Skin in the game prevents dangerous individuals from hurting others. It does so in two ways. First, it incentivizes them not to do anything dangerous. Second, if they do, it prevents them from doing it again. Skin in the Game
It is not incentives that provide skin in the game, but irreversibility. Skin in the Game Incentives
Skin in the game prevents dangerous or ineffective behaviors from spreading. It ensures that frauds, charlatans, and incompetents are quickly filtered out of the pool of experts that people imitate. Skin in the Game Mimetic
Decision-makers who can take short-termed decisions without being affected by their long-term consequences take excessive risks. This condition is called moral hazard. Moral hazard happens when someone has incentives to increase an entity’s exposure to risk because he won’t bear the full cost of that risk. The condition of suffering the consequences of one’s actions, skin in the game, is the opposite of moral hazard. It incentivizes people to make decisions that are good for them and others. As such, it helps protecting populations. Risk Moral Hazard Skin in the Game Nassim Taleb
The idea of electing representatives of the periphery to become part of the center was supposed to solve the problem. It would, in theory, but only if the representatives were true members of the periphery and, after a short mandate, had to come back and be a member of the periphery again. Skin in the Game