This is the Cato Daily Podcast for Wednesday, October 29, 2008. I'm Caleb Brown.

They may not agree on much, but Paul Krugman and Cato Institute Senior Fellow Randall O'Toole agree on one thing.

The artificial housing boom of recent years was driven at least in part by land use regulations.

Randall O'Toole is author of the book The Best Laid Plans, How Government Planning

harms your quality of life, your pocketbook, and your future. We spoke last week.

Well, every single analysis you see of the financial meltdown says it all started with the housing bubble.

And when the housing bubble began to deflate, then like Domino's we had this huge meltdown.

But hardly anybody asked what caused a housing bubble and if you see anybody

talk about that they say well it was the Federal Reserve Banks had interest rates that were

too low or the Fannie Mae and Freddie Mac bought too many subprime mortgages.

And that caused two risky loans.

And that led to people

bidding up houses.

Well, none of those explanations make sense

because those explanations are all national in nature.

And if you look at the housing bubbles,

the housing bubbles were local. They only influenced about

14 or 15 states. The rest of the states didn't have bubbles at all. For example, California and

Florida saw housing prices double between 2000 and 2007. and to Texas or Georgia or Kentucky. Housing prices grew by about 30 to 40 percent between

2000 and 2006 and they haven't declined. They're still growing or they're

flat at best at worst. And so there was no bubble in most of the

central states. The bubbles were in the coastal states, the states that had

...