moral hazard and moral torture-World Credit Organization

1.8 Moral hazard and moral torture

1.8.1 Moral hazard

Moral hazard is a concept commonly used in management and economics. It refers to the possibility that an organization (referring to a unit or individual, the same below) will cause loss of interests to others or society due to violation of morality. Moral hazard often arises from asymmetric information, asymmetric rewards and punishments, and asymmetric rights and responsibilities.

For example: Zhang San entrusts Li Si to buy 10 tons of flour, and he pays Li Si at the price of 2,000 yuan per ton, because Zhang San does not know the quality and price of flour, so when Li Si buys flour, he You can deliberately buy 1,800 yuan/ton of low-quality flour in violation of morality, and ask the merchant to issue an invoice at 2,000 yuan/ton. If Li Si violates morality, he will receive 2,000 yuan of improper income. 2,000 yuan is a moral hazard for Zhang San. Because of the asymmetry of information about the price and quality of flour between the principal and the trustee, it brings moral hazard to the principal.

Another example: an investment broker on Wall Street in the United States recommends to customers to buy a financial derivative product. If the financial derivative product appreciates after the customer purchases, the broker can get a high commission reward. If the financial derivative product loses money Also, the broker will not lose or suffer less loss. Under such trading conditions, investment brokers can violate ethics and recommend as many financial derivatives as possible to clients in pursuit of high commission rewards. In fact, when many investment brokers do this, they no longer pay attention to The value of financial derivatives itself encourages customers to buy financial derivatives crazily, and financial derivatives are pushed up, forming bubbles. After the bubble burst, the 2008 international financial crisis was formed. Because there is an asymmetry of rewards and punishments for brokers, it brings moral hazard to investors.

Another example: In some units in our country, some leaders have power but no responsibility; some leaders have responsibility but no right. This is an asymmetry of power and responsibility. Therefore, these units with power and responsibility asymmetry, accidents occur frequently.

1.8.2 Moral torture

Moral torture is a new concept put forward by the World Credit Organization (WCO) in integrity management. It is caused by moral hazard (whether to abide by morality and give up improper benefits, or violate morality to obtain improper benefits) psychology conflict.

People have a moral standard (whether the standard is high or not, people have the nature of pursuing justice) and consciously abide by it. When the system is flawed, if people violate their own moral standard, they can get illegal or illegal legitimate interests, and the chances of being discovered or held accountable are very small. In this case, people will face a dilemma, that is, the choice of whether to abide by morality or obtain illegal (or improper) interests. This choice makes people feel Pain, the World Credit Organization (WCO) calls this kind of psychological conflict moral torture, which is the product of the conflict between normal self-interest in human nature and human moral standards.

A person faces moral torture. If he chooses to abide by morality, he will not be reconciled to the benefits he can get. If he finds that other people have obtained such benefits, he will feel even more psychologically unbalanced; if he chooses Gaining illegal (or improper) benefits by giving up morality, he will have anxiety caused by guilt or fear. After this anxiety intensifies, he will become numb and empty, without happiness, and he will seek stimulation to obtain Happiness, but only superficial happiness and no real happiness. In addition, those who fall into moral torture and choose illegal (or improper) interests, in order to increase their sense of security, will hope and guide others to make the same choice, but this behavior will conflict with their moral standards again. While feeling safe, it greatly reduces the sense of accomplishment and happiness. In short, when people encounter moral torture, whether they choose to abide by morality or choose to obtain illegal (or improper) benefits, it will make people feel pain or anxiety, and affect their sense of happiness and achievement. In the face of moral torture, the higher the moral standard of the self, the greater the pain or anxiety.

The above content is excerpted from "Introduction to ICE8000 Credit Knowledge" (written by Fang Bangjian, free to use, but please indicate the source)