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Bad Money, Good Money

London – The British comic genius Spike Milligan once observed that he would love to have the opportunity to discover that money wouldn’t make him happy.

Big lottery winners, it is claimed, end up miserable, though real-life research suggests that they are as happy as you and I would be with a check for a million dollars. Money, however, can trigger all sorts of other emotions – like rage, for example.

That is pretty much how most people reacted to the stories about bankers’ bonuses, when the great crash of 2007-2008 wiped out banks, businesses, shareholders’ savings, growth, and jobs. There was, as one banker charmingly conceded, a bit of asymmetry between what bankers were being paid and what their banks had lost.

The Nobel Laureate Amartya Sen notes in his latest magisterial book The Idea of Justice that most people understand that a process is fair when they can detect a connection between effort and reward. The bankers failed this test dismally.