Sub-Prime Paternalism

There’s no shortage of articles about the sub-prime crisis (if that’s what it is). It’s nice to see someone propose a solution, although I wonder who would buy all this new government debt. Arnold Kling is skeptical about it for deeper reasons. On reflection, I agree with Kling: people should live in houses they can afford. Anything else creates even worse problems, as we’re seeing today.

The various “sub-prime solutions” are all symptomatic of paternalism. George McGovern has a great article on the subject, touching not only the sub-prime “crisis” but also the health care “crisis” and the payday lending problem (which hasn’t graduated to crisis status – yet). Here’s his conclusion:

Since leaving office I’ve written about public policy from a new perspective: outside looking in. I’ve come to realize that protecting freedom of choice in our everyday lives is essential to maintaining a healthy civil society.

Why do we think we are helping adult consumers by taking away their options? We don’t take away cars because we don’t like some people speeding. We allow state lotteries despite knowing some people are betting their grocery money. Everyone is exposed to economic risks of some kind. But we don’t operate mindlessly in trying to smooth out every theoretical wrinkle in life.

The nature of freedom of choice is that some people will misuse their responsibility and hurt themselves in the process. We should do our best to educate them, but without diminishing choice for everyone else.

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