I don’t have much to add to Larry’s post about Eliot Spitzer’s persecution (and non-prosecution) of AIG and Maurice Greenberg, or to Larry’s ongoing crusade against the criminalization of agency costs. But I just can’t resist registering my outrage.  How can this sort of thing not make your blood boil? Other than a few lonely voices clamoring in the wilderness of the blogosphere, where is the outcry? I’m not suggesting that those who are enraged by politicized prosecutions in other spheres should take up this cause, but a little sensible appreciation among the rest of us for the costs here would be nice. And while I’m thinking of it, let me add to Larry and TomK’s despair about the egregious prosecution of Jamie Olis.
And while the destruction of human life in these cases is lamentable, it is the social costs that should worry even those who can’t muster any sympathy for the travails of a few rich, white businessmen. Larry’s articles and blog posts on the topic should be required reading for prosecutors, regulators, law makers and law professors. Instead, those folks are too busy hammering away at the presumed evils of backdating, vertical integration, “excessive” compensation, insiders on boards, bundling arrangements and DRM, to name but a few.
It’s possible that some or all of these practices, in some cases, may be costly. But before I’m accused of hypocrisy, there is a huge and under-appreciated difference, even — yes, it’s true — in the business world, between the bad behavior of private individuals and firms and that of the government. Among other things, the former is generally localized, susceptible to economic pressures, and, quite often, ambiguous in its effect. The latter is far-reaching, corruptible, difficult to constrain, and largely immune to economic limits. And these are just the utilitarian concerns. These differences are all-too-well appreciated in other contexts (and I often find myself in embarrassing agreement with the crackpots on left-wing radio who fulminate against the exercise of excessive state power when it comes to wire-tapping, war-making, the drug war and online gambling), but here, where the social costs are so enormous, there is naive belief in the government rather than skepticism. It’s outrageous.Â