March 17, 2008 by Tom Armstrong.

Hardly a day goes by during this housing crisis that the media does not report on families in foreclosure proceedings, or in arrears in repayment on mortgages that had close to zero down payment requirements and low “teaser “ interest rates. The many excuses offered by some home owners for their plight, and also eagerly by the authors of these human interest stories, is that the borrowers did not understand that these introductory interest rates might rise a lot after a few years, or that they would have negative equity in their homes if housing prices stopped rising and began to fall. An obvious alternative explanation for their behavior is that they gambled that the good times would continue indefinitely.

This type of response to failed decisions is not unique to the present housing crisis, but is part of a strong trend toward shifting responsibility to others. Women who sign a pre-nuptial agreement specifying the amount of their husband’s pre-marital wealth that would be theirs in the event of divorce often try to have the agreements overthrown in divorce litigation. They claim that they did not understand what the agreements meant, or that their husbands took advantage of them in other ways to get them to sign the agreements. Usually they signed simply because that was the only way they could marry the men they very much wanted to marry, perhaps in part because the men were wealthy.

Many criminals who confess to or are convicted of serious crimes try to have the courts excuse or mitigate their behavior. They allege that they had uncaring or abusive parents, or that fathers, relatives, stepfathers, or other adults molested them as children. Abusive treatment is awful, but still the vast majority of children abused do become law-abiding and responsible adults. That is a major fact that courts should pay attention to.

Successful attempts to shift the responsibility for bad decisions toward others and to society more generally create a “moral hazard” in behavior. If individuals are not held accountable for decisions and actions that harm themselves or others, they have less incentive to act responsibly in the first place since they will escape some or all of the bad consequences of their actions. It does not matter greatly whether this moral hazard resulted from the shifting of blame for unsuccessful actions to the “small print” in a contract, to an abused childhood, to a mental state, or to many other efforts to shift responsibility away from oneself.

An important foundation of the philosophy behind the arguments for private enterprise, free economies, and free societies more generally, is that these societies rely on and require individual decision-making and responsibility. This philosophy not only emphasizes the moral hazard reasons to require individual responsibility, but also “the use it or lose it principle”, a colloquial expression indicating that various mental and physical capacities wear down and erode if they are not used on a regular basis. This principle implies that people who are accustomed to having other persons or governments make their decisions for them lose the ability to make good decisions for themselves. Free societies lead to better decision-making partly because men and women accumulate more experience at making decisions that affect their well-being and that of others.

Read all of Gary Becker’s comments here.

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March 17, 2008 by Tom Armstrong.

There, government officials and labor experts alike have been scratching their heads over the precipitous 33% drop in teen employment over the past eight years.

“The collapse of the teen labor market has affected all demographic and socioeconomic groups,” noted labor economists Andrew Sum and Don Gillis in a Boston Globe op-ed last week.

Sounds serious, and it is.

Sum and Gillis say Massachusetts’ teen-job woes can be ended by more spending and bigger government. Following are a few of the “strategies” they say would do the trick:

• Passing Sen. Edward Kennedy’s $1.5 billion youth employment program.

• Creating more “One-Stop Career Centers” in Massachusetts.

• Subsidizing funds to create jobs for teens in the private sector.

• Funding “School to Career Connecting Activities” programs “that support local work force boards to develop year-round and summer intern jobs for high school teens.”

With big-government thinking like this, it’s no wonder Massachusetts has a teen unemployment problem.

We have a better idea. One that will cost neither Massachusetts nor the U.S. a penny: cut the Bay State’s minimum wage, now at $8 an hour and the highest in the nation. Better yet, abolish it entirely.

Read it all here.

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March 17, 2008 by Tom Armstrong.

Medicare is poised to wreak havoc on the economy. And our presidential candidates are avoiding the issue.

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March 17, 2008 by Tom Armstrong.

Poor Bear Stearns has to sell itself for $236 million.

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March 17, 2008 by Tom Armstrong.

Don Boudreaux of Cafe Hayek sends readers to read I, Pencil. You may prefer to watch Milton Friedman do the same bit in a clip taken from his Free to Choose video set.

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March 17, 2008 by Tom Armstrong.

Global warming crusader Al Gore repeatedly claims the climate change “debate’s over.” It isn’t, but the news media clearly agree with him. Global warming skeptics rarely get any say on the networks, and when their opinions are mentioned it is often with barbs like “cynics” or “deniers” thrown in to undermine them.

Read this entire BMI report here.

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