What Triggered the Mortgage Crisis?
How Did The Crisis Develop?
Did the Crisis have to occur?
Impacts of the Mortgage Crisis
What the Government is doing
Conclusion and Recommendations
The US Economy Introduction It is the government’s dream for every US citizen to own a home. This will see taking pride in property ownership and thus much engagement with the community around. The problem with the United States of America is that homes are expensive to own and thus most of the American citizens rely on taking loans when buying houses.
In the year 2000 the mortgages rates were at a record low and this allowed many people borrow loans at low monthly rates; at the same time the home prices rose dramatically and this acted as an incentive to many financial institutions allowing people to borrow loans and then use their mortgages as collateral. The rising home prices gave home owners the much needed equities and thus most home owners took second mortgages in the believe that the ever rising prices of their homes could refinance for their mortgages.
While some people used their money wisely others resorted to using the money to maintain their standards of living and thus when the crisis erupted they were among the worst hit. During this process most of the banks and other financial institutions failed to notice that though the home prices were increasing, individual incomes were not and thus resettling the debts could always be through borrowing and this was risky (Prichard 6).
In the year 2005 the worst began to happen, house prices stated declining and the cases of default rose to over 30% from a previous record of 6%. This crisis spilled over to other sectors of the economy and this provoked a public outcry and decisive measures had to be taken. Sometimes one feels like sympathizing with the people who are lost and continue to lose their assets but may be the mortgage crisis was after all the natural process of weeding out the fiscally irresponsible as Charles Darwin would say in his creation theory.
What Triggered the Mortgage Crisis? The housing bubble began to burst in 2005 and as shown in the graph below house prices can be said to have been increasing. In the year 2006, the home prices however started to decline and by the end of year 2007 the rates had declined up to negative levels, those who had borrowed loans with their houses as collaterals could no longer afford and thus stopped paying for the mortgages monthly payments and the rates on mortgages kept going higher and higher. The homeowners could no longer afford paying for their mortgages and the choices that remained were few.
They could either renegotiate with the financial institutions which had led them the mortgages or just wait for the foreclosures and while many others tried to reduce their spending to increase the income there was nothing much left that they could do to save themselves and thus they subdued. The banks were also faced with a major challenge in recovering their money after foreclosure. With the house prices having declined to such negative rates (as shown below) there was no way the banks could recover their money fully.
Another issue which took the crisis further was that the companies that had been issuing the mortgage sub prime loans had invested their money in hedge funds which after becoming worthless forced many to file for bankruptcy this resulted in further enormous losses in the economy. The Americans had done one big mistake they were spending more than they could earn trusting that their mortgages could help them repay and when the worst happened they had themselves to blame, (Tricia, pg 1).
Get your 100% original paper on any topic done in as little as 3 hours Learn More The graph below shows the rate of price increases from 1998-2007:
Source: The U.S. Subprime Mortgage Crisis
Nozick Entitlement Theory of Justice Term Paper
Nursing Assignment Help Introduction Libertarianism refers to a theory that advocates for individual freedom in terms of thoughts and actions, what will usually be referred as liberty. The ideology of libertarianism is founded on the principle of natural rights that existed before the advance of governments which is the reason that it advocates for personal liberty to come before the rights of the government.
As such, libertarianism advocates for two major forms of freedom; in transfer of personal property and own life which it argues that a person should live his/her life as one would wish and that transfer of property should be unrestricted as long as it is consensual (Conway). This is the libertarianism ideology that Nozick subscribes to and which forms the basis of the Wilt Chamberlain argument which is going to be the focus of our discussion in this paper.
The Wilt Chamberlain Nozick argument is an attempt to provide redress to the unfair distribution of resources which has historically existed. To do this Robert Nozick attacks all forms of patterned theories of justice distribution on three premises which he justifies using the following examples; the Wilt Chamberlain argument, the self-ownership argument and the Kantian argument (Conway).
In Wilt Chamberlain example, Nozick reasoning proves that no form of patterned theory of just redistribution is defensible in the long run; this is basically because of the fact that free exchanges between individuals will as a matter of fact disrupt any preexisting pattern of just distribution and cannot also be relied on to achieve future ones (Conway).
Because all forms of free exchanges are just, and all forms of just exchanges disrupts “patterned” theory of justice, then it goes that all free exchanges of property can never be patterned. In a nutshell Wilt Chamberlain argument as advanced by Nozick indicates that “liberty upsets patterns”, an unavoidable outcome that can only be evaded by either limiting peoples freedom or in that case Wilt Chamberlain freedom if we are to maintain a “patterned theory of just distribution” (Conway).
Throughout this discussion this is the position that this paper will be evaluating by critically reviewing all related arguments, its major critiques and finally why this theory of just entitlement is more practical to achieve and favorable as opposed to patterned theories of just distribution.
Entitlement Theory Entitlement theory refers to a model which provides a framework that explains just exchanges in private properties among individuals, what Nozick refers as a theory of “distributive justice” (Conway). In entitlement theory individual persons are regarded as ends in themselves but not as subjects to other peoples which is one of the principles of morality that Nozick raises in the cause of this theory. The entitlement theory is therefore the foundation of Nozick perception of what justice in holdings entails and it limits.
Get your 100% original paper on any topic done in as little as 3 hours Learn More As such this theory is central to Nozick objection on patterned theory of just distribution because of its inference on all patterned theories limitations and shortcomings on sustaining just distribution of properties. The entitlement theory has three important theories; “principle of justice in transfer, principle of justice in acquisition and principle of rectification of justice” (Green).
The first principle of justice in acquisition attempts to describe how the people might have initially obtained and owned private property historically which Nozick reasons must have been unjust given that it was earned illegitimately through exploitation of slave labor.
It is from deduction of this principle that gives rise to the third principle of rectification in which Nozick brings forth suggestions of solutions that should be adopted to rectify the unjust distribution and ownership of property as described in the first principle of just appropriation. Hence, the third principle advanced by Nozick of rectification of injustice is actually an exploratory attempt to find lasting solutions of addressing these historical injustices that led to unjust distribution of property and acquisition.
Towards this end Nozick tackles the issues of compensation, restoration and so forth in this section as possible solutions that might rectify the current situation. It is notable to mention that Nozick third principle of rectification is specifically developed to addresses the failures of the theory of just distribution which he perceives to be ineffective.
The second principle of just transfer entails the process of voluntary property transfer between individuals that is made on the basis of consensual agreement (Green). Thus just transfer is described to have occurred when there is freewill and consent made by a person when transferring or acquiring the property.
These three principles of property ownership is what Nozick identifies as necessary for a legitimate holding of property and just distribution in what he refers as the entitlement theory (Conway). In his own opinion Nozick provides only two possible scenarios of a legitimately obtained property which is if it was originally acquired or transferred in a just manner, anything else does not constitute just holdings of property (Faser and Nozick).
It is from these principles that Nozick develops three major forms of arguments one of which is the renowned Wilt Chamberlain argument which is an analogy that attempts to expound on the concept of entitlement theory.
We will write a custom Term Paper on Nozick Entitlement Theory of Justice specifically for you! Get your first paper with 15% OFF Learn More Because the Wilt Chamberlain argument is founded from the three principles of entitlement theory, let us briefly discuss the Lockean Proviso which Nozick advances to support the principle of just appropriation which he says obliges people to appropriate natural resources in just manner that must ensure “enough and as good in common is left to others” (Nozick).
Lockean Proviso The Lockean Proviso is a theory advanced by John Locke which is one of the concepts contained in his labor theory of property; Nozick modified the Lockean proviso in order to advance the self-ownership theory that governs the historical acquisition of property (Nozick). Though Nozick’s Lockean proviso is compatible with John Lock self-ownership theory it has slightly been modified to specifically provide circumstances under which acquisition and transfer of properties must occur for it to be regarded as just.
The Lockean proviso that Nozick advances to define the criteria for just appropriation of property states that “though every appropriation of property is a diminution of another’s rights to it, it is acceptable as long as it does not make anyone worse off than they would have been without any private property” (Nozick).
To determine whether a property was originally acquired in a just manner three factors must be shown to exist; one, the process of acquisition should not disadvantage others that relied on the property for their survival, two, acquisition should not be based on enhancement of the property and finally the acquisition should not contravene any of the principles of just distribution of property (Nozick).
Having discussed the foundation of Robert Nozick entitlement theory and the concepts of libertarianism let us now take a critical analysis of Wilt Chamberlain argument that Nozick advances to show how all patterned theories of justice cannot be achieved.
Wilt Chamberlain Argument Wilt Chamberlain argument that Nozick presents in this theory is the ultimate example of how the concepts of justice and liberty are incompatible as far as patterned theory of just distribution of properties are concerned. In this argument Nozick does succeed in indicating that people’s freedom of choice, herein referred as liberty is the greatest limitation to any patterned theory of just distribution of property.
This is because liberty provides people with leeway to freely decide and make choices in the way that they choose to transfer or acquire good. In doing so it is not possible to achieve any form of uniform (patterned) distribution of the same goods because liberty entails the ability to make arbitrary and random choice of actions (Long).
On the other hand a patterned theory of just distribution requires two important considerations in transfer of goods i.e. it must be just in accordance with principles of entitlement that we have so far described and it must fit a particular “pattern” (Long).
Not sure if you can write a paper on Nozick Entitlement Theory of Justice by yourself? We can help you for only $16.05 $11/page Learn More For instance the distribution of goods should be equal and just among all subjects before and after acquisition, or it is transferred in a manner that maximizes its utilization, or distributed by any other criteria that would promote equality; whichever the pattern it should be just and patterned.
But as we shall see to achieve this outcome it will be extremely hard and would ultimately require the sacrifice of personal liberty if a patterned just distribution of wealth is to be achieved. Let us now analyze the Wilt Chamberlin argument point by point; premise one of the arguments requires us to imagine a state where just distribution of goods has already taken place based on any of the several patterned theories of just distribution which we can choose from.
Our interest will be in the following points that Nozick is going to raise in this argument starting with point number two; in this case several people are described to have freely consented to buy tickets in order to obtain rights necessary to see Wilt Chamberlain play basketball. This point raises two fundamental issues, one, the principle of liberty and two, theory of just distribution of wealth. Because the people enjoy the freewill to transfer their resources as they wish there is the aspect of liberty in this process of wealth distribution.
The resulting distribution of goods leads to Wilt being able to acquire more resources than any other person in the society now that he has significantly higher amount that was contributed by several of the members in this hypothetical society. The question then becomes is this resulting distribution of wealth just?
To answer this question will have to look more closely at what John Rawl has to say in A Theory of justice which we shall look at later on, but in a nut shell according to Nozick just distribution of goods is describe to have occurred if any of these two conditions are satisfied.
For previously unowned property if “enough and as good is left to the others to appropriate” or if transfer of goods has been freely consented to; in our case the second condition applies and we can therefore determine Wilt newly acquired wealth to be just and legitimate (Conway). In any case the consenting members willingly chose to transfer this portion of their wealth in exchange of the luxury of watching Wilt play the basketball.
This seemingly arbitrary action has two major ramifications in that one it upsets the just distribution of goods and two because of their choice another group of the society members would be thought to be far worse now than was originally the case before this choice was made by the other section of the society, an outcome that would make one question whether indeed this transfer of wealth was just.
These outcomes are the major issues that Nozick is raising in his theory of libertarianism which as we have seen are incompatible with any form of theory that advocates for patterned just distribution of goods.
For example in order to sustain the status quo which would certainly maintain the original just distribution of resources which we had assumed to be equal and just for the sake of this argument, it would mean completely curtailing the liberty of people to transfer goods regardless of their consent, this is unlikely to be the case in any form of society.
The other option would be drastic reduction of liberty in order to achieve a desired form of just distribution of goods which Nozick states is still unacceptable regardless of the extent of the limitation in freedom of choice. The reasons for this premise is best illustrated through another argument that Nozick illustrates, that of self-ownership which also justifies one of the principles that is expounded by the Wilt Chamberlain argument; that of liberty.
The Self Ownership Argument This is the second most important argument that Nozick advances to justify and defend the theory of libertarianism; the self-ownership theory states that “individuals own themselves – their bodies, talents and abilities, labor, and by extension the fruits or products of their exercise of their talents, abilities and labor” (Dammon).
Thus, because people own themselves they should be at liberty to do what they choose without being regulated by any form of authority, of course as long as their actions are not adverse to the welfare of the other members of the society.
This principle of liberty that Nozick is advancing here is essentially the same principle that he is trying to defend in the Wilt Chamberlin argument. But the self-ownership theory is also trying to advance another line of thought; that of slavery, which again implies lack of liberty because individuals in this case are bound to work extra without their volition in order to cater for the welfare of others.
This is what Nozick is referring as slavery, which is slightly so because there is no choice in failing to pay the tax (Birch). In extent other people ends up benefiting from this unjust distribution of resources, and not only this since this scenario also raises another important issues of morality.
Because peoples are ends in themselves, moral principles demands that people not be treated as objects which is the case when they are exploited for the benefit of others; more specifically the resulting wealth that emanates from this arrangement can only be unjust. This is based on the second principle of entitlement theory which Nozick states must involve voluntary and free consent; since this is not the case, this wealth must be considered to be unjust.
But it must be noted this is only for that part of the tax which the government collect which is not channeled towards the three key functions that Nozick thinks should be the role of a minimal State; protection from fraud, theft and security (Nozick). In the following section let us take an objective criticism of the various principles that Nozick raises in his discussion of libertarianism theory in general and more specifically in the entitlement theory.
Discussion on the Critique of entitlement theory and Libertarianism It is a fact that all forms of patterned theories of just distribution are incompatible with the principles of entitlement theory or in that case those of libertarianism; indeed as we have so far indicated they are mutually exclusive.
Having said that what Nozick advocates as the way forward out of this quagmire appears to be impossible to achieve; faced with a choice of sacrificing either the liberty that people enjoy in acquisition and transfer of wealth or disruption of patterned just distribution of resources, Nozick chooses to sacrifice patterned just distribution theory rather than liberty.
Being a libertarian, freedom of choice is a necessity that Nozick thinks should not be reneged for the sake of maintaining a patterned just distribution of wealth; the question then becomes is this option the most favorable to make under the circumstances. To answer this question we need to consider the implications that result from this choice as well as the principles that are contained in A Theory of Justice by Rawls.
As far as freedom of choice is concerned most critiques of this premise argues that unrestricted freedom of choice negatively affects other members of the society that would not otherwise be the case if liberty was limited.
However I find this not to be a serious objection because failure to choose is actually a choice in itself; in that case, the section of people that argues were made worse off by the choice of those who chose to pay for Wilt chamberlain ticket actually also did make a conscious choice of not paying for it. In both instance the aspects of consent and free will are seen to be present.
In A Theory of Justice Rawls derives the First Principle of Justice and the Second Principle of Justice from one of the key theories that he discusses; the difference principle. The First Principle states that “each person is to have an equal right to the most extensive scheme of equal basic liberties compatible with a similar scheme of liberties for others” (Hikaru).
This principle largely attempted to guarantee the basic human rights of all the persons in a society which is seen to be the case in this argument, this is because the liberty of the first group of people who to chose to buy Chamberlain ticket does not in any way lessen the liberty of the second group that chose not to pay for it.
The next critique of Nozick theme is based on his self-ownership theory; true the inferences that Nozvick arrives through this stream of thought appear to be radical but certainly not outrageous. The point of contention in this case is not the moral or ethical issues that surround slavery, but rather the undesirable outcome that unwillingly forces someone to work without their consent for the sake of other people.
This robs the individual a degree of liberty and propagates the distribution of unjust wealth; so to say that people who pay tax are essentially in control of their life as compared to slaves is a very flimsy argument that holds no water. The major characteristic and the only feature of slavery which makes it so evil is its nature that requires someone to work for whatever reasons, be it for good or otherwise without their consent in what amounts to coercion.
Indeed the current system that has been put in place by the government to ensure compliance of tax laws amounts to coercion and forced labor for the simple reasons that you cannot earn unless you pay tax. Besides, taxation system is seen to significantly curtail the freedom of choice; its justification by the government therefore fails the test of objective principles of justice which Rawls describes can only “be chosen behind a veil of ignorance” (Hikaru).
In any case Rawls theory of justice seem to agree that individuals should be left alone to decide whether to allocate part of their wealth by choice to less fortunate in the society because the government distribution system of “taxed” wealth cannot be said to be unbiased.
In A Theory of Justice Rawls recognizes the fact that all individuals desire to achieve a desirable end through the application of principles of justice which requires just consideration of their fellow human beings (Hikaru).
It is on this basis that Rawls advances the principle of fair choice situation which is aimed at providing a person with acceptable alternatives of arriving at a reliable determination of justice under ideal conditions. The principles of justice which is the central concept in A Theory of Justice ideology is developed through a process that Rawls describes as the Original Position which refers to a hypothetical position from which all individuals adopt when attempting to arrive to a certain principle of justice (Lennon).
This is what Rawls refers to as the Veil of Ignorance in which he is actually describing personal biases or circumstances that essentially prevent someone or institutions in this case from making a fair assessment of a given principle of justice, which is the reason why the wealth distribution by the government is unjust. This veil of ignorance that limits someone or an institution from making an objective determination of principle of justice include level of intelligence, talents, social status, assets and strengths.
Hence, the veil of ignorance that are described to exist in the Original Position are what enables an individual to determine and choose an ideal principle of justice that is free from bias (Lennon). As a result this perspective of Original Position leads to what Rawls describes as “a maxim strategy which would maximize the prospects of the least well-off” and therefore enable equal distribution of economic resources in the society (Lennon).
But since this is not even the case no justification of tax should be presented despite the fact that this line of reasoning is beside the point of why tax should not be allowed; this is because tax cannot be justified even in circumstances that can be shown to lead to just distribution of resources.
Nevertheless, this would be the position that the principle of justice would hypothetically hope to achieve when applied in an ideal society, but the same principle of justice that Rawls advances does also provide for inequality to occur in the society but only under specific circumstances, at this point this principle diverges from the Nozick theory of entitlement.
Let us now finally discuss the third widely held objection to Nozick theory of entitlement which vilifies Nozick objections of wealthy people from helping the poor based on the morality principle which emanates from the Kantian argument. Foremost let see what Rawls has to say about this in his Theory of Justice; the foundation of A Theory of Justice ideology is anchored in two important principles.
These two principles of liberty and equality are incompatible as we have just determined to be the case in Nozick theory of entitlement; this is because liberty will always upset any theory of just distribution or equality in this case. But just to mention Rawls attempted to reconcile this incompatibility using two different perspectives i.e. circumstances of justice and the fair choice situation which he concludes are the two circumstances that often confront an individual (Hikaru).
But this is not really the point of our focus; in advancing the difference principle Rawls specifically mentions that inequality in the distribution of resources should only occur if “it is to the advantage of those who are worst-off” (Hikaru).
Now if we look back at the circumstances that result from this new form of unequal distribution of wealth we get to see it is certainly not to the advantage of the “worst-off” who would be the poor, in this case it is the likes of Chamberlain who are benefiting from the proceeds of a just distribution. If this “unequal distribution” does indeed fail to benefit the poor are we not obliged to help the poor in this case in contravention to Nozick morality principle; I would concur, but first there are two things to consider.
One is the conditions that I would be expected to be obliged in helping the poor, note that if this is enforceable for instance in form of taxes that would be contravening my liberty which would make it unjust.
Two, we might need to determine if there is really any form of wealth distribution that can occur in a manner that can be described to be equally distributed among individuals in a capitalist State. Because neither the first condition nor the second can be guaranteed with certainty this objection to Nozick theory of entitlement is both valid and void depending on the outcomes of the two conditions.
Conclusion Indeed no patterned theory of just distribution is defensible, yet we must have both aspects of liberty and justice to achieve an equal distribution of property in the society. By its own standards, I find the just distribution of property to have failed the test in more than one way; this is because if the original holding of properties were justly appropriated we will then have no basis to compel the likes of Wilt Chamberlain to provide for the less fortunate by claiming they owe them in their acquisition.
I would suppose that everyone has the same amount of wealth originally, that is if we are to go by the principles of “patterned theory”, but we know this not to be the case which makes this theory unreliable. The patterned theory and all forms of just distribution also fails another serious test of it applicability because it relies on a clearly equitable system through which it expects to achieve an equal distribution of resources.
There are two reasons why a patterned just distribution of wealth cannot be achieved; because of the capitalism system and the fact that States have always failed to choose reliable systems of equating wealth because they lack what John Rawls refers as “veil of ignorance”.
A critical look at the concept of patterned theory that attempts to achieve just distribution of wealth indicates that it actually defeats this very purpose; this is because limiting the liberty to freely transfer property also ultimately limits the acquisition and distribution of the same property by the same extent. If the ability of people to acquire resources is also curtailed how is it possible to achieve a just distribution of the same properties? In such a predicament I would say Nozick principle of rectification does present a favorable option.
Works Cited Birch, A. The Concepts and Theories of Modern Democracy. London: Routledge Publishers, 1993. Print.
Conway, D. Nozick Entitlement Theory of Justice, 1990. Web.
Dammon C. A Farewell to Marx: An Outline and Appraisal of his Theories. California: Penguin Books, Harmondsworth, 1987. Print.