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The common interest is overwhelming and moral hazard seems to be a small price to pay. It is surprising how little abused these safety nets are as Stephane Pallage and Christian Zimmerman of the Center for Research on Economic Fluctuations and Employment in the University of Quebec note in their paper "Moral Hazard and Optimal Unemployment Insurance".
Markets are perceived as self-organizing, self-assembling, exchanges of information, goods, and services. Adam Smith's "invisible hand" is the sum of all the mechanisms whose interaction gives rise to the optimal allocation of economic resources. The market's great advantages over central planning are precisely its randomness and its lack of self-awareness.
Such an agency will be nothing if not the embodiment, the materialization of one of the rules, a move in the players' strategies, leading them to more optimal or superior outcomes as far as their utility functions are concerned. Bargaining inevitably leads to an agreement regarding a decision making procedure.
The future of the Internet in general I see as becoming more popular and yet more fraught with conflict over the growth of commercialism and the perception that the Net's devolutionary spirit has been undermined. There will also be a need to deal with a glut of information already we see Internet search engines reinventing themselves to try to provide a more optimal and efficient portal."
Martin Gaynor, Deborah Haas-Wilson, and William Vogt, cast in doubt the very notion of "abuse" as a result of moral hazard in their NBER paper titled "Are Invisible Hands Good Hands?": "Moral hazard due to health insurance leads to excess consumption, therefore it is not obvious that competition is second best optimal.
This multiplication of wherewithal falsified all apocalyptic Malthusian scenarios hitherto. Operations research, mathematical modeling, transparent decision making, free trade, and professional management help better allocate these increased resources to yield optimal results. Markets are supposed to regulate scarcity by storing information about our wants and needs.
In 1991, the Gulf War came close to presenting the nearly optimal situation for prosecution to a decisive and irreversible conclusion. Such a course, however, was not politically feasible because it would have shattered the allied coalition while exceeding the authority of the UN mandate.
The obvious answer is that A can never motivate B not to follow B's self-interest never mind what the incentives are. That economists pretend otherwise in "optimal contracting theory" just serves to demonstrate how divorced economics is from human psychology and, thus, from reality. Managers will always rob blind the companies they run.
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