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KNIGHT'S “MORAL HAZARD” THEORY OF ORGANIZATION
Author(s) -
BARZEL YORAM
Publication year - 1987
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1987.tb00726.x
Subject(s) - knight , moral hazard , economics , excursion , positive economics , hazard , mathematical economics , microeconomics , incentive , chemistry , physics , organic chemistry , astronomy , economic growth
In this paper I suggest that besides Knight's well recognized “uncertainty” explanation of the firm, he had another one. “Moral hazard” is the central feature in the second, largely overlooked theory. I argue, and attempt to document, that this theory is not a chance excursion but is rather quite well developed by Knight.