I don’t know if those policies were popular, but if they were popular, that might be because people didn’t understand their consequences. Again the key point is how can an accountable government force people to protect themselves who don’t want to be protected? My guess is that they would prefer private means of protection, but since those private means are not allowed, they must settle for the public means you offer. You argue that the reason we need public means is that private means will not work because they don’t want to be protected. But if they don’t want to be protected, why do they support laws protecting them?
Offering someone a bad contract harms them. (By ‘bad contract’ I mean one that gives negative utility to the party that didn’t draft it.) Either they accept it without knowing it’s bad, in which case the bad terms harm them, or else they find out and reject it, in which case they’ve spent resources analyzing it for which they get nothing in return. And checking a contract for bad terms isn’t cheap; lawyers charge thousands of dollars for that service. Someone who goes around offering bad deals can still inflict massive damage even if none of his offers is accepted. No one has managed to come up with a “private means of protection” which is cheaper than a lawyer on retainer. I don’t think the problem is that people don’t want to be protected; rather, the problem is that most people can’t possibly afford any private protection.
As you know, there are limited instances in which I would support the government protecting people against their will. But I suspect that a lot of legal protections against predatory conduct are popular, even among the people whose conduct is restricted. One possible reason for this is that they don’t understand that the policy restricts their freedom (but then they also don’t understand that the lack of the policy will get them exploited, and I’d rather have them helped for reasons they don’t understand than harmed for reasons they don’t understand).
But another possible reason is that they correctly understand that right now credit cards without those exploitative terms are mostly unavailable (the primary exception that I know of are employee credit unions). They “voluntarily” choose them because there’s no way to get a credit card otherwise. They might perfectly rationally support regulations that will improve the menu of options from which they will make their voluntary choice.
The point of your post was that analysis based on ignorance missed people who just didn’t get that they might be tricked. Now you are saying they do realize they might be tricked, which is why they support the policy. So we are back to ignorance.
People can realize in the abstract that they’re probably being tricked by credit card companies without possessing the legal expertise (or the time!) to go through all the fine print and work out which companies are tricking them most or least. Mandating disclosure doesn’t necessarily change this.
People can also underestimate the magnitude of the tricking, and still want to outlaw it.
They may even believe that mostly other people are being tricked (blind spot bias) and hence “altruistically” support a policy that would actually protect them just as much as anyone else.
And finally, the financially sophisticated may suffer from living in a world of financial products designed to be sold to the financially naive (being too small a market segment, or too hard to market to, or too local or too integrated a market, for specialized products for them to prove effective), and so the intelligentsia/nobility that produces all the visible talk on this subject, wants to outlaw financial trickery from being aware that they are probably being tricked, on behalf of the majority that are not aware they are being tricked (note this is not invalid as justification!)
Not knowing “which companies are tricking them most” is ignorance, and standard models of ignorance can apply.
But ignorance in rational agent models of asymmetric information don’t cause people to be tricked, so it’s can’t be ignorance of that sort.
It seems perfectly plausible to me that people understand that the deck is stacked against them, while at the same time not knowing exactly how to protect themselves and so falling for some of the tricks, and would be perfectly happy to have a government they trusted simply remove the bad stuff from the menu. I know that’s how I see it.
Ooo—sign me up for that! A government I trust that will remove the bad stuff from the menu, and… ohh, hang on. What will the credit card companies, who are a concentrated, highly incentivesed interest group, do next? How will they act on our democratically elected representatives? When we present our carefully thought out policy recommendations to parliament, and the parliament passes the details through to committee… what will happen next? What’s likely to come out the other end of the legislative sausage machine?
When we then try to organize the millions of self-identified likely victims of complexity, and the hundreds of thousands of wise altruists who want to help the likely victims, for all of whom this is a fairly unimportant matter… when we array them against the lobbiests… who’s likely to stay the course and win the regulation that’ll help their tribe?
David, that situation is well modeled as ignorance. So either there are models of ignorance supporting your case, or you need to describe a different situation.
I think clarifying this disagreement is worth a seperate post, which I’ll write up in the next few days.