Did you read the article? In the third paragraph, he says it's impossible for a government to promise not to bail out banks. The banks will outmaneuver everyone when the time comes.
Another way of making the same point:
- We can't guarantee that future governments won't bail out banks.
- We can discourage one-sided risk-taking by banning bonuses in institutions that likely would manage to convince the government to bail them out.
Corruption exists. Power exists. When faced with this reality, what do you do to shift towards a reality with less corruption and power imbalance?
Saying to the powerful, and corrupt: "Don't do that -- what you're doing is wrong." is useless. If they had to listen to you they would be de facto not powerful.
>> what do you do to shift towards a reality with less corruption and power imbalance?
Absolute power corrupts absolutely.
Governments have absolute power. Businesses don't.
Governments have the ability to point their guns at the populace and say, "You have to pay for these failing businesses or some very bad things will happen."
>> If you think Taleb's idea to limit bonuses is bad, then say so. But don't attack an argument he didn't make.
Yes, I think any arbitrary interventions like 'limit bonuses' are not effective and costly. Banks will find loopholes and taxpayers have to pay for the new regulatory staff that enforce the regulations.
The only 'regulation' that is needed is the elegant self-regulation of a free, fair market: broke businesses fail.
I'm not talking about permitting fraud. People who commit fraud should go to jail.
Another way of making the same point:
- We can't guarantee that future governments won't bail out banks. - We can discourage one-sided risk-taking by banning bonuses in institutions that likely would manage to convince the government to bail them out.
Why not do the thing we can do?