Does Rational Choice Have Utility on the Margins?

Also CSST Working Paper #25.http://deepblue.lib.umich.edu/bitstream/2027.42/51156/1/388.pd

The Off-Label Use of Consumer Credit Ratings

Sovereign, corporate and consumer credit ratings are used to assess the creditworthiness of borrowers. Yet these ratings often fulfill other functions as well, serving as measures of more general qualities of countries, businesses and individuals. When ratings are used outside the context of lending, we call it ‘off-label use.’ This paper develops the argument in the context of consumer lending and discusses the use of credits scores in the U.S. by car insurance companies in calculating premiums, landlords in selecting tenants, and employers in hiring workers. We argue that off-label use can have harmful effects through two mechanisms: error propagation and enhanced performativity. Both amplify small initial differences, exacerbate inequalities, lock borrowers in upward or downward spirals and increase economic inequalities. Turbo performativity results when measures influenced by earlier credit scores become direct inputs for calculating new credit scores. Off-label use of consumer ratings, therefore, should be treated not just as a privacy issue but also as a factor in economic polarization

Consumer credit surveillance

This chapter reviews the development of consumer credit surveillance in the United States from the nineteenth century, as the original problem of information asymmetry in consumer lending gave rise to consumer data registries, a process led by merchants, not by financial institutions. Regulations in the 1970s addressing discrimination and data privacy limited consumer credit surveillance, but lately two developments reversed this trend. Aided by banking deregulation and advances in information technology, the use of credit scores expanded beyond lending, while the kind of data used to calculate scores has also widened, turning the credit score into a general measure of character. This results in a pervasive new system of consumer surveillance and control that turns the original information asymmetry upside down, favoring lenders and other corporate actors, including the state, at the expense of consumers. The European Union is trying to limit this system while a full version is currently piloted in China.Accepted manuscrip

Dissemination of Health Information within Social Networks

In this paper, we investigate, how information about a common food born health hazard, known as Campylobacter, spreads once it was delivered to a random sample of individuals in France. The central question addressed here is how individual characteristics and the various aspects of social network influence the spread of information. A key claim of our paper is that information diffusion processes occur in a patterned network of social ties of heterogeneous actors. Our percolation models show that the characteristics of the recipients of the information matter as much if not more than the characteristics of the sender of the information in deciding whether the information will be transmitted through a particular tie. We also found that at least for this particular advisory, it is not the perceived need of the recipients for the information that matters but their general interest in the topic

Research Fellows Conference Panel on Subordinate Actors and Their Marginalization in Social Theory

Also CSST Working Paper #28.http://deepblue.lib.umich.edu/bitstream/2027.42/51159/1/391.pd

Consumer credit in comparative perspective

We review the literature in sociology and related fields on the fast global growth of consumer credit and debt and the possible explanations for this expansion. We describe the ways people interact with the strongly segmented consumer credit system around the world—more specifically, the way they access credit and the way they are held accountable for their debt. We then report on research on two areas in which consumer credit is consequential: its effects on social relations and on physical and mental health. Throughout the article, we point out national variations and discuss explanations for these differences. We conclude with a brief discussion of the future tasks and challenges of comparative research on consumer credit.Accepted manuscrip

Creating Wealth and Welfare

Summaries This article examines the role of China's rural township and village governments in welfare provision. In it, I first describe the role of local officials in the promotion of collective and private enterprise, and the relationship between these entrepreneurial activities and more traditional responsibilities of government, particularly social assistance and welfare provision. The extraordinary development of China's township and village enterprises created resources which have frequently been channelled towards the provision of public goods and welfare. Examination of policy changes and budget allocations for rural welfare highlights the extent to which localities are dependent on their own funding sources. In conclusion, I suggest that new initiatives in fiscal reform may limit the entrepreneurial capacity of local governments, reducing their control over resources and thus their capacity to meet welfare responsibilities

Workers no longer welcome? Europeanization of solidarity in the wake of Brexit (Discussion Forum. Brexit: understanding the socio-economic origins and consequences)

Peer reviewe

A Tale of Two Markets: How Lower-end Borrowers Are Punished for Bank Regulatory Failures in Nigeria

In 2009, the Nigerian banking system witnessed a financial crisis caused by elite borrowers in the financial market. Regulatory response to the Nigerian crisis closely mirrored the international response with increased capital and liquidity thresholds for commercial banks. While the rise of consumer protection on the agenda of prudential supervisors internationally was logical in that consumer debt was the main cause of the global recession, the Nigerian banking reforms of 2009 disproportionately affected access by poorer consumers, who ironically had little to do with the underlying causes of the crisis. As lending criteria become more stringent, poorer consumers of credit products are pushed into informal markets because of liquidity-induced credit rationing. Overall, consumer protection is compromised because stronger consumer protection rules for the formal sector benefits borrowers from formal institutions who constitute the minority of borrowers in all markets. While the passage of regulation establishing credit bureaux and the National Collateral Registry will, in theory, ease access to credit especially by lower-end borrowers, the vast size of the informal market continues to compound the information asymmetry problem, fiscal policies to tackle structural economic issues such as unemployment and illiteracy remain to be initiated, and bank regulators continue to pander to elite customers with policy responses that endorse too big to fail but deems lower-end consumers too irrelevant to save. The essay concluded that addressing the wide disparity in access to credit between the rich and poor through property rights reforms to capture the capital of the informal class, promoting regulation to check loan concentration, and stimulating competition by allowing Telecommunication Companies (TELCOs) and fintech companies to carry on lending activities because of their superior knowledge of lower-end markets will facilitate greater access. The risk of systemic failure deriving from consumer credit in Nigeria is insignificant compared to the consumer vulnerabilities resulting from the exposure of consumers to unregulated products in the informal market

When to rebuild or when to adjust scorecards

Data-based scorecards, such as those used in credit scoring, age with time and need to be rebuilt or readjusted. Unlike the huge literature on modelling the replacement and maintenance of equipment there have been hardly any models that deal with this problem for scorecards. This paper identifies an effective way of describing the predictive ability of the scorecard and from this describes a simple model for how its predictive ability will develop. Using a dynamic programming approach one is then able to find when it is optimal to rebuild and when to readjust a scorecard. Failing to readjust or rebuild a scorecard when they aged was one of the defects in credit scoring identified in the investigations into the sub-prime mortgage crisis