Hayekian Economist Gerald O’Driscoll

On the housing market:

Government programs to prop up home prices have been half-hearted and ineffective overall, and mercifully so. A successful program to prop up home prices would have aborted the recovery process. It would have created an overhang of unsold, over-priced homes. Speculators would have held off buying and first-time buyers would have remained frozen out of the market ..

For all the talk of the failure of markets, what is actually working is markets. What failed were government policies of cheap credit and attempting to make housing affordable by stimulating demand .. Stimulating demand through cheap credit only fuels unsustainable price bubbles. The way to avoid a future housing bust is to stay away from demand-stimulating and supply-restricting housing policies.

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