The housing boom and bust (revised edition 2010)
Thomas Sowell in The Housing Boom and Bust (Revised Edition 2010) focuses on the housing market, an economics area, in which he has sufficient knowledge. The author looks at the turn of events that have precipitated the current situation with a certain housing problem. He addresses a wide range of issues, including the Congress intervention in the housing problem through creation of an act aimed at promoting manageable housing. Sowells book is a highly informative reference material for anyone who seeks to understand the economics of the housing boom.
In the first chapter, Sowell addresses the economics of the housing boom. The chapter introduces the topic through a discussion on the laws of demand and supply, as the author has traversed the necessary principles. The writer asserts that any distortion in the demand and supply can have a drastic change in the chain. The chapter also introduces Sowells disgust with the basic economic laws that politicians introduce to drive home their political agenda.
The second chapter looks at the politics of the housing boom. The author perceives politicians as self-centered individuals who are ready to advocate for unhealthy economic laws to enhance their poorly developed social political agenda. Specifically, Sowells book analyzes the laws instituted to restrict land use and to cope with the extraordinary building restrictions, which lead to artificial low supply in the market that is common for many communities (Mian & Sufi, 2014). Having introduced the restrictive laws as enacted by bureaucracies in chapter one, Sowell turns to a provision of some vocabulary lesson to a media-saturated culture that has dominated in the society for a long period of time. He uses the expression predatory lending to explain his assertion that the only common denominator in this accusation is that the critics dont like them (Sowell, 2010). Sowell expresses disappointment with the bureaucrats who allowed the inadequate supply through the formulated restrictive laws that prevent growth and building density.
The third chapter addresses the housing burst in more details. According to Sowell, people know what they can afford themselves according to their incomes. The chapter shows Sowells dissatisfaction with the idea of affordable housing based on the assertion that affordability is relative. The author argues that people have different capacities as evident in the fact that while one man can afford to rent an apartment in which to reside, another person is capable of renting a mansion (Mian & Sufi, 2014). The illustrations present a justification that the idea of affordability is not appropriately used as per the developed regulations.
Chapter four addresses the housing mystiques and housing mistakes that he believes to have caused the prevailing problem. Sowell calls for a clear understanding of the affordability concept by arguing that it is necessary to allow people to choose their preferred housing with the government establishing measures to enable them afford their houses of choice. Sowell is dissatisfied by the fact that despite governments control and manipulation in creation of affordable housing, the monthly housing expenses, when looked at as a percentage of income, has not shown a positive reduction but continued to increase proportionally to governments instituting policies pupated to facilitate affordability. In this chapter, Sowell argues that the government is reluctant is making a genuine call for affordability, as he states that it has the capacity to create affordable housing if it has a positive will.
Sowell firmly criticizes the Community Reinvestment Act of 1977. The author gives critical explanations to support his assertion that the Act has entailed a current housing crisis. Mian and Sufi (2014) state that Sowell goes beyond a mere criticism of the attempt by the Act to use economic policy to initiate a social outcome, but he also explains his conviction in the fact that such an Act is simply a waste. The Act calls for financial institutions to assist in meeting the local communities credit needs, in which they are chartered in accordance to the safe and sound operations of the institutions. According to Sowell, a business entity does not require an act of Congress as a guideline on how it should conduct its daily operations in the pursuit for profit generation.
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Besides, Sowell has serious reservations regarding the expediency of the Congress directions to business about whom to lend money. The author looks at the idea of seeking the directive from the Congress as an ill-advised move, as it indicates that politicians opinion is more important than stakeholders position. Sowell is convinced that the idea of seeking approval from the Congress (by looking at the provisions of the Act) is wrong, as it presents businesses or lenders unable to make their personal judgments on credit worthiness of borrowers. The Act states that if there is an approved provision of a loan to a borrower; businesses should not consider looking into the borrowers credit worthiness, but issue the requested amount as per the Acts approval. In the book, Sowell finalizes the discussion on the Act by recognizing the fact that in some cases, financial institutions may be wrong in their attempts to determine the borrowers who would be credit worthy and those that would not. However, Sowell states that financial institutions have a profit motive that places them in a better position to judge the credit worthiness of borrowers better than the elected officials who serve to drive the social and political agenda.
In the last chapter, Sowell looks at the past and the future of the society based on the discussed challenges. Sowell states, No doubt perfect government regulation could have solved the housing market problems, but a perfect operation of the free market could have solved them as well (Sowell, 2010). The book claims that it is ridiculous to have perfect capitalism contrasted with perfect regulations. Sowell argues that the current society is high in advocacy for the latter, as it strives to convince the public that the animal spirit of free market has caused a disaster that humans currently experience. According to the author, it only takes a noble and efficient government to keep the business community out of the next disaster. Despite several regulatory interventions by the government to advocate for adherence to particular regulations, Sowell is reluctant to believe that such regulatory efforts can be perfect. He faults the perception that increased regulations will help perfect financial operations and so is redrafting of government jurisdictions.
As a conclusion, Sowell gives recommendations that he feels can help the society to reach the desired levels of excellence. He argues that the society requires a paradigm shift in peoples thought pattern about the discussed affairs. He calls for people to stop the tendency of looking at the government as the public interest personified (Sowell 2010). Sowell ends his book with a critical analysis on how the prevailing crisis is under manipulation to increase government activity and jurisdiction. In Sowells view, the attempts by the government to find a solution to a problem of affordable housing that never existed has given rise to a real-life problem whose impacts are noticeable.
The analogy presented by Sowell is commendable for use in understanding the depressive relationship between the state and its citizens. The governments present regulatory initiatives can hardly be trusted as viable solutions to the challenge of affordable housing, but they may create several wrongs that will take so long to fix.
The book has a significant influence on the way I look at things. It clearly points out the way, in which the government can intrude market practices. The book helps in understanding that most affordable products created during the boom years with an aim to increase home ownership were simply mitigating wrong government policies. It points out that politicians are likely to continue implementation of policies that can be detrimental to the country while positioning such initiatives as advantages. The book clearly shows the implications of small well-meaning actions, and how such actions have contributed to the problems characteristic of the present society. As such, it has increased my assertion that people should cross-examine government policies against their effectiveness in addressing various situations for which they are formulated.
The book has also increased my understanding that the ordinary citizens have an important role in improving their situation without fully looking up to the government for a solution when facing challenges. It has clearly revealed politicians self-interests that often influence their policy decisions. After reading the entire book, I have clearly understood the essence of individual effort as a way out of challenging situations. From the case of affordable housing as advocated for by the Congress, I have learnt about diverse human capacities and the fact that what is good for one person is not necessarily the same for the general public.