The Bailout as Legality vs. Morality
October 17, 2008
The other night, the Northwestern Political Union discussed the bailout. We touched on responsibility, and (potential) fines briefly, and toward the end I brought up economic morality again with the statement, “Profit and risk divorced from responsibility is economics divorced from morality.” The most direct retort went something like this: “You can’t tell people they have to behave more morally than the law requires them to. It won’t work.”
This was the line taken by several to justify government safety-net action for those who had, in essence, taken risks which, in retrospect, were ill-advised—they seemed, by most measures (the argument went) to have been in the actors’ best economic interests at the time, whether this was buying a house by taking out a high-interest loan, or being the lender, etc.
Ignoring (for now) the question of “best economic interests,” let’s take a step back from economics for a moment. The actors all behaved morally because they behaved within the law—the limits of morality, in this view, are defined by what is legal. This is wrong. To use legality to define the limits of morality is to make morality arbitrary and relative; it is, in essence, to destroy the concept of objective morality.
However, I don’t think anyone was arguing this, or thinking about this implication. The case being made was about what expectations legislators/theorists/etc. can reasonably hold of the people, insofar as it regards their behavior within a legal structure. Expected morality must be legislated, by this view. (Think of this as opposed to the unlegislated “preferred morality”—or being a “good” person vs. being a “better” person.)
If this is correct—and you cannot expect people to behave more morally than legally required—then the entire concept of minimal (or small, or non-massive) government has to be thrown out as non-viable; for it to work, this is precisely the expectation which must be made of the demos; there must be choice toward morality.
And while I think this equation of expected morality with legality seeks to protect individuals from being forced to follow religio-moral systems to which they do not adhere (except insofar as they must as members of a polity), one can see fairly easily the end-effect of government bodies imposing such religio-moral systems on the very individuals who are supposed to be protected. To refuse to conflate legality and morality is to protect the latter; to confuse them is to risk dangerous centralization of power.
I think my whole point is summed up very neatly here:
“The fundamental political problem, I’ve concluded, is in how we think about the state. If we look to it as arbiter of legitimacy, safety, or morality, we have already neglected the sources of real meaning in our lives. State intervention is dangerous not because it’s “coercion” (I don’t mind coercion), but because of its inhumanity.”
But back to the bailout. Because people cannot be expected to behave more morally than legally required, then the government, after leading them to expect a safety-net, has an obligation to provide that net. Future events are to be avoided by learning from this event, and adding new regulations to mitigate the consequences of previous regulations. The problem, of course, is that the rift between morality and economics is not mended by choice or consequences, but incompletely (and only potentially) by future regulation.
Here, John Schwenkler excerpts this article on why band-aid regulations might wind up being at least as bad as ripping off the band-aids altogether. And read here for how non-regulatory solutions can have the precise effect we’re looking for—a sustainable, rather than short-term profit driven, economy.
More on that last idea later.