[quote=briansd1][quote=davelj]
Why haven’t you bought a house and taken on a mortgage that you’ll subsequently default on? Isn’t it contrary to your own economic interests NOT to do so? I’m sure I could find all sorts of activities that you engage in that are contrary to your monetary economic interests. Why?[/quote]
Because I don’t believe in the absolute power of the markets.
But if one truly believe in the invisible hand, then one must accept that selfish acts on the parts of some will be counter-balanced by the selfish acts of others.
Obviously, I was being facetious in my first post above.
But considering all the malfeasance in the mortgage and real estate market, this lawyer just part of the unraveling of previous exuberance.
It could be that this lawyer is doing a service to society so that future lenders are fully aware of some of the consequences of bad underwriting.
This lawyer and his clients are rational. I don’t see the paradox here.
It’s much more paradoxical for a real estate bubble-head to now default on his properties, after telling people all these years that real estate is the way to riches.[/quote]
There are many Piggs who would not find your first post facetious, as I read posts from many folks here who say that they feel dumb for not buying a home, defaulting and living “rent free” for X number of years. I don’t think they’re being facetious… but I also don’t think they’ve fully thought the issue through… and when push comes to shove they wouldn’t do it.
There are not a lot of people (in percentage terms) who believe in “the absolute power of markets.” Even most liberal (in the classical sense) economists acknowledge market failures. But I digress…
The answer you should have been looking for is that economics isn’t about maximizing “money” or “wealth” – which is what you suggest. It’s about maximizing UTILITY – of which money and wealth are a sub-set. So, to use a simple example, people who give money to charity may not be maximizing their wealth, but they receive psychic income from engaging in charity such that it increases their overall utility.
So, to get back to your original post, MOST people get utility out of being financially responsible, even if it negatively affects their overall wealth. This does not mean that they are acting against their own economic interests. You’ve merely defined “economic interests” incorrectly.
