The Indirect Ethics of AIG’s ‘Backdoor Bailout’

Daniel Arce and Laura Razzolini ()

Journal of Business Ethics, 2018, vol. 148, issue 1, No 4, 37-51

Abstract: Abstract We experimentally assess the ethics of the U.S. government’s indirect bailout of the bank counterparties of American International Group during the 2008 financial crisis. When the indirect bailout is jointly compared with a counterfactual where the government directly bails out the banks, subjects judge the indirect bailout to be far more unethical. On the other hand, when the two scenarios are judged separately, subjects consider a direct bailout of banks to be more unethical. This suggests that ethical judgments of indirect versus direct action exhibit a type of preference reversal that is dependent upon whether the evaluation mode is joint or separate. The pedagogical and policy implications of this preference reversal are discussed.

Keywords: Behavioral ethics; Indirect agency; Bailout; AIG; Financial crisis; Preference reversals; Framing effects; Framing power; Joint/separate treatments (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/s10551-016-3029-6

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