Self regulation or government regulation?


Banks chose to destroy the world economy, yet no single person and no single decision made that decision. We blame banks and bankers. Yet is it that simple? For example, can we blame banks and bankers when each one of us is making purchasing decisions that increase the negative effects of climate change?

Pretend that you are banker and make your choice:

You are banker who has a hard time getting jobs, and your family of four depends solely on you for income. To make your required level of mortgages, you must pick one out of many mortgages, none of which really should be approved. The failure rate on this additional mortgage is 10% if the economy stays in good shape and 50% if the economy does not do well.

A) Would you approve that one more mortgage when this one mortgage tanks, then the whole world economy tanks? (I would expect most people would say “no.”)

B) Would you approve that one more mortgage if you knew that when this one mortgage and a million other mortgages tank, then the whole world economy tanks? (I would expect most people would say “yes.”)

We have many historical examples where if responsibility is clear and focused on a single decision by a single entity, then we will do the right thing. A single person with no one else around will do the best he or she can in an emergency situation to save another person. Yet a person was murdered running down a crowded New York street, being stabbed multiple times, yet no one did anything. The responsibility was too diffuse. We have to bring the decision-making to a single entity and a single decision to make sure that the right decision is made.

Now isn’t this an argument that we really need government to make these decisions!

But notice that we no longer give government the ability and the strength to control and make rules over big banks or extremely rich people. 

The classic duality of ethics is between two positions:

  1. Consequential – where you make choices according to consequences, usually according to the greatest good for the greatest number of people
  2. Conceptual – where there is a principle that applies no matter what

In real life people balance the two. A human life should never be taken except a police officer can take a life to protect others who would likely die. However one just can not take a life because the multiple body parts would keep multiple people alive, so in that case the sanctity of a human life is is more important than saving multiple lives.

Human beings are capable of holding many self delusions as well as denying very hard facts, so the ethics of humans gets very interesting.

And of course there is the third ethical reality of “It’s all about me!” However no one defends that basis of ethics in a public way. They just do it!

If this sounds very interesting to you, then you might want check out this Harvard lecture: