Morally hazardous

The term “moral hazard” is used in economic circles. Here it is: “The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles.” It is the last part of the definition that has gained some popularity, usually amongst conservatives.

The example of moral hazard is taking out an insurance policy. Since your car is insured against theft, for example, you may not be as careful securing it when parked as you would be if you had to pay for the cost of replacement yourself. So now extend this to the health care debate: people will be careless with their health if they are insured because someone else will pick up the medical bills.

This insight leads some to the philosophical position they already hold, namely, people do best when fully responsible for their own actions. When government gets involved, there is less personal responsibility. Or, as they have it, people are less virtuous when there is a safety net.

This is a sophisticated rationale for the conservative economic agenda since Reagan. Moral hazard has little to do with morality and much to do with moving forward an ethical position in which compassion and care for the less fortune is taken out of the realm of public care and thrown back onto the needy themselves.

All this while the super-wealthy 1% of much of America’s wealth, the gap between the super-wealthy and the rest grows, the middle-class slips downward and the rich are subsidized by the government and bailed out by everyone else.


5 thoughts on “Morally hazardous

  1. You’re quite right in parts of this and quite wrong in others.

    The major flaw in your premise is that you’re ignorant of- or choosing to discount the proven fact that Conservatives donate far more to NGO charities (5x as much I think) than Liberals do.

    We Conservatives certainly compassion and care for the less fortunate, but we DO want it taken out of the realm of “public care” which means government entitlements and “mandatory compassion.”

    The Liberals are the ones putting forward an ethical position in which being a recipient of “compassion” and “care” is an entitlement / right of the less fortunate instead of voluntary act of charity by the more so.

    Ask and you may well receive. Demand and you’ll get nothing that you’d want and possible a whole lot more of what you don’t…

    • No doubt many conservatives are generous (I don’t know the statistics about whether liberals or conservatives donate more), and I don’t doubt that many are also compassionate. My point is that the theory of moral hazard is used as a justification for not having government programs to aid those in need.
      The political question is whether government or private aid is most effective in addressing these imbalances. Liberals fall on the side of government, conservatives on the side of private assistance.
      Let the argument focus here and not use what appears to be an objective theory applied here. Especially one that co-opts the use of what should be an honorable word, “moral.”
      The fact remains that the wealth gap is growing and leaving many behind. This is wrong as a matter of principle and consequence. Liberals and conservatives can disagree about how to best address this. But I don’t see how anyone concerned with morality can ignore it.

  2. In response to:

    The fact remains that the wealth gap is growing and leaving many behind. This is wrong as a matter of principle and consequence. Liberals and conservatives can disagree about how to best address this. But I don’t see how anyone concerned with morality can ignore it.

    I don’t ignore it; I actively refute that it’s a problem.

    Money in any society with fiat currency is not a zero-sum equation and money does not directly equate to wealth.

    In America the gap in money has increased between the “rich” and “poor” but the “poor” have not experienced a reduction in wealth during the course of this that is any greater in proportion to the loss suffered by the “rich.”

    • Morality and psychology don’t always fit together. But the link can’t be ignored either.
      Many people today feel poorer while they see others becoming wealthy beyond imagination. And the reality is that many are indeed poorer.
      Such conditions produce resentment and resentment causes social unrest.
      This isn’t a new insight. While some see this as class warfare (a derogatory term mostly), others view it as real problem for continued prosperity and happiness.

      • A complete view of morality encompasses social ethics. Personal rectitude is sufficient. Context matters.
        But so do personal values, attitudes and behaviors. We still must judge people individually even though they may all exist under similar social contexts. Some Nazis were worse than others, for example, and some Germans were rescuers.
        The distinction between individual and social ethics is like the argument over natures vs. nurture. Both sides of these equations interact with one another. Both are necessary for a complete view of human nature.
        The moralist who neglects social/political/institutional relations is short-sighted. And the person who only sees the social may turn out to be the person who neglects/sacrifices close relations for the sake of the greater good.

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