359. Debt, Forgiveness and the Nature of the Corporation feat. David Skeel

In ancient times, debtors were treated with severe punishment, even sometimes being dismembered. So when did things start to shift towards debt forgiveness leading up to the modern-day concept of filing for bankruptcy?

David Skeel is the S. Samuel Arsht Professor of Corporate Law at the University of Pennsylvania Carey Law School. He’s the author of several books that look at the history of corporate law, debt, and bankruptcy, including Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From and Debt's Dominion: A History of Bankruptcy Law in America. 

He and Greg discuss the origins of debt forgiveness in the world, how Christianity and the Bible played a role in that shift, and the proper amount of risk corporate leaders should take. 

*unSILOed Podcast is produced by University FM.*

Episode Quotes:

A biblical perspective on debt and bankruptcy

17:40:  There's a verse in the Old Testament that says you cannot take as collateral a debtor's millstone. And the idea there is that is the tool of the trade. There's another verse that says if you take the debtor's cloak as collateral, you've got to give it back at the end of the day. The idea being that the debtor's going to need that to keep warm. Even going back thousands of years, a sense that there needs to be a balancing. You need to make it possible for creditors to get repaid, but you also need to be aware of the humanity of the debtor and the needs of the debtor.

Debt is like sex and fire

09:28: Debt is like sex and fire; both of them were important in the ancient world and are important now, but they also have some dangerous downsides if they're misused. And that's the picture you get of debt: that people need debt is inevitable, but it's easy for people to get in over their heads, and there needs to be a way to deal with that possibility.

How do you respond to risk-taking?

29:43: One simple response to the risk-taking concern is to be mindful of regulations that create bad incentives in that respect, such as tax rules. And also, things like disclosure can make a difference.

Sometimes lots of failures is an indication of a good economy or a good system, not a bad one

23:32: There is empirical evidence that shows that in countries where you have a more generous bankruptcy system and more generous availability of a fresh start, you do get more entrepreneurship. There is a direct relationship between the two, but risk-taking can sometimes be problematic.

Show Links:

Recommended Resources:

• Republic of Debtors: Bankruptcy in the Age of American Independence by Bruce Mann
• Thomas H. Jackson
• Bankruptcy Reform Act of 1978

Guest Profile:

• Faculty Profile at University of Pennsylvania
• David Skeel on X

His Work:

• Icarus in the Boardroom: The Fundamental Flaws in Corporate America and Where They Came From (Law and Current Events Masters)
• The New Financial Deal
• Debt's Dominion: A History of Bankruptcy Law in America
• True Paradox: How Christianity Makes Sense of Our Complex World