Qualification: The Credit Ratings Game
Bolton, Freixas, and Shapiro qualify Kaal's treatment of over-approval as moral hazard in the monitoring layer. Their model places the conflict inside the rating agency. The agency can understate credit risk to attract business, while issuers can purchase only favorable ratings. Rating inflation becomes more likely when reputation costs are lower or more investors accept ratings at face value. The monitor's verdict can therefore become more favorable even when the underlying risk remains unchanged. This correspondence supports Kaal's classification of over-approval as an incentive failure by the adjudicator rather than merely an error by the worker being evaluated. The comparison is bounded. Credit rating agencies evaluate securities, not LLM-generated task outputs. The source models reported credit risk rather than approval against a known task-level ground truth. It does not test Kaal's validation pool or establish any measured over-approval rate. It supplies an independently developed mechanism for favorable verdicts to decouple from the quality the monitor is expected to assess. Kaal's empirical application remains a separate proposition.
economicsrisk-and-incentivesconsensus-and-securityscholarly-growth-coveragescholarly-literaturedelegated-monitoringcredit-ratingsmoral-hazard