built-in advantage of truly Free reputation systems (Re: Reading List (for the umpteenth time....))

[David Honig]

At 09:06 AM 4/16/01 -0700, Greg Broiles wrote:
>
>On one hand, this makes privacy "violations" (judged against current 
>ideals) more widespread - on the other hand, it's likely to make identity 
>theft less likely, as the credit guarantor has a stronger motivation to 
>make sure that the party receiving the loan really does match the dossier 
>supplied to rate the risk involved in making the loan.
>
>Getting the credit agencies involved as lenders or guarantors means it's 
>actually good if different agencies rate risk differently - because it 
>means that the transaction can be financed at the lowest available rate, 
>where that rate reflects either especially good or especially poor 
>information and analysis, with the expected effects on the survival of the 
>agency. Credit agencies which include bad (because it was never correct, or 
>because it is obsolete) credit data will end up mispricing the risk 
>involved, which means they'll end up with no business (because they rated 
>risk too high, charged too much interest, and made few/no loans) or too 
>much business.

Currently, the State prohibits the collection of arbitrary data about
loan applicants.  Only State-blessed information may be collected
and analyzed.  So a private evaluation system, free of the artificial
constraints imposed by the State, already has an advantage.