Tuesday, April 10, 2007

Feel Goodism Part II

Allow me to expand a bit on my thoughts from this morning. Let's think a bit more about "sub-prime mortgages." As I mentioned before, the people who are going to be getting sub-prime mortgages are those who can't get a mortgage from a mainstream lender at a reasonable price- these are people with poor credit. Now let's think about these people for a minute and just divide them into the categories of the responsible and everyone else. (Not everyone who defaults on a loan is irresponsible, so we'll just refer to this second group as everyone else.) Responsible individuals will take advantage of these subprime loans to buy a home, build credit, and work towards a successful financial future. For other people, it might not work out so well, but this is like so many other financial risks in life.

Groups like the Center For Responsible Lending really do mean well, but when they go beyond the realm of education and begin pushing for government solutions, I think they tend to forget or neglect the law of unintended consequences. For arguments sake, let's say that there are poor, uninformed people who are "victimized" by these practices. The problem with any law that restricts these sorts of loan practices is you're taking away opportunities from the people who were really benefiting from them in the first place.

Yes, if you eliminated or restricted these subprime lenders, you'd help out a lot of people who'd gotten involved in what ended up being bad deals. But you'd also put the people with poor credit who actually benefited from these subprime lenders out of luck. Problems to help "the poor" shouldn't wind up hurting the poor, but far too often, that's what many of these sorts of programs do.

As I was writing earlier I was remembering my American history, I was remembering the growth and industrialization of cities in the 19th century and the growth of slums and tenements that went along with that progress. There were plenty of do-gooders in the 19th century who wanted to clean up the slums and improve the living conditions of the working man. Remember, this is the precise background many of our immigrant ancestors came from. Well, the do-gooders back then ran into problems because you can't simply change the way people live because it doesn't measure up to your own standards. And this continues today- just because an immigrant is working 12 hour days and living in poor conditions does not mean that they are being exploited. They could be saving up to help their uber-poor families and choosing to live and work the way they do as a rational means of attaining their goal. Again, the problem with feel-good laws is that they never account for this initiative or any sort of responsibility on the part of the poor. Rather, the poor are taken as people who need the stern hand of a paternalistic government to tell them what to do. I'm a libertarian because I find such notions to be obscene and an insult to the dignity of everyone of us who are perfectly capable of making our own choices.


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