Promoting Irresponsibility
PJ O'Donovan
Hardly a day goes by during this housing crisis that the media does
not report on families in foreclosure proceedings, or in arrears in
repayment on mortgages that had close to zero down payment
requirements and low "teaser" interest rates. The many excuses offered
by some home owners for their plight, and also eagerly by the authors
of these human interest stories, is that the borrowers did not
understand that these introductory interest rates might rise a lot
after a few years, or that they would have negative equity in their
homes if housing prices stopped rising and began to fall. An obvious
alternative explanation for their behavior is that they gambled that
the good times would continue indefinitely.
This type of response to failed decisions is not unique to the present
housing crisis, but is part of a strong trend toward shifting
responsibility to others. Women who sign a pre-nuptial agreement
specifying the amount of their husband's pre-marital wealth that would
be theirs in the event of divorce often try to have the agreements
overthrown in divorce litigation. They claim that they did not
understand what the agreements meant, or that their husbands took
advantage of them in other ways to get them to sign the agreements.
Usually they signed simply because that was the only way they could
marry the men they very much wanted to marry, perhaps in part because
the men were wealthy.
Many criminals who confess to or are convicted of serious crimes try
to have the courts excuse or mitigate their behavior. They allege that
they had uncaring or abusive parents, or that fathers, relatives,
stepfathers, or other adults molested them as children. Abusive
treatment is awful, but still the vast majority of children abused do
become law-abiding and responsible adults. That is a major fact that
courts should pay attention to.
Successful attempts to shift the responsibility for bad decisions
toward others and to society more generally create a "moral hazard" in
behavior. If individuals are not held accountable for decisions and
actions that harm themselves or others, they have less incentive to
act responsibly in the first place since they will escape some or all
of the bad consequences of their actions.
Jean Smith
<8e7d0f3a-4873-4798...@u72g2000hsf.googlegroups.com>,
"PJ O'Donovan" <Xen...@aol.com> wrote:
> University of Chicago economist Gary Becker writing at
> www.becker-posner-blog.com:
>
> Hardly a day goes by during this housing crisis that the media does
> not report on families in foreclosure proceedings, or in arrears in
> repayment on mortgages that had close to zero down payment
> requirements and low "teaser" interest rates. The many excuses offered
> by some home owners for their plight, and also eagerly by the authors
> of these human interest stories, is that the borrowers did not
> understand that these introductory interest rates might rise a lot
> after a few years, or that they would have negative equity in their
> homes if housing prices stopped rising and began to fall. An obvious
> alternative explanation for their behavior is that they gambled that
> the good times would continue indefinitely.
They were as likely sold on how home ownership would improve their
standing and allow them to refinance before the rates changed, home
values go up over time and the "we have to tell you this but" stuff.
Communities don't benefit from lots of empty homes. There should be an
effort to keep responsible parties in their homes and minimize losses.