Did or does anyone seriously take any notice of such claims? It’s one thing to believe that a certain percentage of talented investors/ speculators out there would get out of the game if there was less profit in it, but quite another to believe that nobody else would step in and be just as effective as helping a nation grow its wealth.

You only need to look at Warren Buffet – arguably the most successful investor and wealth-creator ever, for whom large personal financial gain is quite obviously not his primary motivation (his regular salary is something like $100K).

Oh and regarding the “to big to fail” problem – how about instead of forcibly breaking them up, simply requiring part nationalisation of companies over a certain size? If they wish to avoid nationalisation, they are free to break up their operations as they see fit.

“deciding who took the riskiest choices and should suffer the most intense consequences is somewhat difficult”

The rating agencies who once rated CDOs as AAA and then, within a week in some cases, dropped their rating to junk might not be too difficult. How could they have been so wrong and still they prosper? Their conflicts of interest appear to be relevant.

Also, why is it legal to write insurance that guarantees your own debts? (Credit Default Swaps) You don’t have to be Warren Buffett to see that activity of that sort should be illegal. It is an example of regulatory failure where the heads that should roll are probably easily identifiable.

How do you know this? After all, if crooked players are getting better at concealing their moves, they should appear more and more like honest players (or alternatively like people who aren’t playing at all). Which makes it difficult to figure out if dishonesty has increased or decreased.

Also, what is your evidence that the severity of crashes and pancis is a function of the size of the economy? I understand from economic historians that the 19th century, when any country’s economy was much smaller (with possible exceptions being countries like Zimbabwae and North Korea), crashes and panics were more common than they have been in the 20th century. The 1890s depression has been estimated at worse than the 1930s depression, though the statistics from that time are not as good. See for example http://en.wikipedia.org/wiki/Category:19th_century_in_economics for a list of panics in the 19th century (very US-focused, sadly).

Ridiculous. It’s a system that was created by individuals and groups of individuals, for the benefit of said individuals and groups of individuals, so said individuals are utterly to blame.

In general the people who design a casino are not the people who gamble in it.

But to my mind the question how to design a workable system is separate from the question how to punish the people who created and operated the bad system.

I’d like to see a way to take their ill-gotten gains from them, but that’s tricky. You can’t prosecute them for things that weren’t illegal when they did them—it’s in the Constitution. To some extent we have to let them get away; they are a side-effect of letting Bush be president.

But we really need a new system. I would suggest first a new stock market, run by the US government as a non-profit. The Treasury keeps the money in a Treasury money-market account. The market keeps open books—anybody can look at the open limit orders. No naked short selling, no short selling at all except by explicit agreement between stockholders. Let stockholders choose which exchange will keep their stock; if the federal stock market has problems they can use another exchange. But they get a tax advantage for using the federal one…. It might be a good place to put retirement money. No brokers, no brokers fees, you can hire a broker to do market analysis etc but you don’t have to.

Second, require the largest corporations to split up. Anything that’s TBTF is too big. Some people argue that economy of scale makes it worth having them that big. But TBTF is a bigger diseconomy than any efficiency they could get from their size.

If we make the largest companies split up we’ll have to do something about insurance. Insurance companies are all about economy of scale. If they get too small they stop working. Maybe the government could do the more common insurance tasks? For a reasonable profit?

Parkes, 44, has an IQ of 56 and the math skills of a first-grader. Sakry is 43 and, like Parkes, faces challenges when it comes to planning and maintaining budgets. Despite their limitations, three different lenders persuaded them to keep refinancing their home until they burned up the equity in their house and could no longer afford the payments.

Don’t like it? Change the system.

Ridiculous. It’s a system that was created by individuals and groups of individuals, for the benefit of said individuals and groups of individuals, so said individuals are utterly to blame.

I’m not sure that something’s “being necessary to save the system” makes a convincing argument that it’s in the interest of the least advantaged, given that the system being saved is the one that provided them with the least advantages.

Yes, I’m confused by that. Could someone explain it to me?

Yeah, but I don’t need LE for that, it adds nothing new or interesting, efforts to level the playing field have been around for a long time , both on a theoretical and a policy level.

LE doesn’t say that a poor actor is, in any sense inferior to a rich medic, just that the latter doesn’t owe the former any support.

But in mixed economies the rich medic does bail out the poor actor, not directly, but indirectly through progressive taxation, welfare programs, subsidized education, public funding of arts programs etc. .

Er no, I don’t think so. To know that a gambler should be held responsible for the outcomes of his or her gambles, we don’t need to know anything about how risky those gambles were, just that the gambler went into the transaction with his or her eyes open, wasn’t suffering from an OCD, etc.

Don’t like it? Change the system. Satisfied with the system? Wind it up (by the bailout) and keep going.