Hazardous immorality: strategic externalization of risk and credit pricing
Purpose – The purpose of this paper is to examine the risks caused by “hazardously immoral” contracts which force external parties to bear significant losses without their consent.Design/methodology/approach – The expectation of substantial future losses raises the question of how investors can become profitable by entering into such risky contracts. The authors investigate the use of such contracts, which obscure the expected cost of failure by not only concentrating risks but ultimately not taking routine charges for predictable, albeit uncertain, future losses. In their investigation, the authors look at a risk concentration strategy and discuss expected profits (losses) under conditions of limited and unlimited liability.Findings – It is found that companies are more likely to minimize losses and maximize profits if they can obtain credit at a low enough interest rate and externalize the majority of the risk. Risks are more likely to be externalized when government and/or international agencies bail o...
The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron
Lunch on a silver platter "Please keep making us millions" "We were the Apostles" the first prima donna guys with spikes the Empress of Energy the 15 percent solution a recipe for disaster the Klieg-Light Syndrome the Hotel Kenneth-Lay-a Andy Fastow's secrets the big enchilada "An unnatural act" the beating heart of Enron everybody loves Enron when pigs could fly gaming California bandwidth hog "Ask why, asshole" "I want to resign" the $45 million question "We have no cash!" epilogue - isn't anybody sorry?
Definitions of efficiency
This is the third in a series of occasional notes on economics

Decision makers are increasingly faced with the challenge of reconciling growing demand for health care services with available funds.1 Economists argue that the achievement of (greater) efficiency from scarce resources should be a major criterion for priority setting. This note examines three concepts of efficiency: technical, productive, and allocative.

Efficiency measures whether healthcare resources are being used to get the best value for money.1 Health care can be seen an intermediate product, in the sense of being a means to the end of improved health. Efficiency is concerned with the relation between resource inputs (costs, in the form of labour, capital, or equipment) and either intermediate outputs (numbers treated, waiting time, etc) or final health outcomes (lives saved, life years gained, quality adjusted life years (QALYs)). Although many evaluations use intermediate outputs as a measure of effectiveness, this can …