There’s no doubt that the financial crisis has inspired a high degree of boodlust among the pitchfork-wielding populace. There’s a palpable level of disgust towards executives who lived the good life during the boom times — spending millions on their bathrooms and offices — who now need bailouts under the claim that it’s for the good of society.
Chris Dillow wonders if the death penalty would really be so horrible:
This means that if the penalties for breaches are low, bank bosses might have an incentive to ignore regulations – as they discount punishments by the probability of getting away with their crimes. To prevent this, punishments must be huge.
What I’m advocating here is a system of perfect deterrence, as discussed by Saul Smilansky in 10 Moral Paradoxes; if the punishment is high enough, no crime will occur. What’s more, the death penalty will focus bosses’ minds. As Chesley Sullenberger showed us, when a man faces the likelihood of death, he finds a way to do a great job. The notion that bank bosses require big bonuses to incentivise them rather than the threat of punishments was always a self-serving fiction, not a realistic psychological proposition.
Dillow, who we’re pretty sure is talking strictly theoretically, anticipates the first rejection:
You might object here that threatening bank bosses with death would deter good men from taking the job. I’m not convinced. For one thing, the threat of death doesn’t stop good people from applying to become airline pilots or army officers. And for another, having duffers run banks wouldn’t be a catastrophe.
Again, given the general mood these days, we’re almost afraid to air these ideas, given that a politician could probably write a ticket into Congress on this platform. Other than the moral issues surrounding the death penalty, we think a compelling argument against this is the arbitrary nature of white collar prosecutions.
Tom Kirkendall reminds us that business leaders who do or don’t face charges are basically subject to a lottery, as prosecutor discretion is frequently based on popularity or political expediency. In each case below, the affected party managed to avoid legal hell by being popular:
Next, there was the Buffett Rule.
And then we had the GM Rule.
Now, Larry Ribstein reports that we have the Geithner Rule.