Introduction and Overview of Consumer Credit: Development, Uses, Kinds, and Policy Issues

Consumer Credit and the American Economy, Ch. 1 (Oxford University Press, 2014)

George Mason Law & Economics Research Paper No. 14-57

38 Pages Posted: 30 Oct 2014

See all articles by Thomas A. Durkin

Thomas A. Durkin

Board of Governors of the Federal Reserve System

Gregory Elliehausen

Federal Reserve Board

Michael Staten

University of Arizona

Todd J. Zywicki

George Mason University - Antonin Scalia Law School, Faculty; PERC - Property and Environment Research Center

Date Written: October 28, 2014

Abstract

The growth of the American economy in the post-War era has been characterized by a growth in the consumer economy as a fundamental driving force in the economy. In turn, this growth in the consumer economy has been driven by a growth in usage and spread of the use of consumer credit. Yet the relationship between consumer credit and the American economy remains little understood and little explored by economists.

This book explores the institutions, history, and economics of consumer credit, focusing especially on the causes and consequences of the growth of consumer credit in the post-War era. Focusing primarily on consumer, non-mortgage debt, we identify the reasons for growing use of consumer credit and public policy responses to it. Starting with the basic question of “Why do consumers borrow?” we consider the evolution of consumer credit institutions and the manner in which these evolutions have co-evolved with other elements of society and the economy and the ways in which these factors have transformed American society. We also discuss contrary hypotheses, such as the long-standing research efforts to study consumer behavior from the perspective of consumer psychology (recently taking the form of so-called Behavioral Economics) and the ways in which these views have been incorporated into the study of consumer credit. Most important, as the government stumbles through efforts to respond to the most recent financial crisis, we argue that a proper understanding of how consumers actually use consumer credit and the impact on the American economy is essential for sound policy-making.

We present here Chapter 1, the Introduction to Consumer Credit and the American Economy, which provides an overview of the book and frames the discussions to follow.

Keywords: consumer credit, credit cards, personal loans, personal bankruptcy, auto loans, student loans, financial management, household investment, installment, revolving, noninstallment, closed-end, open-end, credit reporting agency, CRA, credit bureau, regulation, financial institutions

JEL Classification: B2, D1, G2, K2

Suggested Citation

Durkin, Thomas A. and Elliehausen, Gregory and Staten, Michael and Zywicki, Todd J., Introduction and Overview of Consumer Credit: Development, Uses, Kinds, and Policy Issues (October 28, 2014). Consumer Credit and the American Economy, Ch. 1 (Oxford University Press, 2014); George Mason Law & Economics Research Paper No. 14-57. Available at SSRN: https://ssrn.com/abstract=2515858

Thomas A. Durkin

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Gregory Elliehausen

Federal Reserve Board ( email )

20th and C Streets, NW
Washington, DC 20551
United States
202-452-2326 (Phone)

Michael Staten

University of Arizona ( email )

Department of History
Tucson, AZ 85721
United States

Todd J. Zywicki (Contact Author)

George Mason University - Antonin Scalia Law School, Faculty ( email )

3301 Fairfax Drive
Arlington, VA 22201
United States
703-993-8091 (Phone)
703-993-8088 (Fax)

PERC - Property and Environment Research Center

2048 Analysis Drive
Suite A
Bozeman, MT 59718
United States

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