more-inMany tend to believe that the best way to help a group of people may be to offer them special legal privileges that others do not enjoy. To be precise, these privileged groups had to pay interest rate premiums of 3.4, 2.5, and 3.4 percentage points respectively. So, in response, they cut down their lending to these groups, which in turn caused interest rates to rise. Legal rules biased in favour of privileged groups can thus have the harmful consequence of raising their borrowing rates. This applies not just to elites but also to disadvantaged groups that seem to require any special treatment.

Source: The Hindu March 19, 2018 18:45 UTC