Yeah I mean, one of the things you learn early on in economics is that it's riddled with "self fulfilling prophecies" and I agree. CRA's probably do make the problems of the economy worse. The guy who wrote this article seems to want to get rid of credit rating all together, and I mean, on a micro scale maybe that's fine, but on a macro scale I'm not sure how that would work. I feel like we need it but there's just a lot of room for improvement. Like with this whole housing market crisis we had that he mentions for example. Yeah they screwed up and didn't really understand what they were rating. So when mortgages that had AAA ratings were defaulting, you knew there was a problem with the ratings. I'm not sure not having ratings at all would have helped though. Like, would the people who invest in whatever they are investing in have to research it themselves? I mean in most cases there isn't time for that.
I mean, this whole housing thing is just one instance, and I don't really blame the CRA's entirely for the bad ratings. Nobody really knew what was going on in the housing bubble, and I'm not sure how not having ratings would help the system.
As for your specific case Wals, I mean yeah I assume a person's rating would be placed purely on a buyer/business history or whatever if we're talking in terms of a loans or investiment into the person as a company or something, and like, those other factors such as health and personal relationships affect the person, but there isn't a reliable way to measure that, so the CRA's can only really stick to factors they can reliably measure obviously. I mean, I'm just not sure that mental breakdowns and divorce and what not represent a significant enough problem to cause them to take that into account when rating people, on a large scale.
Like, let's assume the grad student and the manager each want to open a business, so they ask for a loan. I'm sure their rating would be based on if they are making money now and how much, what their past credit history would look like, how long they've been working, and what not. Like, I would think that the thinking behind it would be that the 40 year old manager is less of a risk just from life experience assuming all the other points of his background are in good standing. So like, if something did happen to him, based on his history, he would be able to handle it better than the grad student just because the grad student wouldn't have the same experience in the working world. Like, the grad student could suffer any number of unknown non-business related problems. Any number of health risks or relationship hazards (we've all been there) or whatever, and not know how to handle it, or he might. The point being that there isn't a reliable way to measure those unknowns. I don't really think that's reason to throw out the rating system
Also what that guy up there said about assets. I'm a big dumb idiot.