Tagged: Moral Hazard

Information Asymmetry

Information asymmetry: The battle for data

One key element that affects how people behave in different situations is the information they have about the issue. But, generally speaking, people do not possess same levels of information. This difference in the amount of information between two parties is known as information asymmetry. In business transactions, this asymmetry...

Moral Hazard

Support for bad banks also raises the specter of what economists call moral hazard. If bankers know that the central bank will lend cheaply when liquidity runs dry, they needn’t take care to avoid crises in the first place. In 1873, The Economist’s editor-inchief Walter Bagehot described the danger this...