John Makin explains the forces behind the housing bubble — its genesis in a dubious notion of home-ownership as a public good; its rapid growth due to deliberate changes in tax policy and banking regulations; and its disasterous Fed-encouraged swelling once the tech bubble burst:

• A Government Failure, Not a Market Failure (Wall Street Journal)

When I started to write the Glib Dilettante series on the credit crisis, this was what I had hoped to produce.

It would be foolish to utterly absolve the private players in this particular drama — the investment bankers, for example, who cut shitty mortgages into tranches and expected them to smell like roses, or the house-flippers who staked hundreds of thousands of dollars on the assumption that housing prices would continue to skyrocket indefinitely.  I’m not doing that, and neither is Makin: markets respond to incentives, and when your incentives are nonsensical your markets will do nonsensical things.  The point, however, is that these nonsensical incentives didn’t just appear out of thin air, nor were they craftily fabricated by avaricious tie-wearing fat-cats in pin-striped suits.  A few were imposed by force from Capitol Hill, and those were so imposed in the sincere belief that they would help people.  The rest grew unexpectedly from those legislative fiats, but they are no less artificial for having done so.

At this stage in the game, though, I can’t imagine that anyone who still sees the housing bubble as a market failure is willing to be persuaded otherwise.