I think this can be framed more effectively as , thinking of outcomes. S regulation is closer/more correlated (I think) to the outcome compared with that of L regulation, and that is why I think it is better!

I tend to agree with Tyler Cowen that individual moral propensities are less important than overall social context. To borrow from a different branch of social psychology, I would say that Packer is committing the Fundamental Attribution Error.

In my view, the problem comes from trying to use what I call letter-of-the-law regulation in finance. Call it L regulation. With L regulation, the regulator lays down specific, quantitative boundaries (think of risk-based capital requirements, with fixed numerical weights for various types of assets). The managers of financial institutions are told to stay within those boundaries.
In contrast, think of something I might call S regulation, for spirit of the law. With S regulation, the manager of a financial institution that enjoys some government protection would take an oath to maintain the safety and soundness of the institution. With S regulation, it is wrong to just tiptoe along the edge of the quantitative boundaries, without considering the potential risk to the firm.
Suppose we take it as given that government is going to protect some of the liabilities of some institutions, because of deposit insurance, implicit guarantees, “too big to fail,” or other reasons. I would like to see such institutions be covered by S regulation even more than by L regulation.
I would like to see managers of government-protected institutions take an oath to safeguard the soundness of their companies. I would like to see them subjected to prison terms for violating that oath. The oath is a general promise, not satisfied simply by staying within the boundaries of L regulation.
I believe that S regulation would change the motives of bank managers. They would be looking for ways to avoid failure, rather than for ways to stay within the letter of the law.
There can be plenty of risk-taking institutions in our society. But they should not at the same time be institutions that enjoy government protection when they fail.
Economist’s View: “The Moral Stage of Wall Street”.

ouch

The number of welfare claims unambiguously decreased, but at what cost? More education increases the value of your human capital which leads to higher wages and more self-sufficiency. The authors wonder if discouraging education might ultimately leave the women more dependent on state benefits than they would if education were encouraged. The trade-off is a classic example of the choice of short-term gain and long-term pain.
Economist’s View: Short-Sighted?.

More than any other recent Nobelist, Krugman is no stranger to the general public. I’m sure that his other role as a New York Times columnist and an outspoken critic of the Bush administration will be the lede in discussions of this prize. But the prize is given for scientific research, and economists of all political stripes agree that Krugman’s economic writings are Nobel-worthy.
Even so, Krugman’s broader role is not, and should not, be irrelevant. Over the past decade or so, he has been a determined crisis chaser, offering useful insights on topics like the Asian financial crisis, Latin America, and, well, the United States.
Indeed, his real-time analysis of the current crisis has been important and helpful in shaping the policy debate.
The risk of real-time policy advice is that you risk being wrong; the upside is that you may actually affect the policy debate while it is going on. Krugman has the courage to be on the right side of this risk-reward tradeoff, even as too many economists prefer being slow, correct, but irrelevant to being fast, mostly right, and extremely relevant.
Whether you like his Times columns or not, you have to admire Krugman’s tenacity. He personifies the true public intellectual, and even when he writes a column that irritates you, at least you know it involves careful thought and a true dedication to the public debate.
Beyond his column, he’s also a popular textbook author, and was one of the first economists to understand the power of the web as a way of communicating to a broader audience.
In fact, only 40 minutes after the prize was awarded, Krugman’s blog was updated with a wry message: “A funny thing happened to me this morning …”
There’s no way that Krugman will remember this, but I remember clearly the first time I met him.
In the summer following my first year of graduate school, I attended an S.S.R.C.-run workshop designed to reconnect aspiring economists with real-world economics. Krugman was a speaker at the workshop. After his talk, he spent the evening around a fireplace enjoying a few beers and sharing his career wisdom with the gathered graduate students. These sorts of investments in the economics profession don’t occur in the public eye, and they require a real belief in the power of economics.
Congratulations Paul!
Congratulations Paul Krugman! – Freakonomics – Opinion – New York Times Blog.

One of the people whom I deeply respect, and his blog probably is a close third to (Brad Delong’s blog and Marginal Revolutions Blog) that I frequently link to, (the post that this follows was a link from his NYT blog).
I’d be lying if I said that I understood beyond the general principles his work on trade, but prof Krugman always seems to speak his mind, and he has a way of explaining things that endears him to his readers.

from AFP :

US economist Paul Krugman wins Nobel Economics Prize

1 hour ago

STOCKHOLM (AFP) — US economist Paul Krugman, a prolific New York Times columnist and fierce critic of Washington’s economic policies, won the Nobel Economics Prize on Monday, the Nobel jury said.
Krugman, 55, a Princeton University professor, has formulated a new trade analysis theory which determines the effects of free trade and globalisation, as well as the driving forces behind worldwide urbanisation, the citation said.
Speaking to Swedish public television immediately after the prize announcement, Krugman said the award “obviously will seriously warp my next few days.”
“I hope that two weeks from now, I’m back to being pretty much the same person I was before,” he said, adding: “I’m a great believer in continuing to do work. I hope it doesn’t change things too much.”
The Nobel Economics Prize has been especially closely watched this year owing to the ongoing global financial crisis.
A number of experts had predicted that the worldwide crisis would, in the future at least, prompt the Nobel committee to shift its focus further away from the heavily prized liberal market theories widely blamed for the mess.
And by awarding Krugman, a critic of unfettered free-market policies who has focused heavily on globalisation and the developing world, the jury has indeed decided to confront major, civilisation-changing issues.