Ed Glaeser on Obama’s housing plan

In Cafe Hayek, Russell Roberts concluded his comment on Glaeser’s column by asking:
“What is the public policy justification that makes virtually all economists, even mere ardent libertarians, unwilling to say no to this madness?”
My reply was:
The only justification that E. Glaeser presents is summarized in his last sentence: “It could have been much worse.” This is how low the standard for public policy has declined, not just for Harvard economists but for most economists, even for some of your colleagues at GMU. So to answer your question I think it is the kind of herd behavior that these same economists have denounced as the source of all bubbles. Most people are an easy prey to the bully behavior of few self-appointed prophets. They may talk a lot when they are having lunch together, but to outsiders they want to show how clever they are with great ideas (most are attempts to reinvent the wheel) and at the same time that they are part of a powerful tribe.

It could have been worse?!? What, were they planning an alternative wherein they bombed our own cities into rubble to reduce housing stock?

“You know, not everybody who paid too much for a house was irresponsible. The housing bubble was a nationwide delusion. There were economists, bankers, and “sophisticated” investors who should have known better who shared in the delusion, so why stigmatize ordinary middle class homeowners, particularly when people have been propagandized for decades on the value of a home as an investment?”

Anybody and everybody who bought in should be stigmatized, or at the very least should eat their disastrous losses. Given our inherent tendencies to follow the crowd against our better judgment, we require especially diastrous consequences for doing so.

I only wish that Ed Glaeser would have the guts to state in his column what he thinks that the government should really do, according to his book. He doesn’t address at all the fact that he thinks that housing prices need to decline further, in at least the heavily-zoned areas. Yes, it’s politically impossible, but isn’t it the role of our professoriate to point out the politically impossible truths sometimes? It’s not like he’s a presidential adviser; he’s one of the foremost experts on housing policy. He should state his honest policy recommendations.

I know he’s done so in other forums, even other NY Times articles about him. But he should shout it from the rooftops every chance he gets.

You know, regardless of whether or not the bailouts (bank, mortgage, stimulus) were/are considered good ideas by the economist crowd, I’m very happy to see that they’re happening.

I feel this way because I am very interested to have another data point besides the Great Depression with which to make judgments on the efficacy of large-scale government intervention during a catastrophic economic event. Quite frankly, all of you (‘conservatives’) should feel that way too, because A) you’re not going to stop the plans from being implemented and might as well save your outrage energy and B) if they fail then your position is vindicated and you will then have reams of high-quality, high-resolution, recent data with which to prove your point from your post-apocalyptic bunker.

After having conservative, free-market, supply-side values as the guiding star of our country for the past couple decades with the consequences you see before you, I am extremely reluctant to give any weight to anti-bailout/stimulus arguments cut from that same cloth.

Hopefully this particular fiasco pushes future economists to take a more normative/institutional approach to their research. It has become apparent that the prevailing mode of economic thought is morally bankrupt without any of the practitioners even realizing it. You say its because we don’t understand economics. Recent performance indicates that it is, in fact, you who does not understand the real world.

Incentivization of common-sense morality is the biggest moral hazard. You have created a society that expects to be financially rewarded for every action taken. Example: Complaining that you’re being “punished” for not buying a house you can’t afford. This is not you being punished, nor someone else being rewarded. Would you really trade your current situation for the house-buying situation you opted out of?

In the house-buying option, you would have probably spent the last year or so in a serious state of financial unease at the enormous payments you needed to make as the value of your overvalued house plummets. Instead, you are now more secure, have lived a year without tons of stress, and are now in a better position to buy that house at a much more reasonable price.

Besides, free-market academicians and lobbyists have spent so long stealing from the pocket of the American worker in the name of the corporate bottom line that it’s about time you were forced to pay some of that unearned money back in the form of the progressive taxation that’s gonna come your way.

You say people should be rioting in the streets against this. Perhaps you should look at where protests have actually been taking place (Bank CEO houses) and read some polling data before you call for riots. Do you really want these people run out of their houses into hoovervilles?

I do not think you would like which side of said riots you would end up on.

Who gets the money? The banks get the money. Which is good for the economy. Maybe not for intending first-home buyers. Too bad.

Reversing Marvellous Marvin Hagler, the banks have to give a little to get a lot. Enjoy paying your taxes.

Here’s Ed Glaeser saying what he really thinks about trying to maintain the price of housing.