It also can produce bad public policy:
Ostensibly well-meaning governmental policy promoted home ownership, a beneficial goal that stabilizes families and communities. The government-sponsored enterprises Freddie Mac and Fannie Mae allowed less-than-qualified individuals to receive housing loans and encouraged more-qualified borrowers to overextend themselves. Typical risk–reward considerations were marginalized because of implicit government support. The government used these agencies to promote social goals without acknowledging the risk or cost. When economic conditions faltered, many lost their homes or found themselves with properties worth far less than they originally had paid. Government policy then shifted to the cost of this "altruism" to the public, to pay off the too-big-to-fail banks then holding securitized subprime loans. . . . Altruistic intentions played a critical role in the development and unfolding of the housing bubble in the United States.
The same is true of the higher-education bubble. As we've argued, college degrees became increasingly necessary for entry-level professional jobs as the result of a well-intentioned Supreme Court decision that restricted employers from using IQ tests because of their "disparate impact" on minorities.
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