Tag: utility

  • Platform, Infrastructure, Utility?

    Posted by

    Bill Maurer Stephen Rea

    While we’ve been blogging, Stevie has begun his dissertation fieldwork in Korea. He emailed Bill the other day: “Yesterday I opened a bank account here in Seoul, and conducted the entire interaction in Korean. For some reason, I don't get an ATM card, which is really strange. But in all likelihood I had no idea what the teller was trying to say to me, so I might end up getting a card in the mail next week or something. As ‘technophiliac’ as this culture seems to be, cash is still king; outside of the large department stores and global restaurant chains, I don't see any POS terminals.”

    There’s hype, there’s reality, and there’s possibility around all the cashlessness claims that follow on the heels of mobile and other digital payment platforms. We want to conclude our guest blogging with a gesture toward some of the possibilities of mobile money–and a challenge for the Credit Slips community.

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  • Are the Rich More Likely to Default on Their Mortgages?

    Posted by

    Adam Levitin

    The NY Times has an article about mortgage default rates being higher on larger (>$1M) mortgages than on small mortgages.  The argument suggested by the article is that the rich are more likely to see their homes simply as investments.  Put a different way, the consumption utility component of the home is relatively less important to the rich.  A house has two value components–it's an investment, and it is also a consumable (but durable) product.   The consumption value of a home is basically the same for everyone–I might derive more or less utility from any particular house, but it is all within a relatively constrained range, and my range is probably around the same as everyone else's.  That means that the consumption value component of a house is largely fixed, regardless of the house's price.  The more expensive the house, the smaller the ratio of the consumption value to the investment value.  Therefore, it would follow that people with more expensive houses place more value on the investment component and treat the house more like an investment.  

    I think that's correct, but I also think there's more going on and wish that the analysis in the article had dug deeper because it has unfortunately fed into a narrative of the mortgage crisis being one of strategic default by ruthless investors, with the corollary being that they do not merit any government assistance and even deserve opprobrium or punishment (although they are only playing by the rules of the game, which should have been priced in by lenders).  Here's what I wish the story had pointed out:

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