>But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations o

>But if we make it our social norm that bankruptcy is nothing to be ashamed of and to be taken lightly, won't it change the equilibrium for future generations of lenders and borrowers such that an inefficiently low amount of lending goes on? "Inefficient" is whatever the heck the market decides it is, subject to supply, demand, and risks. If we make it a social norm to take bankruptcy lightly, oh well, the efficient thing to do for markets is to factor that in. It has to be considered on moral grounds rather than economic ones.