Comments | erudito: Niall Ferguson on the credit crunch

erudito

Niall Ferguson on the credit crunch

Nov 29, 2008 06:32

Historian Niall Ferguson has a very enlightening essay on the financial crisis, putting it in its broader and immediate historical context.

The triggering failure is straightforward: The proximate cause of the economic uncertainty of 2008 was financial: to be precise, a crunch in the credit markets triggered by mounting defaults on a hitherto ( Read more... )

regulation, credit crisis, models, policy

Comments 4

catsidhe November 28 2008, 21:58:52 UTC

Oz cities surrounded by lots of un-built on land suitable for housing.Depends on what you mean by ‘suitable’. The borders of suburbia, in whatever direction, are perfectly well suitable to housing... if you work nearby. The Eastern borders - Berwick, Beaconsfield, &c - are a good 1.5-2 hours from the CBD on a quiet weekend, and well over 2 hours in peak, on the absolutely atrocious M1. Public transport is overloaded already, and is crumbling under the stresses of not having had any infrastructure upgrades since the eighties, clearly not enough maintenance done, and management by profit-seeking morons. (Not to say that profit-seeking is what makes them morons, but that their moronic chase after profits over actually running a decent system has killed their chance of making any honest profit, unless you count unending government subsidies). Two hours one-way. Four hours plus commute a day, for hundreds of thousands of people ( ... )

Infrastructure erudito November 28 2008, 22:46:31 UTC

If you are saying there has not been enough investment in transport infrastructure, clearly true. But part of the problem has been the belief that the wise planners could "control" everything so that any set of preferences could just be provided (including prejudices against freeways). This despite the fact that the cost of housing has been increased by insisting that local infrastructure be paid for upfront.

In cities such as Houston, where there has been commensurate investment in transport infrastructure, there is not this problem.

And the issue is not planning per se (as in planning to have enough transport infrastructure), it is zoning: specificually, discretionary control over land use (and thus market entry).

And the market can't be left to it's own devices, because the evidence of the last couple of decades of estate planning and house design fashion demonstrates that the market is stupid.And you have, of course, done a study of all salient aspects of highly regulated land use and building so you know what incentives that ( ... )

Re: Infrastructure catsidhe November 29 2008, 10:20:25 UTC

“... the belief that the wise planners could "control" everything so that any set of preferences could just be provided...”

Um, what? No really, I don't understand what you're trying to say here - I can't parse it. Unless you're trying to say that it is something to do with assumption that planners will make everything better being discordant with reality. To which I can only say that it is indeed: planners have largely been irrelevant over the last few decades, as whatever planning has been done on whatever level has been overridden whenever a developer didn't like it. Developers have had effective free reign, and while they might well have been charged for infrastructure, has any of this gone beyond immediate infrastructure? ie., how much has gone into roads and local feeders, sewerage, power and water, and how much into the larger infrastructure you need to get these people from their shiny new home to their jobs and back ( ... )

Re: Infrastructure erudito November 29 2008, 19:44:59 UTC

First, the Cain-Kirner government, which was in power for quite a while, had a clear prejudice against freeways, with the result that Melbourne has been playing catch-up ever since. Clearly, they thought that, by planning controls, they could avoid nasty freeways. By the standards of Houston, Melbourne is very under-supplied with freeways.

Second, the original idea of zoning is as you say. The effect of requiring official permission to build houses has been to constantly have housing supply undershoot demand, creating surging house prices. In Germany, where officials do not have this power, house prices move about the rate of inflation (a bit less after the substandard East German stock was added in). Similarly in Texas. The median house should be about about 3 times median household income, as it is in Texas. Not 8.6 times as it is in Sydney or 7.3 as it is in Melbourne.

The notion that developers get free reign may be a delusion that The Age manages to convey, but it is not the reality on the ground. We have strict and ( ... )