ABSTRACT
Many schools of ethical theory have developed principles that may be usefully applied to the various practices that caused the Great Recession, but given that this crisis was economic in nature, it may be the case that the principles that are most appropriate in this context are those developed in the body of theory that is known as political economy. For Smith, a central figure in the classical liberal tradition, the ideal society was one that promoted above all else the value of liberty for all of its citizens. In the early 2000s, American investment banks and bank holding companies began to purchase large amounts of debt from commercial lenders in order to create debt securities, which they then sold to investors all around the world. Later, in the mid-2000s, they began to purchase larger and larger amounts of comparatively risky subprime home-mortgage debt in order to entice investors with higher interest payments.
