Saturday, August 08, 2009

The Housing Boom and Bust

If, like me, you're tired of listening to and arguing with know-nothing-know-it-alls who insist that the current economic downturn is the fault of deregulation, the failure or excesses of capitalism, you might be interested in Thomas Sowell's latest, The Housing Boom and Bust. As always, Dr. Sowell writes for the layman, who may not know much about economics, you know, like the know-it-alls. It's a short book, 148 pages of text, and another 30 pages of notes. And if you've been following Sowell's regular columns, you will have already read some of what he says in the book.

You should still read the book. He explains the entire problem beginning at the beginning. And it doesn't even take the entire book to explain how we got into this fix. He also explains some of the failed government interventions of the past, some of which led to, and extended the Great Depression, and Obama's failure to learn from the past as he attempts to lead us into a greater depression.

While the problem began with government intervention and good intentions, to help more people afford to own their own homes, others helped along the way. And yes, some of them were Wall Street investors. Some of them were Republicans. George Bush has his share of blame in this, and so do the people who knowingly bought more house than they knew they could afford.

The simple, yet biggest lesson Dr. Sowell tries to teach, and one that he tries to teach in many of his columns is that government intervention, no matter how well meaning, almost always ends up causing more harm than good, which leads to the government rushing in to fix the problem, which, because of the universal and unbreakable Law of Unintended Consequences, and the fact that government officials have little or no knowledge or experience in the businesses they intend on "fixing", they only make things worse, which leads to still more government, etc. It's a lot like the debate on Obamacare. We've had government intervention that has led to changes in our health care and in the insurance industry since World War II. Nobody remembers that far back. Very few people look back and track the government policies and mandates that, over the years and decades, have forced the price of health care to the level it's at today. We only know what's happening now and we're not happy with it. So, here comes Obama and the Democrats with their multi-trillion dollar solution.

As Dr. Sowell demonstrates in book after book and in column after column, the free market is still the best path toward economic growth and freedom.

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