Moral hazard
道德风险
Consider a project requiring a fixed investment, “I” (to reach minimum efficient scale). The entrepreneur invests her entire net worth, “A” (< I) into the project, and borrows “I - A” from lenders. Standardise the loan from lenders as “1” (i.e., let “I - A” = 1), and let:
“E(ỹ)” represent the expected return from the project;
“R” represent the economy’s discount rate; and
“K” represent monitoring costs.
It is socially optimal to proceed with all investments that satisfy: E(ỹ) > R + K. [Note 1]
“Moral hazard” is the possibility that an agent will engage in behaviour that goes against the interest of the principal. In the context of financing lumpy investments, the agent is the entrepreneur and the principal are her lenders. Perhaps the entrepreneur receive private benefits that are not observable by the lenders, or perhaps the lenders only imperfectly observe realised returns (“y”). In either case, the lenders rely on the entrepreneur to report “y” truthfully, giving rise to the the prospect of misbehaviour or “moral hazard”.
The task for a social planner is to design a mechanism that induces the entrepreneur to report “y” truthfully. [Note 2] Otherwise, lenders will not lend and the project cannot be implemented even if it is optimal to do so.
*****************
Note 1: In Implementation Theory, the socially optimal decision is called a “social choice rule”.
Note 2: This is known as a “direct mechanism” in Implementation Theory. In a direct mechanism, optimal implementation must be “incentive compatible” - i.e., the mechanism induces truthful behaviour. See the posts (in this Substack journal) dated 7 March 2025 and 24 March 2025 for a discussion on “incentive compatibility” and “direct mechanisms”.
考虑一个项目，需要固定的投资“I”（以达到最小有效地规模）。企业家将其全部净资产“A”（< I)）投入到项目中，以及从贷方借入“I- A”。将贷方的贷款标准化为“1”（即让“I- A”= 1），并让：
“E(ỹ)”表示项目的预期回报；
“R”表示经济的折现率；
“K”表示监控成本。
社会最优的所有投资都会满足：E(ỹ) > R + K。[注1]
“道德风险”是指代理人可能做出违背委托人利益的行为。也许企业家获得了贷方无法观察的私人利益，或者贷方只能不完美地观察到现实回报（“y”）。无论哪种情况，贷方都依赖企业家如实报告“y”，从而产生不当行为或“道德风险”的可能性。
社会规划师的任务是设计一种机制，促使企业家 如实报告“y”。[注2] 否则，贷方不会放贷，项目无法实施，即使这样做是最优作出。
*****************
注1: 在实施理论中，社会最优决策称为“社会选择规则”。
注2: 在实施理论中，这被称为“直接机制”。在直接机制中，最优实施必须是“激励兼容的” - 即该机制诱导诚实行为。有关“激励兼容性”和“直接机制”的讨论，请惨阅2025年3月7号和2025年3月24号的帖子（在本Substack期刊中）。