Heavy Lifting - thoughts and web finds by an economist
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Wednesday, February 02, 2005

Is it really moral hazard if the actions aren't hidden?

Here is one of our Arlington city councilmen admitting on local Fox news that he wants to make Jerry Jones "the richest man on this earth" and if the stadium helps him do that, then so be it. The hidden message is that the rest of Arlington will get rich along with Jerry Jones, but I don't think it's gonna happen. I know that Bank of America won't give me a loan using my expected benefits as collateral.

Us sports economists have always thought that there was something fishy about the way local politicians are always lobbying hard for publicly funded stadiums, but we never had anyone bold enough to come right on out and say it. Well, now we have it.

It seems that this type of admittance takes us beyond the moral hazard (hidden action) portion of the principal-agent problem. I think this brings us to the vote-the-bums-out-of-office portion of the principal-agent problem. Unfortunately, the damage has been done - sales taxes are going up on April 1, property taxes will increase soon after that.

Note: Cross posted at Division of Labour

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