Zero mortgage defaults are not the aim

So says Erik Hurst:

Popular belief holds that if the government had better regulated the mortgage industry, the current crisis could have been avoided. At some level, this must be right: if the government outlawed mortgages altogether, there would be no one to default on a mortgage. But we must not risk throwing out the baby with the bathwater.

The whole essay is worth a read. Here are the important links:

Relaxing these regulations led to massive gains in the efficiency of the U.S. banking system. These aren’t just abstract changes in efficiency; they have touched all of our lives. Here’s a quick reading list of research showing that this deregulation yielded greater income growth; less volatile business cycles; better access to housing credit; offset racial discrimination in the labor market; and reduced crime.

Tim Harford’s blog

This blog is no longer updated but it remains open as an archive.

Tim, also known as the Undercover Economist, writes about the economics of everyday life.