A model intervenes: the many faces of moral hazard

John Latsis and Constantinos Repapis

Cambridge Journal of Economics, 2014, vol. 38, issue 4, 743-760

Abstract: This article builds on advances in social ontology to develop a new understanding of how mainstream economic modelling affects reality. We propose a new framework for analysing and describing how models intervene in the social sphere. This framework allows us to identify and articulate three key epistemic features of models as interventions: specificity, portability and formal precision. The second part of the article uses our framework to demonstrate how specificity, portability and formal precision explain the use of moral hazard models in a variety of different policy contexts, including worker compensation schemes, bank regulation and the euro-sovereign debt crisis.

Date: 2014
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