Holman W. Jenkins, Jr. of the Wall Street Journal writes:
A great deal of housing debt was created in the last few years to give speculative buyers nominal title to homes that they no longer want. Any postmortem will also show that too much government subsidy for the creation of housing debt was an original sin at the root of today's mess.Too true. But then he writes:
The result is not unlike pollution -- a market "externality" that imposes unfair costs on others as a result of some people's over-speculation in now decaying, market-depressing, neighborhood-degrading housing.Wait, how does extra housing impose unfair costs on others? Are we thinking about the same others? If there is too much supply, prices fall—making housing more accessible to those who are looking to buy. This is not unlike the bust after the internet boom in 2000. A lot of great capital infrastructure was bought at low prices, and subsequently put to good use. Irrational investors lost, but the capital created was still put to use afterward. Extra fiber didn't impose "unfair costs" on others, did it?
Here's the Broken Window Watch winner of the week:
When politicians understand this, they may finally have something useful to contribute. The shortest road back from this perdition, as improbable as it may sound, would be to foreclose on and demolish some of the least-wanted houses, with taxpayer money if necessary.That's right. Use taxpayer money to demolish houses to prop up their prices. What a great strategy! The immediate effect is to prop up prices (making existing homeowners happy) and create work for demolition teams. There is no way there would be any unseen effects, would there?