Here’s a summary of the forum on the housing market from yesterday. It’s also the subject of my next Forbes piece. Here are a couple of quick reactions:
1. I asked Senator Corker to “state and explain the specific conditions under which government intervention in the housing market is appropriate” and then “in what ways are these conditions met in the US?” His response would have earned maybe 3 out of 15 points on the exam I’m giving this coming Wednesday. That’s probably to be expected: it was a politically astute response to a pretty straightforward question. The rhetorical lesson is that if we can’t define and be precise about what we’re discussing, we’re probably not going to make much progress. There are a lot of areas in the social sciences where we’re still looking for precision. At the introductory level, externalities and marginal analysis are not among them.
2. The forum focused on the costs and benefits of policy changes to very easy-to-identify interest groups (Memphians and participants in the real estate market). It’s good (local) politics, but it’s bad economics. We can’t simply take for granted that Memphis needs to have a strong housing market. It’s a big country, it’s a big world, and we need to recognize that there are a lot of trade-offs. Economics in One Lesson (particularly chapter 14, “Saving the X Industry”) was written for such a time as this. The link is to a PDF of an old version. Here are interviews on the book from 2008. Here’s the most recent edition. Here’s Jeffrey Tucker’s A/V archive on Mises.org; in at least one of these, he explains how IP has prevented the Institute from posting a $0 version of Economics in One Lesson. I write this as someone who probably owes more on my house than it’s worth, so I would be a direct (and substantial) financial beneficiary of the policy stance I’m criticizing.
Update, 9:34 AM: In looking over my notes, I saw that one of the panelists said “fighting over who lit the fire doesn’t make the fire go out.” True. However, when people are effectively asking for another book of matches, it’s a pretty good idea to check their track record.
Update, 10/29: here’s my new Forbes piece.