By now you must have heard about J.P. Morgan Chase’s $2 billion trading loss. You’ll also have heard the screams of outrage and the calls for more banking regulation. Maybe the regulation is part of the problem. But it’s not all of it: Not by a long way.
What you may not know is that at least part of the problem comes from what economists call “agency cost.” That’s the cost of having someone run the business who doesn’t own it.
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