There have been a lot of excuses made for bailing out homeowners, but this one from economist Robert Shiller takes the cake- now we should worry that going into foreclosure will hurt people’s self esteem:  [Shame on you Shiller, you are usually one of my heroes!]

 

It is important to consider the psychological trauma of foreclosure. No one is likely to starve or sleep on the streets as an immediate result of a foreclosure, and the authorities no longer dump a family’s furniture on the sidewalk when it happens. Nonetheless, there is deep trauma.

Homeownership is fundamental part of a sense of belonging to a country. The psychologist William James wrote in 1890 that “a man’s Self is the sum total of all that he CAN call his, not only his body and his psychic powers, but his clothes and his house, his wife and children, his ancestors and friends, his reputation and works, his lands and horses, and yacht and bank account.”

Homeownership is thus an extension of self; if one owns a part of a country, one tends to feel at one with that country. Policy makers around the world have long known that, and hence have supported the growth of homeownership.

MAYBE that’s why President Bush’s “Ownership Society” theme had such resonance in his 2004 re-election campaign. People instinctively understand that homeownership conveys good feelings about belonging in our society, and that such feelings matter enormously, not only to our economic success but also to the pleasure we can take in it.

The pain of this reverse movement could leave a psychological scar that will be with all of us for the rest of our lives.

 

This is the same warped logic that keeps us from giving poor grades to children- an excessive concern with coddling self-esteem.   Shiller makes the mistake of assuming that everyone opposed to the bailout plans are lacking in sympathy.  That is undoubtedly true in some cases.  Some of us, however, care very deeply, and believe that in the long run, it is better to learn the importance of financial responsibility from the loss of a house, than from reaching retirement age with no resources and a broken social security system.

Self-esteem comes from overcoming life’s challenges, not from harboring the delusion that we are competent because all obstacles have been swept from our path by someone else. Many of us are opposed to bailouts, not because we don’t care for what happens to individuals, but because we do.

[Thanks L!]