The situation of the “Too Big to Fail” banks can be analogized to the situation of a plagiarist facing the following alternative.
If he plagiarizes and doesn’t get caught, he gets an A and looks like a genius.
If he plagiarizes and does get caught, he fails the assignment but then gets extra credit to cover the gap in his grade. What’s more, the extra credit is docked from the points that the honest students had earned up to that point. And finally, he gets to write a really harsh evaluation at the end of the term.
3 thoughts on “Moral hazard: an academic illustration”
Plagiarists can pass your courses!? No student I’ve ever caught has passed.
Revised scenario: Plagiarizes, gets caught and fails the class; appeals the grade and, to rectify the situation, someone who initially passed the course fails in order to allow the plagiarist to pass–after all, we need a regular distribution of marks. He can still write his evaluation and, if he wishes to take it to the media, go to ratemyprofessor.
The second scenario is entirely hypothetical.
What if he planned to get caught?, knowing scenario two is real ánd the one that maximizes his profit.
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