Scientific Definition
Originators paid on volume, not on default rates, fueled the subprime collapse.
Plain-English Definition
Originators paid on volume, not on default rates, fueled the subprime collapse.
Feynman Explanation
If the loss is downstream, the loan looks great.
Core Principle
Originators paid on volume, not on default rates, fueled the subprime collapse.
Mechanisms
Pending editorial review.
Originators paid on volume, not on default rates, fueled the subprime collapse.
Pending editorial review.
Pending editorial review.
Risk passed downstream creates markets for bad loans.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
If the loss is downstream, the loan looks great.
Examples
- Liar loans during the subprime boom.
- Risk passed downstream creates markets for bad loans.
Pending editorial review.
Famous Experiments
Pending editorial review.
Design Principles
- Originator skin-in-the-game. Risk retention rules.
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. Risk retention rules.
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.
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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.