consumers" and "cows" with "nonessential goods and services." The recent decade of boom, domestically and globally, was largely driven by
nonessential goods and services foraging on
American consumers. Big houses, expensive electronics, SUVs, sneaky fees
, and other products made huge profits by stretching the resilience of American consumers. And while one or two industries stretching consumers beyond good fiscal discipline could be sustainable, when everyone piled on, the resource was tapped out and everyone's
business ventures starved.
The Free Marketeer solution of privatizing the resource obviously doesn't work in this analogy -- private ownership of another person's economic activity is slavery. The other main resolution to the tragedy of the commons is regulation: the people organize a governing body which can prevent or punish those who try to
graze more cows
endanger the ecosystem for personal gain.
Remember: Be suspicious of anyone who has a vested interest in you making poor decisions. Credit card companies don't like people who pay off their full balance every month (the responsible thing from the card holder's perspective). Rather, they prefer people who make the minimum payment each month, but a couple days late so they can rack up interest and fees. (Except now they're trying to get rid of those people to reduce their risk exposure. Oops.) Therefore, the credit card company does everything it can to get you to make poor economic decisions. A commercial bank wants to make as much profit off your deposits, loans, and fees as possible, but a credit union wants to provide the most benefit to its depositors and lenders. Therefore, a credit union's policies are more likely to be in your favor.