Editor,

RE: "Housing dilemma: Who should take the blame?” (The New Times, November 16).

Contrary to what its fundamentalist ideologues often claim, Adam Smith’s invisible hand and the market are ill-equipped to resolve most social problems.

Public policy and the public sector need to intervene when socially-required goods cannot be provided via that quintessential market mechanism of price, supply and demand.

Private investment decisions are driven by the imperative of private gain, not social policy goals. Unlike Government whose investments are aimed at maximizing access to public goods, private investors are interested in maximizing their own private returns and the faster they pay back, the better.

Of course public policy can be designed in a way that attempts to incentivize (‘bribe’ to be crude about bit) private investors to deliver public goods, including affordable housing.

This ensures that more and more resources can be mobilized towards investing in those sectors favoured by public policy. But favouring one sector against others is market distorting, hence the initial statement: markets are not always the best mechanism for providing socially-desirable ends.

The public sector and fiscal policy are often the only way to do that.

MK