Well Ramesh, to steal a phrase, Brooks is in the eye of the beholder. Who knows what he means? (Brooks’s op-ed in The New York Times doesn’t help much either). For instance, when he says “we have a system; a system we all share,” is “system” in this case the housing or banking market(s), the macroeconomy, the social compact, or a box of electoral chiclets? It would be good to know, because if we’re going to invite even more moral hazard into the marketplace, I would like to know what we’re supposedly saving in the course of throwing personal responsibility under the bus.
I do find it interesting that virtually all economists and social commentators concede that government programs that (at least in part) force the responsible to bailout the irresponsible risks breeding more irresponsibility and creating even bigger problems down the road. But that never seems to stop anybody from doing exactly that. You may be correct, Ramesh, to think that concerns about moral hazard alone should not stop us from entertaining the bailouts embraced by David Brooks; Larry Summers certainly makes that argument. My original post, however, did not argue to the contrary . . . although I will confess to being less sure on this score than you or Summers.