Consumer Credit And The American Economy

This article provides an introduction to a law review symposium by the Journal of Law, Economics, and Policy on our book (co-authored with Michael E. Staten), Consumer Credit and the American Economy (Oxford 2014). The conference, held November 2014, collects several articles responding to and building on the research agenda laid out by our book. For those who have not read the book, this article is intended to summarize several of the main themes of the book, including discussion of economic models of consumer credit usage, trends in consumer credit usage over time, the use of high-cost credit, and behavioral economics.

This text examines the economic, psychological, sociological, historical, and legal traditions behind the demand, supply, institutions, and regulation of consumer credit in today's marketplace and how and why they have evolved.

This book is an investigation into the economic policy formulation and practice of neoliberalism in Britain from the 1950s through to the financial crisis and economic downturn that began in 2007-8. It demonstrates that influential economists, such as F.A. Hayek and Milton Friedman, authors at key British think tanks such as the Institute of Economic Affairs and the Centre for Policy Studies, and important political figures of the Thatcher and New Labour governments shared a similar conception of the consumer. For neoliberals, the idea that consumers were weak in the face of businesses and large corporations was almost offensive. Instead, consumers were imagined to be sovereign agents in the economy, whose consumption decisions played a central role in the construction of their human capital and in the enabling of their aspirations. Consumption, just like production, came to be viewed as an enterprising and entrepreneurial activity. Consequently, from the early 1980s until the present day, it was felt necessary that banks should have the freedom to meet the borrowing needs of consumers. Credit rationing would be a thing of the past. Just like businesses, consumers and households could use debt to expand their stock of personal assets. By utilizing the method of French philosopher Michel Foucault this book provides an original analysis of the policy ideas and political speeches of key figures in the New Right, in government and at the Bank of England. And it addresses the key question as to why policy-makers both in Britain and the United States did little or nothing to stem rising consumer and household indebtedness, instead always choosing to see increasing house prices and homeownership as a positive to be encouraged.

This is the first comprehensive account of the development of consumer credit. Consumer credit is a vital force driving the development of our economic system. Rather than look at consumer credit solely as an economic phenomenon, Klein examines the social impact of the consumer credit industry within the framework of economic and cultural change. His analysis offers a concise examination of the industry from the perspective of marketing, the creating of material and experiential products, and the product distribution mechanisms. The discussion of changes within the bankruptcy structure accounts for the creation of overzealous consumer spending and the implementation of controls over individual consumer credit. This will be of interest to scholars or students concentrating in economic sociology, stratification, and cultural studies.

. . . provides an excellent example of economic analysis using atypical analytical approaches. . . the book is very accessible, especially to readers with some grounding in economics. Mathematical models and empirical evidence are appropriately used and the writing is superb. Advanced undergraduates and graduate students should be able to follow the analysis and will benefit from seeing the alternative analytics at work. Of course economists of all stripes will find something useful in this book as will anyone with a strong interest in understanding the current economic crisis. Richard V. Adkisson, The Social Science Journal For those who do not mind a stimulating read, the book by Christopher Brown, Inequality, Consumer Credit and the Saving Puzzle, is recommended. . . the book is exciting, tracing the causes for the uncommonly low savings rate in American households. . . this book is written in nearly colloquial language and easily understood. It is divided into eight chapters, each of which addresses one theme group, respectively. The author evaluates in detail literary sources, and also examines alternative approaches, but always returns to his line of thought. Relationships that he perceives as important are exemplified through small models. In addition to that, he always attempts to support the central thesis with statistics. In particular, to read those statistics is very exciting. Conclusion: a book definitely worth reading. Friedrich Thießen, Bankhistorisches Archiv Brown makes an important contribution to the field of consumer credit by presenting a broad view of the issues and problems associated with growing consumer credit habits, culture, and institutions. . . This book effectively uses a heterodox methodology, which will appeal to a wide audience of social scientists. Highly recommended. R.H. Scott, Choice Providing much needed context for current events like the sub-prime mortgage crisis, this timely book presents a vision of an economy evolved to greater dependence on consumer credit and analyzes the trade-offs and risks associated with it. While synthesizing the Keynesian theory of consumption with the Institutional theory of habit selection (brought up to date with new knowledge from evolutionary biology and neuroscience), this book represents an in-depth treatment of the macroeconomic dimensions of consumer credit and implications of recent financial innovations from a non-traditional economic approach. Some of the effects of consumer credit dependence include the potential for illiquidity in markets for debt-collateralized securities, sub-prime contagion, or the possibility of a Minsky-type debt deflation episode. The author also argues that a sharp increase in borrowing by US households over the past 20 years, aided by financial innovations such as the securitization of consumer loans and sub-prime lending, have lessened the harmful consequences of income inequality, and that the collapse of personal saving after 1993 is actually a gradual trend of consumer habits conforming to the imperatives of corporatism. The book s primary audience will be academic economists in sympathy with heterodox and pluralist approaches. It sets forth an institutional or top-down theory of household spending behavior that should be of interest to readers in fields such as sociology, consumer or family studies, psychology, or anthropology. Much of the book is technically accessible for non-economists and students.

Cross-national analysis of empirical, theoretical, and policy issues in the consumer credit industry, including household debt, credit card usage, and bankruptcy.