economic discussion 8

Apply the concepts of moral hazard and adverse selection to a situation from your professional life. Explain the situation and how it was resolved.

As you review the concept of moral hazard from your professional life, consider application to your current or a future career field you are pursuing. In the recent economic downturn, the concept was applied to the level of risk taken by many firms with the sub-prime mortgages that led to the housing crisis. Banks taking risk never contemplated the financial impacts of housing prices declining relative to the bundling of mortgages that were sold to insurance companies that secured such risk practices. How does this apply to your professional life and the business model you are currently engaged in?

Reference:

(n.d.). Retrieved from http://www.newyorker.com/business/james-surowiecki/moral-hazard-and-the-crisis

 

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