The politics of mortgage credit expansion in the small coordinated market economies

Abstract

Recent contributions to the comparative political economy literature claim that liberal market economies are vulnerable to asset booms and busts because of financial deregulation, shrinking welfare states and a political ideology emphasising financial self-sufficiency. This article examines the rapid expansion of mortgage lending in three coordinated market economies (CMEs): Denmark, Sweden and the Netherlands. This expansion is puzzling given that all three countries are CMEs with generous welfare states. Yet the pattern of mortgage lending resembles the Anglo-Saxon or liberal market economies (LMEs) more than other CMEs. The article argues that mortgage bubbles in the small CMEs emerged as the unintended outcome of pairing neoliberal programmes to expand home ownership with collectivist housing institutions. This resulted in supply restrictions and rising property values which saddled households with extraordinarily high mortgage debts. In short, mortgage credit bubbles are not unique to Anglo-liberal welfare states and may have different origins.     

Representational Altruism: The Wary Cooperator as Authoritative Decision Maker

What drives policymakers to put the interests of others above their own? If human nature is inherently selfish, it makes sense to institutionalize incentives that counter decision makers' temptations to use their positions to benefit themselves over others. A growing literature rooted in evolutionary theories of human behavior, however, suggests that humans, under certain circumstances, have inherent predispositions towards “representational altruism,” i.e., to make an authoritative decision to benefit another at one's own expense. Drawing on Hibbing and Alford's conception of the wary cooperator, a theoretical case is made for such behavioral expectations, which are confirmed in a series of original laboratory experiments.     

Does Federalism Weaken Democratic Representation in the United States?

The framers of the U.S. Constitution explicitly designed federalismto enhance representation. Because powers are divided amongmultiple governments, citizens are able to exert pressure onthe elected officials of various governments in an effort toachieve desired outcomes. If one government is not doing whatcitizens prefer, they can seek it from a different government.This assumes that individuals form opinions about the functionsperformed by different governments. Given the complexity offederalism, this may be an unrealistic assumption for many citizens.Original survey data uniquely suited to explore this questionsuggest that citizens do behave in a fashion consistent withthe federalist framework. Moreover, the actual change in theassignment of functional responsibilities across governmentsbehaves as if it responds to public opinion.