From Twitter:
The trending hashtag #BailOutPeopleNotCorporations is founded on a basic error; namely, reification. While it may be necessary to reify the corporation for semantic convenience, it can mislead.
Conceptually, the corporation is not a thing, but rather simply a set of contracts between various persons pursuant to which services are provided and rights with respect to a set of assets are allocated.
When we "bail out" a corporation, what we're really doing is redirected wealth from taxpayers as a whole to the subset of individuals who collectively make up the corporation. We thus have to make a decision: In a period of economic triage, is this group of people worth saving? Are the jobs of these employees worth preserving. Are the savings of these shareholders worth preserving?
Concomitantly, we need to consider the problem of agency costs. Corporations are not democracies. They are run by managers and executives. Hence, once we decide that a particular group of people is worth saving (in an economic sense), we need to ensure that managers and directors cannot divert the "bail out" funds from the desired goals. This is a non-trivial design problem. The TARP bail out in the financial crisis was not well designed. We need to do better this time.
