A healthy economy would make investors compete over those investment opportunities. If a lot of investors want to put their money into residential single-family mortgage loans, and only N families seek to borrow with that type of loan per year, the investors would have to offer lower interest rates for every level of default risk. This limits the amount of money the investors can make by lending, so some go off to look at different types of investment. The rate of return naturally sorts itself out such that it increases with increasing risk.
When rates of return are low, entrepreneurs generate more investment opportunities at all levels of risk. But housing starts and transfers are more closely associated with employment opportunities, which tend to trail new business starts. People don't buy houses unless they have jobs that pay enough to buy houses, and they don't have better jobs unless businesses are expanding and labor is getting more scarce.
What seems to be happening is that middlemen are assembling artificial investment opportunities with a falsified risk profile, in order to capture investment dollars that would otherwise leave to find other opportunities with a better return/risk ratio. Some of those investments would have eventually sloshed back into mortgages, filtered through new employees or promoted employees, to replenish the pool of available investment opportunities. So the risk fraud is self reinforcing; the more it happens, the more it has to happen in order to maintain the status quo.
If the financial institutions are completely serving the mortgage market, that excess money has to go into other investments, or it loses its value. They won't be mortgage investments, but there are only so many of those around to pick up. The "nightmare scenario" is "OMG! We need to find another parking spot for our colossal pile of money! And the available ones are SOOOO FAR--like 50m away!"
Are hospitals predatory?
I guess this is the clearest case ever of why regulation is important. Good regulation provides businesses with incentives that help rather than harm society.
"Healthy" society is a weasel word here though: a qualifier that turns this into a "no true scotsman".
In this one, and most real societies, hospitals do want people to visit more often. Their incentives are geared towards that.
And not just "visit more often" -- hospitals (well, hospital execs, doctors, etc) want (and do) all kinds of things detrimental to society:
- to charge more for healthcare
- to add hidden charges
- to perform unneeded operations and treatments to make profit (even if the patient not only doesn't need them, but can be in danger from them)
- to prescribe drugs that the drug companies wine and dine them to promote, whether they're needed or not
And whole more besides.
E.g. https://www.scientificamerican.com/article/unnecessary-tests...
https://eu.usatoday.com/story/news/nation/2013/06/18/unneces...
http://discovermagazine.com/2018/apr/doctors-wined-and-dined
https://theconversation.com/whos-paying-for-lunch-heres-exac...
This might be true, but I would expect citations. I might be biased, is only anecdote, but my experience around the world would single out USA as a place where this is predominant.
Besides, not all the hospital visits are equal, a clear example of how we can align the incentives are vaccination campaigns.
Sure, but most of the discussion on HN focuses on a USA context.
In my country for example, such incentives might not be predominant re: public healthcare (since the staff gets paid whether they have more patients or not), but they are with private practices.
Maybe this is true in the US but not sure it's valid point in Europe where, given how the health system works, most of the time patients are actually a cost for the business hence less patients the better really.
Hence the other arguments he made, about gas stations want you to burn more fuel, etc.
It's about how for-profit incentives of companies can be detrimental to society.
Price-sensitive customers may feel differently.
The Surgery Center of Oklahoma[0][1], for instance, makes a profit while providing better, lower-cost treatments than traditional hospitals. And they actually have transparent pricing.
[0] https://surgerycenterok.com/ [1] https://reason.com/reasontv/2012/11/15/the-obamacare-revolt-...
It seems really backwards to consider this the nightmare scenario. This is exactly what everybody wants: for people to take a mortgage once and pay it off eventually.
A business that considers healthy finances a nightmare scenario is a predatory business that needs to die.