[johnpmayer]

Credit allows people to purchase things beyond their current wealth but rather within their future means to pay (their future productivity and trustworthiness). This is particularly useful for those who aren't born into wealth: Credit is practically the only way for normal folks to access productive capital, such as a home that allows you to avoid paying rent, or an education that in theory makes you more productive in the future.

You are correct to point out that the prediction of one's future ability to pay (their future productivity and trustworthiness) is difficult. But I think eliminating credit (at least when used to purchase productive capital) is throwing the baby out with the bath water.

[tonyedgecombe]

I can't help feeling half the problem with the UK student loans system is the fact it is framed as a loan rather than tax. If it was a graduate tax people would look at it completely differently despite a similar financial outcome.

You are right though, without that extra finance there is no way universities could have expanded the way they have. Traditionally they were always underfunded (in the UK) compared to other parts of the education system.

[ktosobcy]

If you are not born into wealth you shouldn't be controlled by it - you should be able to get "free" education (tax based) so you wouldn't end up with a collar on your neck when you finish your studies and you should be able to get sane leaving conditions. Anything above that is "bonus" for the hard work that you put into making your live better.

[__blockcipher__]

IMO homes should not be considered productivr capital. Farms are, as one example.

A home sits there and looks pretty (maybe), slowly losing real value. Of course, w/ an increasing population amd limited supply it accrues nominal value (and “real” value in the investment sense).

Yet compared to owning shares in an actual productive company, it’s a very poor value proposition.

[johnpmayer]

A home produces rents. If you live in the home that you own, you can think of it equivalently as a productive asset that provides you one unit of free rent (modulo some quality of life factor based on how nice the property is to live in) every month.

[boombust]

If you look at it through the lens of opportunity cost, sure. But homes don't actually yield anything, they are not productive in that sense. So from the economy's standpoint, there seems little reason to classify it as such along with financial assets that produce yields.

[tonyedgecombe]

If that was all it was it would be fine. The trouble is, at least in the UK, property has been an appreciating asset. People have been using it as a source of current or future income rather than just a home.

[hedvig]

Those that aren't born into wealth - controlled by rents or controlled by debts. Those with capital - can control others by rents or control others by credit. What great options.

[johnpmayer]

Well yeah, that apparent injustice is the ethical rationale behind a progressive wealth tax, once you've decided to enforce property rights.

[will_brown]

>This is particularly useful for those who aren't born into wealth: Credit is practically the only way for normal folks to access productive capital

Look at studies on credit it results in bias against minorities. It’s one of the reasons behind the deregulation’s leading to 2008 real estate crisis, the fact that these biases were showing up in home ownership and they tried increaseing homeownership amoung minorities.

That “experiment” greatly failed proving your point, that in a credit based system, a credit rating based on factors such as assets, income, existing liabilities is necessary in determining how much to lend and the risk/interest. I definitely don’t dispute the way the system works, just I think it’s a bad system.

For every rich person who benefits with access to capital they can manage and payback, or normal person who gains a house they struggle with paying for 40 years or more; the otherside, is indebtedness an evil of society (put the 1M defaulted student loan people in this category - the will effectively be paying for that house for 40 years only not for an asset that at least historically will appreciate, but a sunken cost) and what I mentioned before which is a statehood of nearly second class citizenship where one will never gain access to banking services much less credit.

I see your point baby/bath water...why get ride of the system instead of fix the problems. I’d say the credit system creates those problems, and that’s definitely not to say the same bias in homeownership rates/percents wouldn’t show up in more of a cash/capital based system with no credit. But at least those unnecessary and IMO evil classes of society (bad credit/no credit) wouldn’t exist. At minimum I’d be curious about two such systems in the US side by side, and with all the talk/interest in startup cities maybe a non credit based city could be tried - though I can’t solve how it could be created fairly within the existing national system of credit.