I agree that this is ultimately a hypothesis we could test empirically. I know homeowners who have done a variety of things in the face of rising housing costs or lower income, including refinancing for longer terms, downsizing, and stubbornly sticking with the house when it was no longer a good idea financially. (I haven't personally seen anyone get to foreclosure yet, but of course that happens.) So there could be any number of responses to the situation, and I know no particular evidence that many people do actually exercise the option to deal with less disposable income by reducing housing costs.

Posted at December 7, 2006 7:39 PM in response to What's Missing from the Housing Debate? Risk.

Some indication of success: there's soon to be competition from the business model's inventor, Zopa. Zopa's currently only available in the UK -- we just love ripping off British ideas -- but it's branching out to the US soon.

Posted at October 12, 2006 4:28 PM in response to A Lending Revolution? Too Soon to Tell

As always, brilliant.

The best articulation of your "government as risk arbitrageur" idea that I've ever read is a 1916 book by I M Rubinow called, simply, Social Insurance.

The rhetoric, alone, makes the book priceless. I recommend it highly.

Posted at August 10, 2006 12:38 PM in response to The City of Tomorrow

I wish as much as you do that we could reliably trust the press. But when you want to take the nation's pulse, scanning the press seems to be one of the best methods available to a mere blog contributor. Since such pulse-taking is an important part of reasoning about policy, I must put aside my disgust and do the best I can do.

Posted at April 18, 2006 10:54 AM in response to Taking Home-as-Investment Seriously

My favorite -- especially since we're nearing the centenial -- is David Graham Phillips's 1906 "The Treason of the Senate."   As the OUP blogger notes, it was crucial in exposing how deeply business had captured our Senate by corrupting state legislatures, and in pressing for direct election in Senators.  Some research I assisted marshalls strong evidence showing that this muckraking series was quite influential in changing our Constitution.  Go muckrakers!

Posted at March 15, 2006 9:47 AM in response to Muckraking through the Ages

I can't disagree with your first two points.  But the third is dubious.  If intra- and international trade is fair, then, sure, money is drained from Austin to Boston, but it's also "drained" from Boston to Austin.  If we took the "keep the money in one place" argument seriously, we'd prohibit banks from having more than one branch, or from lending far from where their depositors lived.  That was what Americans did for centuries -- following that exact logic -- and, man, that sucked.

Posted at February 24, 2006 12:37 PM in response to Wal-Mart Data

Posted at February 21, 2006 11:52 AM in response to College Costs, Benefits and Risk: Can the Middle Class Afford It?

I don't claim to know much about this topic. But, for my simplistic take.

Perhaps the most effective investment risk management strategy is diversification. Education is, in part, an investment. But there's no clear way to "diversify" your education investment. (Not even a JD is the magical key to "whatever job you might want," contrary to popular opinion.) Indeed, more generalized degrees are often less desirable. (My college offered a "general studies" degree for the truly desperate. Try explaining that at a job interview.) And even that strategy won't allow you to include in your portfolio the prospect of fruitful employment without a college degree. (The educational equivalent of emerging markets securities, I suppose.)

Let's say you think debt prospects are scaring some students away from additional education. Perhaps that's only appropriate, but perhaps it isn't. Let's say you think the consequences of wrongly believing the former are worse than the consequences of wrongly believing the latter. Then there's a plausible argument that a decent risk pooling scheme (such as Australia's) would be a revenue neutral way to make students more free. Free to choose how to educate themselves, and free to choose the most productive and satisfying career for themselves.

This doesn't necessarily mean that the federal government should directly subsidize college students. Private enterprise can presumably come up with some way to offer an innovative diversification product. On the other hand, innovative risk markets are notoriously bad at developing naturally. For instance, they often lack the means to overcome the initial problems of small risk pools and an untested ability to live up to guarantees. Americans have historically used government to help business provide such guarantees in key industries and sectors -- from lending railroads government bonds to sell as their own (effectively loaning the government's credit rating) to allocating funds for terrorism risk reinsurance. So such industry support could be one item in the bag of tricks to manage college education in America, in the interests of having a skilled workforce, and in the interests of making students more free to lead the lives they choose to lead.

Posted at February 19, 2006 9:44 PM in response to College: A High Stakes Gamble

All good comments. This book seems to address some of what's going on.

Posted at February 6, 2006 11:55 AM in response to Labor/Leisure

A question I haven't seen well-answered: are those now covered by Part D actually worse off than they were before Jan 1?

Posted at January 25, 2006 6:09 AM in response to Medicare Part D: The Start of More Federal Government-Provided Health Care?