Knight’s 'Moral Hazard' Theory of Organization
Economic Inquiry, Vol. 25, No. 1, 1987
Posted: 30 Aug 2012
Date Written: January 1987
In this paper I suggest that besides Knight's well recognized "uncertainty" explanation of the firm, he had another one. "Moral hazard" is the central feature in the second, largely overlooked theory. I argue, and attempt to document, that this theory is not a chance excursion but is rather quite well developed by Knight.
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