I started reading Principles for Managing Big Debt Crises, and it makes a strong case that despite the moral hazard of supporting failing institutions that made bad calls, it's super important for mitigating financial collapse across the board
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Replying to @mesolude @Aella_Girl
I like this analogypic.twitter.com/Lh5M2XsJ8a
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Replying to @mesolude
I'm unconvinced about the tradeoff though, taking away the ability to fail seems like it would change the incentives inside the company in a bad way
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Replying to @Aella_Girl
Yeah, if an institution couldn't fail in any circumstance it does seem like they'd do riskier things If bailouts are conditional on some sort of greater crisis, does that still seem not worth it?
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Replying to @mesolude
I think so? I guess it depends on how much corporations would operate differently if they knew for a fact they would just disintegrate if something really bad happened. I don't know a ton but I assume they'd build more robust backup plans.
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Replying to @Aella_Girl
If it turned out that bailouts were the thing that helped reverse a severe economic downturn, I think I'd take the bad incentives it puts on institutions
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Replying to @mesolude @Aella_Girl
Bailouts should probably be restricted to individuals (like families that temporarily cannot pay rent) and essential businesses that are expensive to rebuild from the ground up (eg airlines)?
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Replying to @Plinz @Aella_Girl
There's a question of what is effective vs what doesn't cause bad incentives vs what feels morally good I'm primarily concerned about effectiveness
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Replying to @mesolude @Aella_Girl
Closely related on how to create accountability for that assessment (bad incentives). And ethical behavior is going to be the one that gives the best outcomes in the long run.
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Replying to @Plinz @Aella_Girl
Generally yes. Many of the ethical intuitions people have overly personify governments and companies
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Agree that the intuitions of many people about the most rational macroeconomic strategies are systematically wrong
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