ARBUS202 Lecture Notes - Lecture 10: Cut Blocking
28 Aug 2018
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Social action problems in real life: moral hazard, free rider problem, ends justify the means, seductive thinking, unhealthy competition, i am not a fool. Bill cli(cid:374)to(cid:374)"s dri(cid:448)e to i(cid:374)(cid:272)rease ho(cid:373)eo(cid:449)(cid:374)ership (cid:449)e(cid:374)t (cid:449)ay too far. People ha(cid:448)e (cid:373)ortgage, (cid:271)a(cid:374)k do(cid:374)"t (cid:449)a(cid:374)t to keep (cid:373)o(cid:374)ey tied i(cid:374) (cid:373)ortgage, so they sell the (cid:373)ortgages for more money. So banks started giving ninja loans: loans without assets, no income, no job. In a few years, they jack their payments of interest up! This creates a price bubble in the price of houses. But then people default on their loans, so everyone is selling their house. All the people that invested in the house made a bad investment. Moral hazard: they tried to solve the problem of people not having homes, this lead to incentive to give easy loans. This led to problem of people not having even more houses. Priso(cid:374)er"s dile(cid:373)(cid:373)a: you do(cid:374)"t (cid:449)a(cid:374)(cid:374)a lose your o(cid:449)(cid:374) (cid:271)usi(cid:374)ess.
