Utilitarianism and the financial crisis
My econ class was recently asked this question which lead to an hour long debate. I ended up hearing some pretty interesting things to say the least. What do you guys think?
"What steps would a utilitarian consider justified to prevent another 2008 type financial crisis?"
I wanna add to this. Start us off with some examples. The question is too open-ended.
Spoiler alert: This is OP's homework assignment, if he knew what the question meant he wouldn't be asking for input.
Anyway, I think he means what sort of government regulations (or lack thereof), laws, Fed action, lending policy etc. could prevent another financial crisis. I'd counter by asking, is that really desirable?
Anyway, end subprime lending, put tighter regulations on house flipping (up the tax on gains from the sale of any house owned for less than maybe 3-5 years). Lend at a much higher interest rate for people working in manufacturing or other jobs prone to outsourcing. Better yet, lower the size of a mortgage such people can get: At most, monthly payments can be 20% of gross income (since their risk of unemployment and getting a lower-paying job is fairly high). Things like that. Really boils down to smarter lending standards. And tighter regulations on leveraging.
Oh, and take the federal government out of the mortgage industry. Sell the FHA at auction, stop giving Fannie and Freddie preferential treatment. Stop all the "affordable housing" programs, they're pushing (government-backed) "market rates" at the bottom end artificially higher.
This actually is not my homework, in fact it is exactly as I described in my original post. It was a topic that I was not entirely familiar with, but wanted to learn more about. With that being said, I appreciate your contribution but my original question still stands. The question revolves around ethical ideology (JS Mill, Bentham, Singer etc.), not necessarily economic policy.
For example, my professor asked "were the causes of the financial crisis truly utilitarian and in accordance with capitalism?" (considering the fact that there were entities which maximized their utility through the financial crisis)
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