It distorts and confuses the information and incentives that consumers, entrepreneurs, savers and investors rely on to make their economic  3 See Bank of Canada, “Box 3: Scenario with a wage-price spiral,” Monetary Policy Report (July 2022): 25. -9decisions. That means workers and businesses have less to show for their work, and it’s harder for everyone to plan for the future.
One of the causes of the subprime bubble is the pay structure adopted by financial institutions in launching subprime products. During the subprime cycle, most financial institutions pursued a compensation scheme which gave incentives to all personnel involved in the subprime products to chase after high income through risky trading, launching risky products that generally provided higher rates of return.