In Chapter 18 of your textbook there is a section with a nice discussion of ‘usury’ and the impact usury laws/regulations have on the market for money.
In recent history the debate was not so much about interest rates being to high, but how low they should be. However, in the latter part of 2023 the conversation is about how high interest rates should be and for how long. So, thinking about the current time, do you believe there should be a cap on interest rates based on the law or should we let the market set the price of money freely?
Given that topic there are two questions to be answered in this short essay. The top side and the bottom side of interest rates.
First, is a usury law efficient? Your thinking should be along the lines of the textbook’s treatment of the efficiency of usury laws. Specifically, what does it mean for the allocation of loans in the economy and the purpose they are put to. You might draw on the idea of ROI, as well as consumer spending choices in your response, as well as your knowledge of the macro economic impact of investment loans in the economy if you want to take that approach. But don’t discount the conversation we had earlier about the impact of price interventions on the market too. There are a LOT of take off points that you could and probably should include in your essay.
Second is a zero interest rate a ‘good’ thing? This brings the cultural/social aspect of economic policy into the evaluation based on your own personal ethical idea of what is ‘good’. Be sure to include in your response ‘why’ you believe it is or is not a ‘good’ policy to implement based on your own point of view. For example, you might choose an end goal of increasing wealth for all versus wealth for a few. Or you might build around the four traits of measuring economic policy that were mentioned earlier in the class. For a review of those metrics I have posted a file titled “Evaluation of Economic Performance” in the class files.
This is to be written in proper essay format with a title page, introduction, use of paragraphs to separate out the topics, conclusion and cited references if applicable. There is no specific length requirement, however, be sure to address each topic in terms of not just your position, but also the supporting arguments behind it, not the plural arguments asked for.
Here is the score sheet used to evaluate your work.
Criteria
Points
What is the definition of efficiency? 3 points
Would an interest rate of zero be efficient? 2 points
Could interest rates be to high to be efficient? 2 points
From an economic perspective why? 5 points
/12
Explain your idea of a ‘good’ economic policy including what your idea of good is or means. 5 points
Based on your idea of what a good policy is do you believe that an interest rate of zero would fit. How about a cap on rates? Why? 10 points
/15
Title page or title header. 1 point
Introductory paragraph. 1 point
Proper use of paragraphs. 1 point
Summary/concluding paragraph. 1 point
If used outside sources are cited and referenced. 1 point
/5
Each day assignment is submitted late, a 10% deduction per day will be applied towards your total grade.
