Chris Dillow criticises Mervyn King for over-optimism in reaction to the latest wave of banking scandals. King suggests ‘a real change in the culture of the [banking] industry’ as the way to avoid this sort of thing in future. Chris questions the plausibility of King’s proposals, not because culture isn’t important but on the grounds (I paraphrase) that cultural change can’t be conjured up out of good intentions and 'leadership of an unusually high order' (King's phrase). I am very sympathetic to this sort of argument: culture is a hard constraint on action, not a bunch of easily manipulated sentiments, a fact that many economists and politicians are inclined to overlook. Chris proposes a more direct route to cultural change, and here we part company.

Chris writes ‘We could learn from pre-modern states. They imposed brutal punishments upon wrong-doers, in part because they needed to terrorize their subjects into submission simply because they had no other means of controlling them. Similarly, if shareholders or regulators cannot control bankers - and it looks like they can't, draconian punishments for wrongdoing are needed to keep them in line. As Voltaire nearly said, "it is wise to kill a banker from time to time to encourage the others."

This gets what Voltaire said wrong in a way I find disturbing. The adapted quotation is from Candide, and was a transparent reference to the execution of Admiral Byng in 1757 for 'failing to do his utmost' to prevent the British loss of Minorca to the French. Voltaire’s point, surely, was that the reason offered for executing admirals was in fact a rationalisation of a practice which lacked any rational grounding. The full quotation is 'In this country [England], it is good to kill an admiral from time to time to encourage the others.' That killing the odd admiral is a practice which derives its legitimacy from tradition rather than reason is signalled by the phrase ‘In this country it is good...’ That the reason offered is in fact a rationalisation is signalled by its absurdity: in what sense does arbitrary extreme punishment ‘encourage’ (the French could equally be translated as ‘give courage to’ ) anyone, as opposed to reducing them to terror? The gag works because it captures, in microcosm, the ultimate target of enlightenment criticism- practices sanctioned by emotional investment and/or tradition being passed off as rational responses to real world problems.

Now this, mutatis mutandis, is precisely the sort of lame rationalisation we are being offered today. Sensible people are buying into the argument that there is a rational justification for exemplary punishmment, when the motivations which make this approach appealing have everything to do with emotion and nothing to do with reason. Even Jonathan Freedland warns, in tones more suited to the Poujadiste rhetoric of the Daily Express, that ‘anger is rising, and Britain's masters – politicians and bankers – would be wise not to push the people's patience too far’. A perfectly reasonable parallel with the treatment of last summer’s rioters by the courts - to be clear, numerous cases of excessive punishment overtly intended to 'send a signal'- is being diverted to support exactly the wrong conclusion. You don’t have to be a Kantian (like me) to believe that using the coercive power of the state to send messages to citizens is a breach of norms which are fundamental to enlightened political order. What was wrong last summer with regard to rioters is wrong today with regard to bankers.

Exemplary punishment is of course also a distraction from the question of how to reform the banking system. I’m less worried by that distraction than by what seems to be the increasing acceptability among political elites and commentators of the kind of arguments Voltaire fought with the weapons of irony and satire in the eighteenth century. But the two aspects are nonetheless intimately linked. 'What do they want' the Montagnard leader Saint-Just asked at the height of the French revolutionary Terror, 'who want neither virtue nor terror?' If the choice is between 'virtue' - King's 'cultural change' produced by 'leadership' - and 'terror' - exemplary punishment to encourage the others- we really are in trouble. The proper response when offered that choice is to reject both alternatives: we need institutions that neither demand implausible levels of individual virtue (Chris is very good on why King's preferred solution is unconvincing in this respect) nor legitimate 'draconian' symbolic punishment. Fortunately, we are not without the intellectual tools to evade the dichotomy. It would be unfortunate- strike that, it would be disastrous- if the emotional appeal of a purge of top bank personnel prevailed over the rational interest in serious reform for the long term.