Re: [Pen-l] Behavioral economics

["Max Sawicky" <sawicky@xxxxxxxxxxx>]

Hasn't the simple 30-year fixed been available all along?

As long as people are susceptible marketing, they will go for
the crooked mortgages.  And people ain't gonna read Consumer
Reports.



On Wed, Dec 3, 2008 at 3:32 PM, Jim Devine <jdevine03@xxxxxxxxx> wrote:
> Sean Andrews <cultstud76@xxxxxxxxx> wrote:
>> Thaler and Sunstein say, of the latter, "A potential response to complexity would be to require simplicity - for  example, by allowing only the standard 30-year fixed-rate mortgages. This would be a big mistake. Eliminating complexity would stifle innovation...<
>
> One compromise would be the requirement that all lenders offer a
> standardized and simple 30-year fixed-rate mortgage (or a small set of
> simple and standardized mortgages) that would be evaluated by CONSUMER
> REPORTS and the rest of the media (and maybe the FHA). The financier
> could offer fancy mortgages (with none of the legal prohibitions that
> Thaler and Sunstein have nightmares about) but I'd bet that the vast
> majority of people would prefer one of the standardized simple ones.
> (It's simple and it's been vetted and tested in practice, while most
> people are conservative about such things.) For the financiers to
> foist a new and fancy mortgage would require that they prove that it
> is clearly superior.
>
> (By the way, in NUDGE, Thaler and Sunstein present a similar scheme
> for pensions. I don't know why they hold back when it comes to
> mortgages.)
> --
> Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own
> way and let people talk.) -- Karl, paraphrasing Dante.
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