The moral dilemma of banking debt made public

horusd, I agree with your logic and conclusions, but I think it is safe to say that politicians do not abide by logic. If they did then the majority of their policies would be scrapped before they make it into practice.
Where I think things are little more ambiguous is on this point:

horusd said:

3. Western Democracies are ruled by a legal principle that all are equal before the law. So, if bondholders can assume such guarantees, then all can assume such guarantees, or none can assume them. There is not middle ground here.

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While everyone is equal before the law, there certainly are different laws dependent on whether you are a private citizen or a corporation (take bankruptcy laws as an example). As far as I know bond holders and depositors have equal standing in bankruptcy proceedings. But depositors enjoyed an explicit guarantee while bond holders did not.
I think this is something that is not explicit enough in western legislatures and would be fully in favour of a constitutional law that forced legislators to ensure that every law was applied equally to every person or organisation.

horusd, I agree with your logic and conclusions, but I think it is safe to say that politicians do not abide by logic.

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Both you & Dr M point out this fact. The operation of the political world is generally or sometimes illogical. The implication of this is that logic can tell us nothing of real import; it might be of mere academic interest, but cannot be of actual use in the world, because this is not how the world operates. I will agree, but argue this is immoral.

As a thought experiment, lets assume that all politicians do not reason logically*. Lets also assume the neccessary truth that humans need reasons (to think or act). Therefore, all human actions require reasons (or principles) but not all principles are logical. This is a valid argument. So, if no logical principles neccessarily underpin political actions, what does underpin them? Now consider that modern society is supposedly based on Enlightenment principles governed by reason, and reason is rooted in logic. The paradox becomes evident, and the moral dilemma too. We can offer no justification for such actions.

The great Enlightenment philosopher Immanuel Kant suggested that the supreme principle of morality was simple. Act only in such a way that you could wish your action were a universal law in a rational world. Does it matter that this is flouted in the bailout of bondholders? Well yes it does, because it highlights a vacousness at the moral heart of politics, and logic shows this clearly. It is not a mere exercise in academia which has no value, but clearly points to the lack of principles operating. As Stigliz has pointed out, this is an unjustified and unjustifiable redistribution of resources from the Irish taxpayer.


* We'll assume all rather than some to avoid the neccessity for somewhat more complex predicate logic.

I couldn't agree more with you and it rarely happens, but I also agree with Stiglitz.
Regarding your point "that logic can tell us nothing of real import", I would certainly say that we live in a world where the benefit of logic has been largely ignored or discounted. In just a few posts you have been able to show how fallacious one government policy actually is from a logical point of view; just imagine what would happen if you analysed all the policies of the last 10 years. My prediction would be that far from bankers' greed being the cause of the crisis it would be a multitude of government actions that caused the crisis.

To give an example of political response to logic, during the last election I had a candidate at the door and conversation veered towards regulation. When I pointed out mistakes in his premises for concluding that deregulation was to blame (I challenged him to name one significant deregulatory policy) and corrected his statement logically, he actually resorted to saying that it makes no sense to use logic in government policy. I think my laughter indicated that he was not getting my vote.

Political logical, or objectives, may not align with non political logic, objectives. Especially if the politician has no altruistic motivation.

Didn't Iceland change some laws relating to politician acting in the best interest of the country or something. I can't find any info at the mo.

AlbacoreA said:

Political logical, or objectives, may not align with non political logic, objectives. Especially if the politician has no altruistic motivation.

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I think the logic would be no different, but objectives certainly would. It doesn't matter what your political view or objective is, the same rules of logic apply. In my case I offered the candidate following syllogism as a representation of his opinion:
P1: financial industry was deregulated
P2: financial industry collapsed
Conclusion: deregulation caused the financial system to collapse

What I challenged the candidate to, was to prove that we had significantly less regulation rules/laws in the lead up to the crisis than 10 years ago. What I did was show him that premise one was false and that therefore the conclusion was not valid.

AlbacoreA said:

Didn't Iceland change some laws relating to politician acting in the best interest of the country or something. I can't find any info at the mo.

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Haven't heard of this, but would be interesting to know. Don't think that it would make any difference though. US politicians take an oath to uphold the constitution (which was written in the public's best interest), but many ignore it and downright claim it is not relevant any more.

Chris you might be right, but not necessarily in logical terms, recall from true premises, and valid inference, only true conclusions may follow. But the truth value of P2 is challengable. Many things can cause financial collapse apart from deregulation. So the fact that P2 follows P1 doesn't entail that P2 was caused P1!

This is called the logical fallacy of post hoc ergro propter hoc. B followed A, therefore A caused B. The causal link you make cannot be ascertained without question. Having said all that, your probably right anyway!!

horusd said:

Chris you might be right, but not necessarily in logical terms, recall from true premises, and valid inference, only true conclusions may follow. But the truth value of P2 is challengable. Many things can cause financial collapse apart from deregulation. So the fact that P2 follows P1 doesn't entail that P2 was caused P1!

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Yes, it certainly is a simplification, but one used extensively by politicians, the media and the general public.You would have to dig down into each premise until you get to an a priori statement in order to totally overcome uncertainty over causation. Correlation should never be deemed sufficient to argue causation, this is what my school chemistry teacher used to preach, and I think it has validity in some many other areas.

horusd said:

This is called the logical fallacy of post hoc ergro propter hoc. B followed A, therefore A caused B. The causal link you make cannot be ascertained without question. Having said all that, your probably right anyway!!

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Very important point, inference must be valid. But you can get a correct conclusion from wrong premises using valid inference:
P1: Monkey's have no comprehension of economics
P2: Bertie Ahern is a monkey
Conclusion: Berti Ahern has no comprehension of economics

Inference is valid, conclusion is valid, but one of the premises is not valid.

As stephen Kinsella said when he tweeted this Article " Kaboom "

[broken link removed]

Chris I did mean to reply to this! From wrong premises anything can follow. But once the premise is undermined, the whole thing falls regardless. Interesting article Ethan.