https://cuicaihao.github.io/tags/moral-hazard/Recent content in Moral Hazard on C.CUI's LogHugoen-AUFri, 12 Jun 2026 07:00:00 +1000https://cuicaihao.github.io/posts/2026-06-12-soft-budget-constraint-when-a-safety-net-exists-accountability-distorts/Fri, 12 Jun 2026 07:00:00 +1000https://cuicaihao.github.io/posts/2026-06-12-soft-budget-constraint-when-a-safety-net-exists-accountability-distorts/This post delves into the concept of “soft budget constraint,” where the expectation of a bailout distorts accountability and encourages risky behavior. It uses examples ranging from personal debt and corporate overspending to state-owned enterprises and the “too big to fail” financial institutions. The article explains how a perceived safety net undermines budget discipline, leading to a dynamic commitment problem where initial promises to withhold aid are often broken.