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Last month, Marc Hedlund shared a guest article about the dangers of the payday loan trap. He wrote:

The basic lesson for personal finance is the same you’ll have heard many times, but it always bears repeating: If it seems like you’re getting easy money, watch out! Easy money is the hardest kind there is.

Hedlund’s piece was inspired a New York Times article profiling the payday loan industry. Now the Times has published a thoughtful editorial from Robert H. Frank. Frank is an economist at Cornell University, and the author of the upcoming The Economic Naturalist: In Search of Answers to Everyday Enigmas. He writes:

Each society must decide whether the costs of easy credit outweigh the benefits. This entails trade-offs similar to those we confront when deciding whether to regulate drugs. For example, alcoholic beverages, like payday loans, inflict considerable harm on a small percentage of people, but prohibiting alcohol appears to create more serious problems than it solves. Prohibiting cocaine and heroin entails troubling side effects, too. Even so, concern for those most vulnerable to these drugs has led most societies to prohibit them. Evidence suggests that easy credit access is more like heroin and cocaine than alcohol.

That’s twice today that I’ve seen credit abuse compared to drug addiction. (The first was in response to my confession that I do not trust myself with a personal credit card — one reader compared this to alcoholism, which I thought rather apt.) Frank wonders aloud who is responsible for this addiction to cheap credit. He suspects that the real problem is a “recent liberalization of lending laws”:

Those who feel that payday lending is a bad thing are inclined to vent their anger about the hardships it has created. But outrage directed at payday lenders cannot prevent those hardships, just as outrage directed at alpha male lions cannot prevent them from killing cubs. A more deserving target would be legislators who supported lax credit laws in exchange for campaign contributions from lenders.

I’m not sure that legislators are a more deserving target. Frank hints, but never states, that there is a complex interaction between lenders, borrowers, and government. As with many social ills, this problem is messy, defying any attempt to identify a single culprit. One thing is certain: you can avoid the payday loan trap by never going near it. Even if the lenders and the legislators perpetuate the problem, you can avoid being snared by refusing to participate.

Frank’s editorial seems to end just as it’s getting started — I would have liked a more in-depth essay. I’ll have to borrow his new book from my library. (Here’s more about Frank’s concept of the economic naturalist, though it’s stuck behind a paywall.)

[The New York Times: Payday loans are a scourge, but should wrath be aimed at the lenders?]