Most things are complicated

If a public policy choice appears simple and obvious, there's a good chance you don't actually understand the nature of the choice

I recently ran across a post which struck me as deeply frustrating. Not in a ‘this person is Wrong Online’ sense (although they are wrong), but in a ‘this person has no apparent interest in thinking generously about a complicated question’ sense:

For context, this is what the first person was responding to:

And here’s the thing: while I’m more sympathetic to JD here, I also think they suffer from the same basic problem. They’ve identified an irritating viral tweet and have decided to respond in the lest hospitable terms.

The result is a ‘debate’ that goes nowhere, enlightens no one, and accomplishes nothing. Both sides have decided to treat the other as idiots or liars. Except the actual disagreement here is about something completely different from what either is describing.

On one side, the question is: Does it make sense to live in a society where charging interest is forbidden? To which the answer is obviously no, because a society in which it’s impossible to charge interest is one without liquid capital, and therefore a society where it’s impossible to invest in anything. Therefore, little to no progress is made, everyone is immiserated, and things are generally awful.

From the other side’s perspective, the question is: should charging interest be a complete free-for-all, and should the worst abuses be shrugged aside as the cost of doing business? To which the answer is, again, obviously no.

Except no one is seriously proposing either of those things! They’re only pretending that those are the issues because it’s far simpler to ‘win’ an argument when you get to invent fools to take up the other side.

The actual answer is: it should be legal to charge interest, and there should be reasonable regulations to protect loanees from abuse. Except this isn’t really an ‘answer’ because it just indicates the need for discussion about how far those ‘reasonable’ regulations should extend. But that’s the thing with public policy. It’s almost always very simple to outline generally and incredibly hard to settle specifically.

The impulse to start from moral sentiments is natural, and there’s nothing wrong with it per se. If you regard flexible capital and innovation as fundamental goods, that will influence how you treat the space for regulation. Alternatively, if you regard loans as ‘usury’ and intrinsically suspect, you might be inclined to favor tighter restrictions. but in a pluralistic and secular society, the moral arguments need to attach to concrete outcomes as well.

This is especially true in the modern world, where debt is truly foundational to everything we do. But even if you go back 700 years to a time when ‘usury’ laws were widespread in some parts of the world, you’d still find plenty of loans on offer. They were just more awkward, and entailed a lot more risk on all sides.

Going back to the starting point of the argument, I think there’s a reasonably compelling case that student loans should be interest-free, or at least the interest should be capped below market rates, and should be secured by the government directly. That obviously would have some downsides (it’s effectively a government subsidy to students, which carries a much larger risk of moral hazard thanks to the lack of long-term costs for nonpayment). But education is valuable enough for a society that the benefits of making it far cheaper may outweigh the costs.¹

I could also make arguments in the other direction, of course. That’s the nature of complex issues in public policy. Moral sentiments often guide us toward desired outcomes, but they rarely supply us with all the tools needed to actually build a pathway to the result. Much of the actual work still needs to be taken up in the nitty-gritty details.

Unfortunately, the more that people get used to arguing against strawpeople, the less inclined they will be to acknowledge that many of these choices are genuinely hard, and the more they will tend to simply regard ‘everything’ as corrupt and broken.

And that’s how the feedback cycle of social distrust continues.

1. This is basically the Swedish model, for what it’s worth, though they also provide a direct grant of cash in addition to offering extremely low-interest loans. Swedish universities don’t charge tuition, either, so loans are exclusively for living expenses. Which is potentially an important feature, since one of the biggest problems with no-interest student loans is that colleges can simply ramp up tuition rates without deterring enrollment, effectively surcharging the public pocketbook.