Stimulative Effects of Consumer Protection

The general perception of consumer protections (at best) is that they are a necessary burdens, regulations that must be implemented in order to protect purchasers from predatory lending or ingesting toxic materials. The more negative view is that they often create sub-optimal results. In the case of predatory lending, lenders will argue that loans to higher risk borrowers require higher rates of return, and these high risk borrowers are better off being able to borrow money at higher interest rates than not being able to receive loans at all.

In any case, few see consumer protections as a direct benefit to economic growth, and I'm not sure that's right. When people are spending more money on things like bank and credit card fees and interest rates, it obviously impacts their disposable income. This means they have less money to spend on restaurants, clothes, food, and other direct services. The question then becomes whether the economy generates more wealth through banks taking their fees and returns and reinvesting it into the economy in the form of loans, or letting consumers keep that money and letting them buy stuff.

This can also be applied to consumer protection in terms of ingesting toxic products, where the economic benefits are even more clear cut. Instead of having to waste money on medical treatments, which have the side effects of raising insurance rates, burdening government subsidized healthcare programs, eating into a company's employee healthcare expenditures, (not to mention legal and and reputation costs) that money could almost certainly be put to more productive use on practically anything else.

Consumer protection has traditionally been advocated on moral and philosophical grounds, but I believe there's a economic benefit as well.