When Policies Collide: A Decision Making Framework for Financial System Overhaul in the 21st Century

Abstract

The recent global financial meltdown has shaken the modern market system to its very core. This collapse has undermined many of the theories underpinning the engine of the system. The same phenomena is unsettling many of the moral and practical intuitions policy makers championed during the modern era. But decisions to significantly overhaul fiscal policy are fraught with challenges. Though the crisis has resulted in a opportunity to reassess policy, the interconnectedness of policy rationale makes untangling and cleanup of the challenges quite difficult. Attempts to remedy or alleviate pain in one area can conflict with policy rationale in other areas. This complexity is compounded by a highly globalized economic system, which is pitting the differing policy goals of nations in conflict with one another. These competing policies have made it difficult to find a balance. This paper analyzes one example that illustrates policy tensions in play -- the decision by the American International Group (AIG), a company propped up by billions in taxpayer dollars, to pay millions in bonuses to its employees. This example will be used to establish a workable framework to effectively balance competing interests during a time of significant policy overhaul.