@Ben Collins-Sussman: I agree with you about the risk-management, meaning I probably agree with the conservative viewpoint. I am not so sure about the requirement for regualation. In essence, what a market system which is free requires is a legal system that creates stability in lieu of individual trust relationship (which are still important and much much stronger than the legal system, but cannot practically be as wide in coverage). Regulation, or ownership, is when the government decides that the costs of something are worth bearing regardless of the cost, because the subject is seen as vital or critical. Whether that viewpoint is justified is then empirically measurable by the results on that country’s economy.

But also, I’m not sure the existence of the assumed safety net is what caused those risks to be taken. Rather, consider the difference between an individual executive’s career span and the lifetime of the institution(s) for which that executive works. If you make a billion dollars for your company by selling something now while deferring the costs to a decade in the future, you could look like a financial genius right up to and including your retirement day. Then, while you’re sunning yourself on your yacht off Patagonia, the bill comes due and the firm has to deal with it. What do you care? Your private finances are not on the hook for the consequences of bad decisions, except to the extent that you’re still invested in that company. But you would have been smart enough to diversify, probably.

The difference between what’s good for individual executives versus what would be good for their companies’ long-term health has been explored in detail in a few really good articles I’ve read in the past year… I only wish I could remember one of their titles .

I don’t deny that the presence or absence of a government-backed safety net has some effect here, but I’m not sure it’s the major factor.

But the argument I’ve heard from thoughtful conservatives is that the status quo is messed up not because we’re regulating things, it’s because we’re *halfway* regulating things. In other words, we’ve failed to achieve the “free market ideal” because everyone *knows* that the government will bail them out. In a true free market system, failure is actual failure. In our half-regulated system, we have this insane situation where Wall Street execs can take crazy risks and KEEP all private profit (if successful), but run crying to the government if they fail. It’s not possible to evaluate risk sanely if there are no consequences, is it? In any case, the argument is that if the government absolutely swore *not* to bail out whole sectors no matter what, then the industry would be evaluating risks as they really ought to — and probably wouldn’t have been so dumb as to partake in massive trading of unreliable loans. It’s the existence of the safety net — the improvised regulation — which caused the reckless behavior in the first place.

Anyway, it’s a nice argument for the free market purist, but I’m not one of them. I’ve always believed that capitalism needs to be deliberately regulated with forethought, just ilke you.