There's a mildly interesting tiff taking place on the web right now. On one side are those who are confused, and more than a little outraged, to see people complaining about the bailout on the grounds that people who bought too much house shouldn't be rewarded for their folly. I estimate that none of these people, plus or minus five percent, are homeowners with fixed mortgages on sensible, boring properties.

On the other hand, there are those who are outraged that their neighbors who bought too much house are being rewarded for their folly.

On a moral level, I'm with the latter group: people who qualify for the bailout are mostly people who really should have known better; they will now be bailed out mostly by people who did know better.

On a macroeconomic level, placing blame is somewhat counterproductive. Those who have sensible, fixed mortgages will not really be made happier if the credit crunch turns into a liquidity crisis, the economy plunges into a deep recession, and they lose their jobs, forcing them to default on their sensible, fixed mortgages.

In my opinion, a willingness to tolerate high levels of moral hazard--to give people second, and third, and eighth chances without inquiring too closely about how they got into so much trouble--is one of the great strengths of the American system. It makes us happier as people, and it lets our society make use of human capital that is too often left moldering in (metaphorical) debtor's prison under the more punitive and moralistic regimes that prevail in the rest of the world.

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