Friday, April 2, 2010

Why Read Dean Baker?

Here's a small illustration of why Dean Baker should be widely read. As a trained economist, he sidesteps the Punch and Judy theatrics and addresses empirical questions as if they are just that, questions that can be shaped into an answerable state:

We help homeowners when we actually put money in their pocket. If homeowners are paying more in housing costs than they would to rent the same unit, then we have not put money in their pocket, we have put money in the banks' pockets. This is a policy to help banks, not homeowners.

That can be offset if there is reason to believe that the homeowner will eventually end up with equity in their home. Do we have any reason to believe that this will be the case? Well, that would depend on things like current ratios of sale price to rents and vacancy rates. These issues are not discussed anywhere in this piece or indeed in the overwhelming majority of pieces that discuss mechanisms to help homeowners.

In markets where prices are still bubble-inflated, giving people money to stay in their homes as owners is giving money to banks. In other markets, the owners could actually benefit. However, it is impossible to discuss the issue seriously without being able to distinguish between these situations.
On a large number of economic questions, we can read Dean Baker (and other experts who may or may not accept his conclusions) or we can watch Punch and Judy shout their favorite prejudices at each other. Reading Dean Baker seems the better choice by far.

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