From this interview:
There’ve been a whole series of these booms or bubbles in the last few decades, and I think it’s a very complicated question why there have been so many and why things have been so far off from equilibrium. There’s something about the U.S. in the last several decades where people had great expectations about the future that didn’t quite come true. Every form of credit involves a claim on the future: I’ll pay you a dollar on Tuesday for a hamburger today; I’ll buy this house, and I’ll pay off the mortgage over 30 years; and so you lend me money based off expectations on the future. A credit crisis happens when the future turns out not to be as good as expected.
The Left-versus-Right debate tends to be that the Left argues that the expectations were off because of ruthless lenders who sold a bill of goods to people and pushed all this debt on people, and that it was basically the problem of the creditors. The Right tends to argue that it was a problem with the borrowers, and people were sort of crazy in borrowing all this money. In the Left narrative, it starts with Reagan in the ’80s, when finance became more important. The Right narrative starts in the ’60s when people became more self-indulgent and began to live beyond their means.
My orthogonal take is that the whole thing happened because there was not enough technological innovation. It was not really the fault of the borrowers or the lenders; the problem was that everybody had tremendous expectations that the country was going to be a much wealthier place in 2010 than it was in 1995, and in fact there’s been a lot less progress. The future is fundamentally about technology in an advanced country — it’s about technological progress. So a credit crisis happens when the technological progress is not as good as people expected. That’s not the standard account of the last decades, but that’s the way I would outline it.
People were expecting house prices to go up 8 percent a year. That would be quite possible in a society where the GDP was growing tremendously and where there were tremendous gains in efficiency and technological innovation. But we’re not having that much innovation and, because of that, the housing bubble was unrealistic. It’s also possible that the housing bubble was very deeply linked to the tech bubble. The tech bubble was about extrapolating technological gains; it turned out that the gains didn’t materialize as quickly, or at all, and then people went back to housing and back to credit to get the 8 percent returns. But housing and credit still depend on an underlying society that is progressing, and that sort of progress was not actually happening. So, if the tech bubble was fake, then the housing bubble would almost certainly have to be fake. The real root of the problem is always technology.