Newmans Own

Bubble Blogging

James Surowiecki asks a question I have also asked (and that Dan Gross has long been pondering ): What did the housing bubble give us? He reaches a conclusion similar to my own, though I picked on Las Vegas instead of Phoenix:

The housing bubble was unique, and uniquely awful. Each of the previous waves had come in response to a profound shift in the real economy. With the housing bubble, by contrast, there was no meaningful development in the real economy that could explain why homes were suddenly so much more attractive or valuable. The only thing that had changed, really, was that banks were flinging cheap money at would-be homeowners, essentially conjuring up profits out of nowhere. And while previous booms (at least, those of the twenties and the nineties) did end in tears, along the way they made the economy more productive and more innovative in a lasting way. That’s not true of the past decade. Banking grew bigger and more profitable. But all we got in exchange was acres of empty houses in Phoenix.

But wait: On her blog,

Megan McArdle

calls this analysis too full of “a sort of post-hoc, ergo propter hoc reasoning”—bloggin’ in Latin!—and that we still don’t know what the benefits of the housing bubble will be.

Ezra Klein

says that if we didn’t spend the money on housing, we probably would have wasted it on something else. And

Ryan Avent

adds levels of complication about exchange rates and global trade imbalances and deficit spending. I will not attempt to summarize.

All I can say is this: If one benefit of the bursting of the bubble was supposed to be reasonable prices for houses in places where people may actually want to live, then I’m not seeing it. Not yet anyway. And yes, we’re still looking.