Welcome to Econ Talk, part of the Library of Economics and Liberty. I'm your host Russ

Roberts of George Mason University and Stanford University's Hoover Institution.

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It's February 11, 2009 when I'm taping this and my guest today is Todd Sawicki, Professor

of Law at George Mason University. Todd, welcome to Econ Talk.

Great to be here Russ. Our topic today is debt. A lot of people argue that our prosperity

in America is an illusion. We've built our standard of living on debt. Obviously, we've

had a lot of problems in the housing market recently related to debts that didn't get

repaid. Is there any truth to this worry that somehow our standard of living is built

on a house of cards and living beyond our means, et cetera?

Well, certainly what we've seen over the past few years is that in the housing market,

the housing market was at an unrealistic level of debt and that bubble is bursting. But

the more systematic question what people usually have in mind is the idea that the consumers

have too much consumer debt, too much credit card debt, and that sort of thing.

Well, if you look back over the course of history, this theme, this paranoia in some sense

that the sky is falling because there's too much consumer debt, that's almost as old

as America itself. In 1873, the New York Times expressed the concern that Americans were

running in debt. And by 1877, the New York Times already was concerned that Americans were

borrowing trouble. They were concerned in the 19th century. They were concerned in the

1910s. They were concerned in the 1940s. In 1940, Harper's Magazine asked whether debt

...