Now, political economy of that kind is not really my specialty, and I don't really want to get into a discussion of what I specifically think should be done from a public policy standpoint. I don't really know, to be honest, and my opinion is basically worthless on this. But I was reflecting on this earlier, and I immediately thought of something John Simmons said in his totally unrelated (but nevertheless very interesting) essay, "On the Territorial Rights of States":
...one of the fundamental problems with all varieties of consequentialism is the way in which they permit their conclusions to be strongly influenced by the weight of frustrated expectations and desires, however unjustified these might be, and by considerations of simple convenience...
I don't mean to suggest that I think that convenience or frustrated expectations and desires are morally irrelevant, and I'm sure that Simmons would agree. But it is interesting to note that when we think only in terms of consequences, we often lose sight of the fact that there are other things that matter, e.g., the fact that the money that's being used to help these people who screwed up belongs to other people who worked hard for it and earned it, or that people may be frustrated because of their own poor judgment.
I'm not among the people who believes that there's no role for coercion in order to promote positive consequences. I do, however, think that we need to think long and hard about the fact that this bailout is not being used only to save lives and protect people from the worst kind of poverty and loss, but also to protect people from bearing the consequences of entirely unreasonable and irresponsible decisions that they made without giving proper thought to the risks that they were incurring and doing so, and to protect firms which unscrupulously invested in products which were founded in deception and predatory opportunism, and which are now being penalized for their lack of foresight and integrity.
I'm certainly not saying that everyone's mistakes were proportionate to the losses which they will likely incur as their result. But we live in neither a meritocracy nor a desert-based social order, and proportionality has nothing to do with the way that we live our lives. If I'm walking down the street and I accidentally step awkwardly on a crack, causing me to severely sprain my ankle, it seems fair to say that any absentmindedness I might have displayed in failing to watch where I put my feet would not make a severe ankle sprain my just deserts. But that doesn't mean that I could legitimately hobble into a nearby house and write myself a check for the price of crutches. As communities, perhaps we have an obligation to help people out when they're in need, and I would certainly think that if someone sprained their ankle in front of me, I ought to help them out in some way. But the idea that we have an enforceable responsibility to make people whole again when, in some cosmic sense, they don't deserve their fates seems odd to me, and somehow antithetical to the way we ordinarily think about our responsibilities to other people.
So ultimately, I'm not sure what to say about an ideal economic policy. It's not really my specialty. But what I will say is that from an ethical standpoint, there's something fishy going on.