Scientific Definition
Originators paid on volume, not on default rates.
Plain-English Definition
Originators paid on volume, not on default rates.
Feynman Explanation
Liar loans were a perfectly rational career strategy.
Core Principle
Originators paid on volume, not on default rates.
Mechanisms
Pending editorial review.
Originators paid on volume, not on default rates.
Pending editorial review.
Pending editorial review.
Risk passed downstream creates a market for bad loans.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
Liar loans were a perfectly rational career strategy.
Examples
- Subprime mortgage origination boom.
- Risk passed downstream creates a market for bad loans.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Originator skin-in-the-game requirements.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Originator skin-in-the-game requirements.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
Originators paid on volume, not on default rates, fueled the subprime collapse.
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Auditors paid by the firms they audit have predictable blind spots.
Quarterly bonuses create end-of-quarter behavior changes.
Government rescues of failing institutions privatize gains and socialize losses.
Issuers pay raters who compete for the highest ratings.
Quarterly earnings drive quarterly behavior.
Percentage-of-AUM fees reward gathering assets regardless of net performance.
EPS-targeted comp incentivizes buybacks even when reinvestment yields more.
Candidates dependent on large donors become structurally responsive to donor priorities over voter priorities.
Discount framing nudges people to buy things they wouldn't otherwise want.
Productivity targets compress visits, raising misdiagnosis and burnout.