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Health care is a bad example. It's a multiple edge case, and a uniquely terrible choice for market solutions. The time when a patient can best make a market dec

Health care is a bad example. It's a multiple edge case, and a uniquely terrible choice for market solutions. The time when a patient can best make a market decision is the time it's probably too late. I don't see why a resource being "life-critical" should make something not work for market solutions. Food and housing are already market allocated, and you'll have a hard time finding an economist who wants to centrally plan those things. "But the poor have poor access to food and housing." I'm not too worried about this as enough water is a lot cheaper, even at a market price. Anyway, it's not like we don't already allocate water when and where it is scarce--just in an unfair, inefficient, and broken way. And it's not like anyone wants to deregulate the pipes to your faucet. And it's not like it's free to use that faucet.

_delirium 14y ago
I agree few economists want to outright central-plan housing, but I believe many are skeptical of the degree of financialization it's ended up with: mortgage-backed securities in their various forms are looked suspiciously on by a significant proportion of economists (though perhaps a minority?), and some argue that they contribute to volatility in housing markets and severity of cyclical crises. Though here in Denmark there is actually a significant degree of central planning of housing, via a strong state role in the overall urban-planning framework, and laws that encourage owner-occupation and cooperatives, while discouraging absentee real-estate investment. There are constant debates over it, but going to a fully liberalized market approach doesn't seem too popular.
- cynicalkane 14y ago
  The #1 seller of mortgage backed securities were, by far, the government through the GSEs Fannie Mae and Freddie Mac. The #1 money losers on the resulting disaster were--again--the GSEs to the tune of several hundred billion dollars. By contrast, the private market bailouts are actually above water. Mortgage backed securities are not a very good example of free market distortions. Edit: I noticed you've added something about the housing ownership structure in Denmark. I think this is not very relevant to the discussion, but I also think it would be nice in the US if the law were more encouraging to the sort of ownership structures you described. I also think that kind of thing would still be rare because US citizens are a lot more mobile than Europeans and happen to like it that way.
- danielweber 14y ago
  Mortgage-backed securities were put in place to fix the last problem with the mortgage market. Which was caused by the fix put in place to fix the problem before that. EDIT probably too late to fix the downvotes, but Regulation Q limited the interest rate that banks could pay out. After banks had lent out their money, they couldn't raise any more, especially if interest rates were high, as happened more than once. But if they could sell off their loans to the GSE, they could get more capital back, and lend it out some more. Of course, this led to problems. But if we don't understand the psychology that led to securitization as being the natural solution to the previous column, how do you know you are being any wiser about suggesting what is going to replace securitization? (I simplify a bit, because securitization also allows banks to diversify geographically.)

_delirium 14y ago

I agree few economists want to outright central-plan housing, but I believe many are skeptical of the degree of financialization it's ended up with: mortgage-backed securities in their various forms are looked suspiciously on by a significant proportion of economists (though perhaps a minority?), and some argue that they contribute to volatility in housing markets and severity of cyclical crises. Though here in Denmark there is actually a significant degree of central planning of housing, via a strong state role in the overall urban-planning framework, and laws that encourage owner-occupation and cooperatives, while discouraging absentee real-estate investment. There are constant debates over it, but going to a fully liberalized market approach doesn't seem too popular.

cynicalkane 14y ago
The #1 seller of mortgage backed securities were, by far, the government through the GSEs Fannie Mae and Freddie Mac. The #1 money losers on the resulting disaster were--again--the GSEs to the tune of several hundred billion dollars. By contrast, the private market bailouts are actually above water. Mortgage backed securities are not a very good example of free market distortions. Edit: I noticed you've added something about the housing ownership structure in Denmark. I think this is not very relevant to the discussion, but I also think it would be nice in the US if the law were more encouraging to the sort of ownership structures you described. I also think that kind of thing would still be rare because US citizens are a lot more mobile than Europeans and happen to like it that way.
danielweber 14y ago
Mortgage-backed securities were put in place to fix the last problem with the mortgage market. Which was caused by the fix put in place to fix the problem before that. EDIT probably too late to fix the downvotes, but Regulation Q limited the interest rate that banks could pay out. After banks had lent out their money, they couldn't raise any more, especially if interest rates were high, as happened more than once. But if they could sell off their loans to the GSE, they could get more capital back, and lend it out some more. Of course, this led to problems. But if we don't understand the psychology that led to securitization as being the natural solution to the previous column, how do you know you are being any wiser about suggesting what is going to replace securitization? (I simplify a bit, because securitization also allows banks to diversify geographically.)