3 ms·
it’s very reasonable to take out a loan for an income producing asset (like education), as long as the expected return is greater than the cost of the loan. bu
by clairity 8y ago
it’s very reasonable to take out a loan for an income producing asset (like education), as long as the expected return is greater than the cost of the loan.
but those sensible loans have also normalized loans for non-income producing assets, and that’s where it’s better to be able to pay up-front (unless you get an interest rate below inflation or the fed rate).
- esotericn 8y agoThe variance is more important than the EV. An individual human is N=1. It's a single trial. You only live once. ;) An example would be taking out a mortgage. The highest EV is generally mortgaging yourself to the hilt. But in various circumstances, you'll then lose everything. Oh, and during the period you've basically given yourself a guaranteed annual cost you can't discharge without potentially taking huge losses on a house. (In the student loan example, you stay for the period, or you get no fancy bit of paper at all).
- clairity 8y agoyes, i've assumed a functioning market where the interest rate correctly accounts for risk, but that does mean a small but non-zero chance of loss. but simply being alive is risky; there are no guarantees in life.
- basch 8y agoget rid of banks, and make tuition a combination of % of income for x years, combined in with some kind of social good calculation, so charity type work can count more than what it pays.
- clairity 8y agoi'm not sure getting rid of banks would be appropriate, but i agree about pricing in positive externalities!