What is Moral Hazard?
Answer:
Just a guess, but I think that it would be any temptation placed before someone that might cause them to violate their and society's perception of moral correctness. For instance the temptation of skimming some money off of large seizures by narcotics officers would be a moral hazard.
Of what?
The term moral hazard is used in economic and ethical theory to describe a situation where a person or entity does not bear the full adverse consequences of an action that he/she/it undertakes.
For example, one might argue that a system of national health insurance (where health care is entirely paid for by taxes) creates a moral hazard because people might then take more risks with their health (like smoking, excessive use of alcohol, etc.) if they know that the government is going to pick up their healthcare costs.
Also, with respect to the savings & loan crisis in the 1980's, some believe that the fact that the federal government insures savings deposits (up to a certain amount) created a moral hazard in that such insurance gave savings & loan institutions an incentive to make riskier loans.
dcdc1211 I think knows what he's talking about but I have to answer anyway...
It is when that Angelina Jolie look alike walks by and your wife is standing beside you... Ouch.
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