Game On: The First Presidential Debate

[Professor S]

You make a good point with malpractice in medical law, but I think that could be avoided by having the civil penalties for financial judgements relegated to dollar for dollar. Meaning that the cap of the judgement could not go past the amount of money the accused misappropriated. If you eliminate financial "pain and suffering" from the equation and "statement verdics", I think it becomes more manageable.

Wow.. we're realy kind of working this out, aren't we? I'm impressed and it takes a lot for me to impress myself.

[Xantar]

Well, I do have some technical quibbles, but let's not get bogged down while we have a good thing going. I think we've agreed on some broad principals. Let's say for the sake of discussion that we have some kind of ethics board and that we've defined exactly how to decide monetary awards. I think it would be a good idea to eliminate "pain and suffering" from jury verdicts and simply render it down to a punitive 1.5 multiplier. In other words, if my stock broker does something unethical and it costs me $20,000, the jury would be allowed to award me no more than $30,000 ($20k plus $10k as a punitive award).

I want to raise an entirely separate issue now. I think at its core, we still have a bit of a moral hazard problem. In the above example, my stock broker will get stung pretty badly and he will have a strong incentive not to do it again. But what do you do about the guy is responsible for managing $8 billion worth of assets and who screws up? He knows at this point that there's no way anybody is going to get their money back. To him, $1 billion worth of damage is the same as $5 billion.

When I think of it this way, I confess that my earlier proposal with stocks getting a negative value isn't going to help at all either because the punishment only kicks in after the malfeasance is discovered by which time the problem may have blown up beyond anybody's ability to compensate. People in the financial industry by definition are not putting their own money at risk with their work. I don't have a moral problem with that, but it does mean that the system is vulnerable to people who let greed get the better of them. After all, the fact of the financial system is everybody gets caught sooner or later, and if everyone were acting in their rational self-interest, absurd risks like the sub-prime mortgage meltdown wouldn't happen. But the fact is some people do let greed get the better of their good sense, and so we need to figure out a way to safeguard the public from the consequences of those actions. An ethics board is a good start, but I'm not sure it's enough.

Great. Now I've just gone and convinced myself that the problem is a fundamental flaw of human nature that we will never fix and that nothing the government or private associations come up with will fix it. Help me out here, Strangler.