Costs Quote by Richard Thaler
“Morality aside, there are other factors deterring 'strategic defaults,' whether in recourse or nonrecourse states. These include the economic and emotional costs of giving up one's home and moving, the perceived social stigma of defaulting, and a serious hit to a borrower's credit rating.”
About This Quote
Strategic defaults are discouraged not only by financial penalties but also by emotional costs, social stigma, and credit damage, making people reluctant to abandon a home even when it may be rational.
In simple terms: Financial and social consequences deter people from defaulting on loans.
Key Takeaway
Weigh costs before defaulting.
Themes
finance
behavioral economics
risk management
Mood
analytical
cautious
Type
informative
analytical
When to use this quote
- mortgage refinancing
- personal bankruptcy
- investment decisions
Key Concepts
credit risk
homeownership
Questions to Reflect On
- What non‑financial factors influence your financial decisions?
- How can policy reduce the stigma of strategic defaults?
A Different Perspective
Defaults can have long‑term credit impacts beyond immediate relief.
