The Asset Economy by Lisa Adkins, Melinda Cooper, Martijn Konings

Rating: ★★★★

The Asset Economy is a short book about how asset ownership, particularly home ownership, is central to the state of the modern economy. The authors argue convincingly that governments' focus on asset appreciation has increased inequality. They also say that there's no easy way out. It's a great read, and I was delighted to see the book's heavy emphasis on Hyman Minsky's understanding of uncertainty and speculation.

Here are some particularly interesting ideas:

The importance of intergenerational transfers

Buying a house not as easy as moving money from bank account to investment account - it requires a down payment and leverage. The lump sum means intergenerational transfers are needed even for fairly high incomes. The only way to buy property in many Western cities is with parental help.

This is not the return to an earlier era; instead it operates by a modern logic of speculation with strategic fund transfers. "The new logic of inequality has mixed 'hypercapitalist' logics of financialization with 'feudal' logics of inheritance."

Also, the idea that younger generations are locked out of asset ownership is inaccurate when you consider intergeneration transfers.

Inherent speculation in real estate

"[I]t is very apparent to buyers themselves that their willingness to buy at a certain price is bound up not with any beliefs about true underlying values but about the future of market sentiment and expectations about what others will be willing to pay."

Greenspan and asset price inflation

Greenspan told Clinton that it was not possible to square asset inflation with a program of public investment. "It was one thing or the other: high asset prices or public sector abundance."

He urged Clinton to use wealth effect and relax rules on credit. So the government took advantage of a credit boom to push income-poor to invest in housing. This caused a cycle that pushed up housing prices, creating collateral that would allow more credit (this sounds a lot like Minsky).

This is a neat account of the origin of subprime mortgage crisis.

High stakes in the asset economy

Participation in modern economy means holding illiquid investments – it makes more sense to call it asset economy than a debt or financialized economy.

"The asset economy requires not low-commitment participation in trading, but investment and exposure."

People left out of the asset economy

"The combination of inflated capital gains and deflated wages progressively closes the gates to newcomers, who struggle to buy their way into housing on wages along."

Those who can't afford a down payment are increasingly forced to put their income streams in service of others' asset accumulation. Take a long-term renter paying their landlord's mortgage, for example.

No easy way to stop the asset economy

Housing was the preferred vehicle for asset price inflation because it was already democratized in the 20th century. Now large parts of the electorates invested in ongoing asset price inflation, tax concessions, and minimal inheritance tax.

The middle class is large enough to effectively oppose change to the asset economy, but these policies yield a smaller middle class.

The Minskyian household

Modern households are Minskyian: they're no longer units of subsistence or consumption, but instead balance sheets of assets and liabilities to be managed. Minskyian households hope to achieve capital gains on their houses, and they're concerned with the house as an asset. They're under pressure to invest in assets that will become object of others' self-interest and speculation and so will appreciate.