I always get nervous when being directed to a post by Nicholas Nassim Taleb, author of Fooled By Randomness and The Black Swan. (Ooh, there's a new section to that.) He frequently convinces me of something I am suspicious of at first glance, with intimations I may have to eat my words.
Not so, but nearly so, this time. Taleb argues, in commenting on OWS that bankers shouldn't be paid bonuses. That smacks of exactly the hippie nonsense that would make me embarrassed to show my face over at NOfP, Tigerhawk, or Maggie's.. But, we must pursue thoughts where they lead, especially with NNT. Yet he does not get distracted by the issues that seem to consume the rest of us - whether the financial managers make too much, whether the reporting is fair, whether the protestors make anything more than 15% sense, whether corporations are persons. He gives a quick nod to corruption - which to me was the main issue and the one ignored by political groups fighting other battles - and moves straight to the basic psychological mechanisms which encourage the corruption, mechanisms which are thus the real problem.
When we bail out banks or other large entities, we encourage extra risk by taking some of the danger and sting out of it. When bankers can also secure large bonuses without much personal risk, without much "skin in the game," what do we expect them to do in response? What would we do in a situation where the personal risk is low but the gain is high?
Disguised risk is the problem. Transfer that risk to the hedge funds, where people like to live on that adrenaline, and are actually allowed to fail. Bankers should be boring, like they were in the old days. No big bonuses, just a respectable career.