The important housing sector
The idea that there is some inherent "importance of the housing industry to the overall economy" is so commonplace, it is glossed over in an article on a conservative periodical's website. This idea seems self-evident, and perfectly in keeping with conservative ideals of private property, family, and individual prosperity.
Upon closer examination, however, the idea of "importance" in one segment of the economy implies that the economy can be segmented and those segments, in turn, can be assigned different levels of importance. These ideas, particularly the latter, are mistaken and dangerously close to the flawed reasoning that puts government in the role of protector of the stock market, banks, farm policy, energy policy, air travel, airwaves, and (sadly) more. For if something has primacy in the economy, it cannot be allowed to suffer a downturn or collapse, as some industries do from time to time. Housing is key to the economy, the thinking goes, so if people are defaulting on their loans, losing their homes, and/or unable to take out a mortgage to get a new home, something must be done! Particularly, government must act!
It was government action to try to help out stock investors in 1929 that caused a recession, and government tariffs, wealth redistribution, minimum wage laws, forced employment and such that turned that recession into the Great Depression. One bad policy followed another as new ideas turned a fast-growing, opportunity-rich economy into a shambles in which people were starving as the government bought crops and destroyed them, and the poor couldn't get jobs in a private sector that was terrified of the caprice of the Roosevelt administration (which was even worse than the lamentable Hoover administration).
Some of you are perhaps arguing that the causes of the Great Depression are more complicated than that. The causes of the Great Depression are indeed numerous, as numerous as the interventions Hoover and Roosevelt tried. It is a sad coincidence that the stock market correction of 1929 took place under an interventionist presidential administration. Had Coolidge been president during such a correction, it is doubtful any government action would have been taken, except perhaps to lower taxes. In that case, the correction would have been corrected, recession (let alone the Great Depression) would have been averted, lives would have been saved.
Why did Coolidge take such a passive stance with the economy? Because he viewed it as a whole, capable of adapting and changing to fit its environment. Imagine that Woodrow Wilson said that blacksmiths were an important sector of our economy, and that they had to be saved from wage suppression caused by a move away from horses (and horseshoes) to the auto car. What if he had limited car production to achieve this, or had the government buy horseshoes to destroy them? He would have been considered crazy, wouldn't he? (That seems to testify to the immense propaganda power held by Keynesians and other FDR types, doesn't it?) Government "solutions" have likewise always bound adaptivity and stifled innovation in the economy, and the Great Depression was no different. Doesn't any FDR fan wonder why it was so long?
More to the point, here we are in the 21st century, looking at the housing sector and worrying about the damage that might be done to the economy if this "important sector" is allowed to suffer. Well what damage might be done to the economy if we get the government to fix these problems? Getting government help with a sector of the economy seems to me to be like getting Jason Voorhees to cut your hair, because "it's a disaster." To paraphrase Groucho Marx, if you think the economy's bad off now, just wait till they get through with it.
SRS
Upon closer examination, however, the idea of "importance" in one segment of the economy implies that the economy can be segmented and those segments, in turn, can be assigned different levels of importance. These ideas, particularly the latter, are mistaken and dangerously close to the flawed reasoning that puts government in the role of protector of the stock market, banks, farm policy, energy policy, air travel, airwaves, and (sadly) more. For if something has primacy in the economy, it cannot be allowed to suffer a downturn or collapse, as some industries do from time to time. Housing is key to the economy, the thinking goes, so if people are defaulting on their loans, losing their homes, and/or unable to take out a mortgage to get a new home, something must be done! Particularly, government must act!
It was government action to try to help out stock investors in 1929 that caused a recession, and government tariffs, wealth redistribution, minimum wage laws, forced employment and such that turned that recession into the Great Depression. One bad policy followed another as new ideas turned a fast-growing, opportunity-rich economy into a shambles in which people were starving as the government bought crops and destroyed them, and the poor couldn't get jobs in a private sector that was terrified of the caprice of the Roosevelt administration (which was even worse than the lamentable Hoover administration).
Some of you are perhaps arguing that the causes of the Great Depression are more complicated than that. The causes of the Great Depression are indeed numerous, as numerous as the interventions Hoover and Roosevelt tried. It is a sad coincidence that the stock market correction of 1929 took place under an interventionist presidential administration. Had Coolidge been president during such a correction, it is doubtful any government action would have been taken, except perhaps to lower taxes. In that case, the correction would have been corrected, recession (let alone the Great Depression) would have been averted, lives would have been saved.
Why did Coolidge take such a passive stance with the economy? Because he viewed it as a whole, capable of adapting and changing to fit its environment. Imagine that Woodrow Wilson said that blacksmiths were an important sector of our economy, and that they had to be saved from wage suppression caused by a move away from horses (and horseshoes) to the auto car. What if he had limited car production to achieve this, or had the government buy horseshoes to destroy them? He would have been considered crazy, wouldn't he? (That seems to testify to the immense propaganda power held by Keynesians and other FDR types, doesn't it?) Government "solutions" have likewise always bound adaptivity and stifled innovation in the economy, and the Great Depression was no different. Doesn't any FDR fan wonder why it was so long?
More to the point, here we are in the 21st century, looking at the housing sector and worrying about the damage that might be done to the economy if this "important sector" is allowed to suffer. Well what damage might be done to the economy if we get the government to fix these problems? Getting government help with a sector of the economy seems to me to be like getting Jason Voorhees to cut your hair, because "it's a disaster." To paraphrase Groucho Marx, if you think the economy's bad off now, just wait till they get through with it.
SRS
posted by weblogbob83 at 10:09 PM
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