Thomas Sowell is one of my favorite economists because he explains economic concepts without economic jargon.  In fact, his book Basic Economics is “a new kind of introduction to economics for the general public–without graphs, statistics, or jargon.”

In this article, “Subsidizing Bad Decisions,” he explains why Obama’s mortgage bailout plan is a bad idea.  It creates a moral hazard.

Since the average American never took out a mortgage loan as big as 700
grand ? for the very good reason that he could not afford it ? why
should he be forced as a taxpayer to subsidize someone else who
apparently couldn?t afford it either, but who got in over his head
anyway?

Why should taxpayers who live in apartments, perhaps
because they did not feel that they could afford to buy a house, be
forced to subsidize people who could not afford to buy a house, but who
went ahead and bought one anyway?

…..Worse, the subsidizing of bad decisions
destroys one of the most effective sources of better decisions ?
namely, paying the consequences of bad decisions.

In the wake of
the housing debacle in California, more people are buying less
expensive homes, making bigger down payments, and staying away from
?creative? and risky financing. It is amazing how fast people learn
when they are not insulated from the consequences of their decisions.

Sowell also explains the political meaning of “affordable housing:”  

The same politicians who have been talking about a need for ?affordable
housing? for years are now suddenly alarmed that home prices are
falling. How can housing become more affordable unless prices fall?

The
political meaning of ?affordable housing? is housing that is made more
affordable by politicians intervening to create government subsidies,
rent control, or other gimmicks for which politicians can take credit.

Affordable housing produced by market forces provides no benefit to politicians and has no attraction for them. 

Study
after study, not only here but in other countries, shows that the most
affordable housing is where there has been the least government
interference with the market ? contrary to rhetoric.

Research Intern Abby Alger and I look at “affordable housing” in North Carolina in this JLF policy report:  “Unaffordable Housing: Cities Keep Low- and Middle-Income Families from Homeownership.”