ARBUS202 Lecture Notes - Lecture 5: Social Actions, Moral Hazard
16 Feb 2017
School
Department
Course
Professor
Document Summary
The perils of group work: moral hazard, free-rider problem, end-justify-means thinking, seductive thinking, unhealthy competition, i"m not a chump! The solution shields the agent from the full consequences of their actions, thereby incentivizing more of the same problematic behaviour. Thinking clearly about moral hazard requires us to distinguish between prudential reasons and ethical reasons. Coming up with a solution requires prudential reasoning. How we respond to the change in incentives if often a matter of ethics. How we respond to people who have been tripped up by moral hazard is also a matter of ethics. Situation in which each individual does what is in their self interest and collectively every individual collectively is worst off for it. Use everything but don"t pay for it. Every instance in free-rider is a moral hazard. When working in a group, increases your desire to slack off. Moral hazard and free-rider problems are very similar.
