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The ancient Babylonians knew a thing or two about nudging. Or, at any rate, Hammurabi’s code – the first legal code in history – had a firm grasp of behavioural incentives:

  • “If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death.”

A tad harsh for modern tastes, perhaps – but not so very different from the still current idea that a captain should be the last to leave a sinking ship. In an extended essay, Nassim Nicholas Taleb and George A Martin argue that something similar should apply to the banks:

  • “… instead of relying on thousands of meandering pages of regulation, we should enforce a basic principle of “skin in the game” when it comes to financial oversight… In other words, nobody should be in a position to have the upside without sharing the downside, particularly when others may be harmed. While this principle seems simple, we have moved away from it in the finance world, particularly when it comes to financial organizations that have been deemed “too big to fail.”

Steve Baker’s backbench bill – already featured on the Deep End – would put this principle into practice by requiring unlimited liability for bank directors. But Taleb and Martin would go cast the net more widely:

  • “Accountability for everyone involved in risk-bearing for others, especially systemically; no exception, not a single one—contractually, morally, legally, or by means of whatever can be done to evade responsibility… It is time to realize that capitalism is not about providing free options.”

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