(this post is in draft form, it is going to take a lot more work and my head hurts)
The next stop in considering a natural right to housing is John Locke, author of Two Treatises of Government. This book, written at the end of the 17th Century, provided a foundation for private property rights and challenged the concept of monarchies.
Locke describes a State of Nature that has the following properties:
1. all persons are free to behave and use their possessions as they see fit
2. all persons are equal with no one having more power than another
3. the State of Nature is governed by the "law of nature", or reason
4. no person should harm another person's life, health, liberty, or possessions
5. all persons have the power of execution of all laws and of using reason and no person can appeal to a judge or arbitrator
Locke sees three weaknesses in the State of Nature:
1. lack of settled law (i.e. common consent to right and wrong)
2. lack of an indifferent judge of law
3. lack of a power to execute and enforce the law
Similar to Hobbes, Locke expressed a "fundamental law of nature" regarding self-preservation. This Fundamental Law of Nature comes about when a State of War exists such that one person tries to subject another to his/her will. Society is formed when people, desiring to avoid the State of War, are willing to quit the State of Nature and join into community for the mutual preservation of their lives, liberties, and estates (i.e. property). Even though people may consent to be governed by the majority in community, no person gives up (or can give up) the Fundamental Law of Nature (i.e. the preservation of mankind).
Similar to Hobbes, Locke believes that people have a right to property that they apply their labor to and can use (i.e. property necessary to preserve and enrich one's own life). By use, Locke means "not wasted or perishing unused" so that "used for trading something else that is then used" is reasonable and within the right of property. In fact, the combination of natural resources and labor is the basis of Locke's definition of property. Locke sees all mankind as benefiting from this type of property because the application of man's labor increases the common stock of all mankind.
In this way, Locke defines and confines property to things that are "not wasted" as opposed to things that are traded or stored up (e.g. the use of money as a holder of value from one time period to the next). When people increase, and introduce money as a store of value, land becomes scarce. And so, communities settle the boundaries of their territories and use law to regulate private property among their members.
What then would Locke say of our current situation where some have 20,000 square foot houses, some have 2,000 square foot houses, and some have none at all? Locke's ideas about property were bounded by a combination of "use" (meaning not wasted) and "labor" (meaning effort on the part of people). In this sense, I believe Locke would have found that a society containing unused houses (or portions of houses) to be a violation of the State of Nature, but that no person by right deserves to be housed if they do not apply their own effort to being so.
Next stop, Rousseau...
Monday, March 9, 2009
Sunday, March 8, 2009
The (Natural) Right to Housing (part 2): Leviathan
Any conversation about natural rights has to consider a basic text of political science, the Leviathan by Thomas Hobbes. For those that have been out of school for a while, the Leviathan was published in 1651 and is an essay (a long essay) regarding how and why governments are formed.
Here's a quick summary of what I find in Leviathan that is applicable to this question of whether there is a natural right to housing. Hobbes line of logic is:
1. All persons are born equal in nature.
2. Without government, life is solitary, poor, nasty, brutish, and short (this is one of Hobbes's famous quotes). Everyone is at war with everyone.
3. The "laws" of nature are what men agree to as articles of peace due to a fear of death from war. Laws determine and bind persons from action.
4. The "rights" of nature are that each person has the liberty to pursue self-preservation (liberty being the absence of external impediments). Rights are the liberty to do or forbear doing some thing.
5. Some rights are inalienable under any circumstance, such as self-defense against force.
6. The sum of the laws of nature are "do not unto others that which you would not do to yourself." This is an interesting twist on the Golden Rule to "do unto others as you would do have them do unto you." It reflects Hobbes's emphasis on liberty (i.e. the right to act or not act).
So, where does that lead us regarding a right to housing? The following reflects one way to interpret Hobbes with regard to this subject:
1. Self-preservation is a right of nature, fundamental, inalienable, and common to all persons.
2. Among the physical things needed for self-preservation are food and shelter, at least at subsistence levels. Without laws to the contrary, persons would create subsistence shelter on their own (or they would perish in many climates).
3. The ability to shelter ourselves is not possible unless the titling of land into ownership by law incorporates a way to ensure all persons hold title to some land suitable for human habitation (e.g. a common area available to all).
4. Further, zoning ordinances and building codes prohibit the creation of some forms of shelter that would be suitable at a subsistence level, thereby reducing some persons to the absence of shelter.
5. Because the right to self-preservation in alienable, no law that prohibits the provision of subsistence shelter without providing an equivalent alternative is unjust.
6. To do otherwise violates Hobbes's sum of the law of nature.
Hobbes's political philosophy leads me to conclude he would be in favor of a right to housing. However, Hobbes's most well known quotation (i.e. "life is solitary, poor, nasty, brutish, and short") and his belief that persons are naturally at war with one another unless they form a government bound by laws suggest that even our worst prisons or shelters would probably look luxurious to Hobbes. After all, the right to self-preservation is not a right to equality and would more likely reflect bare subsistence at best (i.e. that which people would create in nature if otherwise unobstructed by laws).
Next stop, John Locke's Two Treatises of Government...
Here's a quick summary of what I find in Leviathan that is applicable to this question of whether there is a natural right to housing. Hobbes line of logic is:
1. All persons are born equal in nature.
2. Without government, life is solitary, poor, nasty, brutish, and short (this is one of Hobbes's famous quotes). Everyone is at war with everyone.
3. The "laws" of nature are what men agree to as articles of peace due to a fear of death from war. Laws determine and bind persons from action.
4. The "rights" of nature are that each person has the liberty to pursue self-preservation (liberty being the absence of external impediments). Rights are the liberty to do or forbear doing some thing.
5. Some rights are inalienable under any circumstance, such as self-defense against force.
6. The sum of the laws of nature are "do not unto others that which you would not do to yourself." This is an interesting twist on the Golden Rule to "do unto others as you would do have them do unto you." It reflects Hobbes's emphasis on liberty (i.e. the right to act or not act).
So, where does that lead us regarding a right to housing? The following reflects one way to interpret Hobbes with regard to this subject:
1. Self-preservation is a right of nature, fundamental, inalienable, and common to all persons.
2. Among the physical things needed for self-preservation are food and shelter, at least at subsistence levels. Without laws to the contrary, persons would create subsistence shelter on their own (or they would perish in many climates).
3. The ability to shelter ourselves is not possible unless the titling of land into ownership by law incorporates a way to ensure all persons hold title to some land suitable for human habitation (e.g. a common area available to all).
4. Further, zoning ordinances and building codes prohibit the creation of some forms of shelter that would be suitable at a subsistence level, thereby reducing some persons to the absence of shelter.
5. Because the right to self-preservation in alienable, no law that prohibits the provision of subsistence shelter without providing an equivalent alternative is unjust.
6. To do otherwise violates Hobbes's sum of the law of nature.
Hobbes's political philosophy leads me to conclude he would be in favor of a right to housing. However, Hobbes's most well known quotation (i.e. "life is solitary, poor, nasty, brutish, and short") and his belief that persons are naturally at war with one another unless they form a government bound by laws suggest that even our worst prisons or shelters would probably look luxurious to Hobbes. After all, the right to self-preservation is not a right to equality and would more likely reflect bare subsistence at best (i.e. that which people would create in nature if otherwise unobstructed by laws).
Next stop, John Locke's Two Treatises of Government...
Saturday, March 7, 2009
Letter to the Editor of CFA Magazine
Below is the text of a "Letter to the Editor" of CFA Magazine that I submitted in response to a recent article regarding the role of regulation in the current financial crises.
Raymond Niles's Point/Counterpoint in the Jan-Feb 2009 issue of CFA Institute Magazine misleads readers about the Community Reinvestment Act (CRA). He claims that regulation caused the financial crisis, which is an appropriate expression of opinion given that it was an opinion piece. However, his claim that the CRA is a regulation that caused the financial crisis, that CRA was a principal factor in the housing bubble and related collapse, and that CRA is an example of government's repeated violation of our individual rights is not supported by evidence within his article and runs counter to evidence presented elsewhere.
CRA legislation was passed in the 1970s to ensure that entities using federal insurance to gain deposits subsequently made loans in those neighborhoods where deposits were obtained. CRA is not new, it was not implemented just prior to or concurrent with subprime lending and the financial crises. There are also specific studies that challenge his argument:
1. Regarding the financial crisis and CRA's role, an analysis conducted by Federal Reserve staff in November 2008 indicates that "only 6 percent of all higher-priced loans in 2006 were made by CRA-covered institutions or their affiliates to lower income borrowers or neighborhoods in their [CRA] assessment area" (see Glenn Canner and Neil Bhutta (2008). "Staff Analysis of the Relationship Between the CRA and the Subprime Crises" at http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf).
2. Regarding CRA's role in the housing bubble and related collapse, two studies found no conclusive evidence that CRA-related loans are more likely to have performance issues than comparable non-CRA-related loans (see Glenn Canner and Neil Bhutta (2008). "Staff Analysis of the Relationship Between the CRA and the Subprime Crises" at http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf and see Elizabeth Laderman and Carolina Reid (2009). “CRA Lending During the Subprime Meltdown,” Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, pp. 115-133).
3. CRA was not forced upon anyone; the choice was simple, any entity that felt the bargain was unfair could choose not to be federally insured (i.e. not be a bank). In fact, many lenders made such a choice. An analysis of the 2006 Home Mortgage Disclosure Act (HMDA) data indicates that roughly a third of applications were taken by independent mortgage companies rather than depository financial institutions or their affiliates (see Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner (2007). "The 2006 HMDA Data," Federal Reserve Bulletin, vol. 93 at http://www.federalreserve.gov/pubs/bulletin/2007/articles/hmda/default.htm).
One thing I can agree with Niles about is that we have to understand root causes of the current situation before developing appropriate responses or else we are doomed to repeat our mistakes. Towards that end, our assessment of root causes must be based on available evidence and not just ideological opinion.
Raymond Niles's Point/Counterpoint in the Jan-Feb 2009 issue of CFA Institute Magazine misleads readers about the Community Reinvestment Act (CRA). He claims that regulation caused the financial crisis, which is an appropriate expression of opinion given that it was an opinion piece. However, his claim that the CRA is a regulation that caused the financial crisis, that CRA was a principal factor in the housing bubble and related collapse, and that CRA is an example of government's repeated violation of our individual rights is not supported by evidence within his article and runs counter to evidence presented elsewhere.
CRA legislation was passed in the 1970s to ensure that entities using federal insurance to gain deposits subsequently made loans in those neighborhoods where deposits were obtained. CRA is not new, it was not implemented just prior to or concurrent with subprime lending and the financial crises. There are also specific studies that challenge his argument:
1. Regarding the financial crisis and CRA's role, an analysis conducted by Federal Reserve staff in November 2008 indicates that "only 6 percent of all higher-priced loans in 2006 were made by CRA-covered institutions or their affiliates to lower income borrowers or neighborhoods in their [CRA] assessment area" (see Glenn Canner and Neil Bhutta (2008). "Staff Analysis of the Relationship Between the CRA and the Subprime Crises" at http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf).
2. Regarding CRA's role in the housing bubble and related collapse, two studies found no conclusive evidence that CRA-related loans are more likely to have performance issues than comparable non-CRA-related loans (see Glenn Canner and Neil Bhutta (2008). "Staff Analysis of the Relationship Between the CRA and the Subprime Crises" at http://www.federalreserve.gov/newsevents/speech/20081203_analysis.pdf and see Elizabeth Laderman and Carolina Reid (2009). “CRA Lending During the Subprime Meltdown,” Revisiting the CRA: Perspectives on the Future of the Community Reinvestment Act, pp. 115-133).
3. CRA was not forced upon anyone; the choice was simple, any entity that felt the bargain was unfair could choose not to be federally insured (i.e. not be a bank). In fact, many lenders made such a choice. An analysis of the 2006 Home Mortgage Disclosure Act (HMDA) data indicates that roughly a third of applications were taken by independent mortgage companies rather than depository financial institutions or their affiliates (see Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner (2007). "The 2006 HMDA Data," Federal Reserve Bulletin, vol. 93 at http://www.federalreserve.gov/pubs/bulletin/2007/articles/hmda/default.htm).
One thing I can agree with Niles about is that we have to understand root causes of the current situation before developing appropriate responses or else we are doomed to repeat our mistakes. Towards that end, our assessment of root causes must be based on available evidence and not just ideological opinion.
Friday, March 6, 2009
The Right to Housing (part 1)
There's a topic that has been bothering me recently as I considered the 2009 Taylor Symposium topic - the American Promise and housing - namely, is there a "right to housing"? That issue is/was too broad for the limited time available at the Symposium so I am going to try to work through that issue in a couple of posts, of which this is the first (don't be surprised if you come back and I've revised/edited as it is a thought-in-process).
Let's start with what is meant by "right(s)". Have you ever looked the word up in the dictionary? Lot's of entries. I am not a political scientist and will probably violate a dozen issues in that field, but I find a discussion of rights can generally broken down into three types:
1. Natural rights that are absolute, common to all persons, and inalienable except when taken by unjust force. An example of such rights in the Declaration of Independence are the rights to life, liberty, and the pursuit of happiness. Violations of these rights are often enforced through criminal law.
2. Social or civil rights that are provided through law, enforced by the community as a whole (often through a police and/or judicial process if necessary), and are transferable through contract. By "civil", I mean "established by law" as opposed to the more common "Civil Rights Act of 1964" as used in the United States. An example of such rights are the bundle of rights included in fee simple title to real estate. Violation of these rights are commonly litigated through civil law. Natural rights are sometimes embodied into social rights by law as well.
3. Economic rights that are relative and evolving over time. Examples of these rights are policies/programs known as "entitlements" (e.g. social security payments that are available to all persons who are disabled, meet certain age requirements, etc.). Economic rights are always(?) embodied into social rights by law as well. The term "economic rights" is sometimes used to describe what I've defined as natural rights above.
For the purposes of these posts, I mean the following (Webster's Ninth New Collegiate Dictionary) by "right":
"...something to which one has a just claim...the power or privilege to which one is justly entitled..."
Clearly, the concept of "just" (i.e. "...acting or being in conformity with what is morally upright or good...") is closely tied to this definition of rights. And, from the three types of rights noted above, it is most closely tied to natural rights.
In short, is there a natural right to housing? Dust off the college textbooks boys and girls, this will be a trip back to the basics of western civilization, more to come...
Let's start with what is meant by "right(s)". Have you ever looked the word up in the dictionary? Lot's of entries. I am not a political scientist and will probably violate a dozen issues in that field, but I find a discussion of rights can generally broken down into three types:
1. Natural rights that are absolute, common to all persons, and inalienable except when taken by unjust force. An example of such rights in the Declaration of Independence are the rights to life, liberty, and the pursuit of happiness. Violations of these rights are often enforced through criminal law.
2. Social or civil rights that are provided through law, enforced by the community as a whole (often through a police and/or judicial process if necessary), and are transferable through contract. By "civil", I mean "established by law" as opposed to the more common "Civil Rights Act of 1964" as used in the United States. An example of such rights are the bundle of rights included in fee simple title to real estate. Violation of these rights are commonly litigated through civil law. Natural rights are sometimes embodied into social rights by law as well.
3. Economic rights that are relative and evolving over time. Examples of these rights are policies/programs known as "entitlements" (e.g. social security payments that are available to all persons who are disabled, meet certain age requirements, etc.). Economic rights are always(?) embodied into social rights by law as well. The term "economic rights" is sometimes used to describe what I've defined as natural rights above.
For the purposes of these posts, I mean the following (Webster's Ninth New Collegiate Dictionary) by "right":
"...something to which one has a just claim...the power or privilege to which one is justly entitled..."
Clearly, the concept of "just" (i.e. "...acting or being in conformity with what is morally upright or good...") is closely tied to this definition of rights. And, from the three types of rights noted above, it is most closely tied to natural rights.
In short, is there a natural right to housing? Dust off the college textbooks boys and girls, this will be a trip back to the basics of western civilization, more to come...
Thursday, March 5, 2009
CRA v2
o.k., I have to admit it, I began feeling bad this week that maybe my last post re: CRA in Indianapolis was a little harsh. In that post I compared what percentage of mortgage loans in the Indianapolis MSA were made by banks vs. what percentage of deposits they held. The more I thought about it, the more I realized that a lot of of the mortgage market is made up of non-deposit lenders (in this case for 2007, over 60 percent of the market was made of lenders other than those listed as the top deposit institutions) that I should take a second look. The chart below shows a revised calculation that looks solely at the mortgage loans made within the existing group of deposit institutions compared to the percentage of deposits made by those lenders. A couple of noticeable differences (yeah 5/3rd!!), too much of the same...
CRA Info
If you are interested in learning more about the Community Reinvestment Act, see the following links:
http://www.frbsf.org/publications/community/cra/revisiting_cra.pdf
http://www.federalreserve.gov/newsevents/speech/duke20090224
http://www.frbsf.org/publications/community/cra/revisiting_cra.pdf
http://www.federalreserve.gov/newsevents/speech/duke20090224
Sunday, March 1, 2009
2007 Indianapolis MSA Lending Data
Cut/paste the link below to connect to a spreadsheet that summarizes mortgage lending in the Indianapolis Metropolitan Statistical Area (i.e. Boone, Brown, Hancock, Hamilton, Hendricks, Johnson, Marion, Morgan, Putnam, and Shelby Counties).
http://spreadsheets.google.com/ccc?key=p6zfId0QFa9Dlx-IdoRqnew&hl=en#
http://spreadsheets.google.com/ccc?key=p6zfId0QFa9Dlx-IdoRqnew&hl=en#
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