24 Sep 2008

Tyler Cowen Endorses (?!) Blowing Up Homes

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I have been good for a few days, and avoided my nervous tic of ridiculing Tyler Cowen’s blog posts. (This is mostly because I think he’s been good on opposing the Paulson Plan.) However, I cannot bite my tongue when he today writes this:

So I have a modest proposal. The Fed/Treasury can identify those parts of the country with the most foreclosures. They can buy or confiscate empty homes in those areas and destroy them. That will raise the price of the remaining homes. Anyone who is otherwise about to default could then sell the home at a high enough price (fingers crossed) to get out of the deal alive. This would stop home prices from falling and it would limit the number of future defaults.

You might think he’s kidding, especially with the Swift allusion, but in context I don’t think he is. And…how can I put this?…Tyler has said crazier things in his day.

Something is seriously wrong when one of the leading (and smartest) free market economists recommends that the government start destroying buildings in order to help the economy.

Another symptom of this general messed-up-itude: What is the deal with everyone contrasting the financial markets with the “real economy”?? In the real economy, financial markets really are important. If a strange virus suddenly killed off all the people working in advertising, would the analysts wring their hands over whether this would influence “actual output”? What about truckers? They don’t actually make stuff, they just move it around, right?

So who are these “real” producers? Farmers and entertainers? Hair stylists?

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