The Financial Crisis: What Would the Talmud Do?

If this last bit sounds too ethical to be true, that's because, these days, it is. "To be honest," Diamond explains, "In the medieval and the modern periods, Jewish law caved to the marketplace on this." The financial markets that Jews found themselves in routinely assumed profits of over 6%, and they followed suit. "It became more an aspiration than a duty," he says. "Let's say that the more pious among us would take this seriously in establishing prices that are responsible, based on the marketplace." Indeed, with the exception of those involved in specifically Jewish markets like the Kosher foods industry that may fall partly under the jurisdiction of religious courts, Jewish businessmen are far less likely to be discussing rabbinic ethics than people like Levine and Diamond.

But the desire to apply them to the wider world may be growing. Diamond belongs to a group called Rabbis for Obama, and says that in light of the financial crisis, its members have begun to discuss how the old wisdom could mediate the new mess. The question these days, he says, is not whether Jews can be induced to be more ethical than the market, but whether the market can be made more ethical. "I think classic rabbinic tradition is certainly pro-regulatory," he says. Meanwhile, Yeshiva's Levine calls in his journal article for what he describes as "an incentive structure in the workplace that would dissuade people from wrongdoing." He gets quite specific, imagining a "carrot and stick" arrangement. One stick would be an expansion of the Sarbanes-Oxley Act of 2002, which mandated greater accountability for CEOs of publicly-owned companies, among other things.

Sarbanes-Oxley is not popular among free-market advocates. "I know," says Levine, "people involved in all this will say that they wanted to maximize shareholder value." But he thinks that today's capitalism needs to be a little more bounded in order to protect the possible victims of its excesses. That term includes the poor man who mistakenly takes an impossible mortgage. But increasingly it may mean all of us. In regulating, says the rabbi-economist, "we have to imitate God, in the way He shows compassion and mercy when he deals with mankind."