default class methods can be given too general a type as GHC tries to share them between instances

GHC does not accept this program:

class Baz v x where
   foo :: x -> x
   foo y = y

instance Baz Int Int

even though it does accept this one:

class Baz v x where
   foo :: x -> x
   foo y = y

instance Baz Int Int where
   foo y = y

I can't find an explicit answer in the report, but I think both should be accepted.

The tc199 test says, in a comment,

This code defines a default method with a highly dubious type,
because 'v' is not mentioned, and there are no fundeps

However, arguably the instance declaration should be accepted,
beause it's equivalent to
 instance Baz Int Int where { foo x = x }
which *does* typecheck

GHC does not actually macro-expand the instance decl.  Instead, it
defines a default method function, thus

 $dmfoo :: Baz v x => x -> x
 $dmfoo y = y

Notice that this is an ambiguous type: you can't call $dmfoo
without triggering an error.  And when you write an instance decl,
it calls the default method:

 instance Baz Int Int where foo = $dmfoo

I'd never thought of that.  You might think that we should just
*infer* the type of the default method (here forall a. a->a), but
in the presence of higher rank types etc we can't necessarily do
that.