QUEUES can once again be seen at condo launches – a sight that may surprise many, given that the effects of the world financial crisis will last long after countries emerge from the recession.
Are the queues a sign of the start of a new asset price bubble? Will we learn from our mistakes? What can policymakers do to pre-empt future crises?
Sadly, the root cause of financial crises is in our genes. We are genetically coded to survive and to seek a better life for our offspring. In economic terms, this means consuming some resources now and accumulating the rest for a better future.
While the relentless pursuit of wealth may be individually rational, it can become collectively destructive. The role of a government is to put in place a system that can mitigate the destructiveness by constraining the actions of individuals and businesses.
Going back to the condo frenzy, I can understand why people would line up even after being burned by the market recently. Who would want to miss the boat? The price may soon be out of one’s reach if one doesn’t jump in now. Continue reading
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