Should government protect us from ourselves?

Randy Barnett has a good post on payday Loan centers. His opinion is that we would be better off if they were closed down. I'm not a fan of payday loan places myself, but I'm hesitant to say that they should be outlawed.

Randy implies the comparison between crack cocaine and payday loans, and while that may seem dramatic, I think that's a fair comparison. And even if he didn't intend the comparison, I will. It made me realize that both topics are really part of a larger question. Should government protect us from ourselves? And to what degree?

It's many of the same issues with drugs as it is payday loans. Is it the proper role of government to prevent someone from doing something harmful to themselves? If that thing is outlawed, would the results be worse? For instance, is a black market of drugs more dangerous than the accessibility of legal drugs? Is somebody getting a loan from a sketchy character under the table worse than having Pay Day loans on every corner?

I posted on the issue of the Drug War in the past. While I still wrestle with the same issues, I'm inclined to not support the prohibition of payday loan centers, if for simply for the reason that it is hard to outlaw such a transaction. Giving a loan to a friend or casual acquaintance is quite easy. Yes, there is less contract work involved, but it is hard to monitor something as easy as loaning money. And yes, I do believe that if payday centers are outlawed, people may resort to worse measures, whether it is some shady character or somebody running up credit card debt. (There was a post on Market Power about this, but I can't find it at the moment)

Anyway, I don't know the answer to the question to what degree government should protect us from ourselves, but in this issue of payday loans, I don't think outlawing them is the way to go.