Talk:Moral hazard

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This article was the subject of a Wiki Education Foundation-supported course assignment, between 21 January 2020 and 30 April 2020. Further details are available on the course page. Student editor(s): Aely-Aronoff.

Above undated message substituted from Template:Dashboard.wikiedu.org assignment by PrimeBOT (talk) 04:27, 17 January 2022 (UTC)

Arson

"Many, perhaps most, police investigations of arson are the result of leads from suspicious insurance adjusters." I'm curious - where was this taken from? I'm not doubting its validity, just pondering upon the origins of its source.

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I do not understand. Please give an example of a moral hazard.

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Re: "It could be argued along the same lines that military spending increases the risk of war." I don't see this logic, and don't see how it fits under moral hazard. It would make sense if (a) the military was given money based on how many wars it fought, and (b) it was the military which decided whether to go to war. But (a) is not what is said-- it's not military spending that matters, but rather the tying of spending to war (in the same way that welfare is tied to number of children); to illustrate, even if military spending were presently zero, the incentive for war would exist. As for (b), it is just false. The military is given orders by the government, not vice versa. The exception would be the case of a military gov't, but in that case it pretty much can take as much money as it wants anyway. Perhaps one could argue that the military once deployed might try to provoke a greater conflict to get more money, though this really seems a stretch. I think this example needs to be struck or greatly retooled. -- VV 21:39, 19 Sep 2003 (UTC)

The purchase of weapons is a sunk cost that removes or reduces one disincentive to belligerent and provocative behaviour. We got all of these bombs and guns lying around. Do we just let 'em rust, or do we shoot something? OTOH, if they weren't already stockpiled, they would have to first be acquired before a belligerent plan could be carried out. So even if the army is not paid on a piecework basis, and even if it is civilian leaders who decide whether to go to war or not, the purchase of weapons still creates a moral hazard of warlike activity. -- Smerdis of Tlön 23:53, 19 Sep 2003 (UTC)

I agree that the military example is misleading. Military expenditure facilities perverse behaviour, but doesn't induce it. I think the inducement is the critical component of moral hazard. -- RyanCastle

^ That's so incorrect on a number of levels.

moral hazard vs morale hazard

In the insurance field, morale hazard can better be seperated from moral hazard, according to a textbook written by Rejda, George E., Principles of Risk Management and Insurance.

Moral hazard refers to dishonesty. For an example taken from the article, if someone is operating a failing business and decides that they'd rather have the cash from the insurance proceeds on the buildings, the term moral hazard is used.

morale hazard refers to carelessness due to presence of insurance protection. Example taken from the article would be automobile driver (with insurance protection) drive less cautiously.

Trump economics in 2025

Can a section be added, analyzing Trump’s 2025 economic policies in terms of Moral Hazard. 88.97.108.45 (talk) 16:21, 30 April 2025 (UTC)

This article should be about the general concept rather than its economic sub-species

Example: Linda is an alcoholic who is 11 days sober, but beer is being served at her neighbors' cookout. If Linda attends the cookout, being forcibly exposed to extra temptation would constitute a moral hazard.

Example: Don is a kleptomaniac who was recently caught and found guilty but didn't have to serve jail time so long as he keeps his record clean for some years. His uncle would like to hire someone to work in his antiques warehouse, but he doesn't mention the opening to Don because he doesn't have confidence Don would be able to resist the temptation to steal from him, and he would hate to see Don go to prison if the theft led to Don getting caught (e.g. while trying to fence the hot items).

Example: Kris is a college student who is taking an exam on the web. Suddenly, their web browser shows them a Homework Tool that offers to answer all the exam questions for Kris. The web browser has created a moral hazard by smuggling a cheating tool into an academic test, which would otherwise have been very difficult for Kris (or any other student), and which Kris (and the browser vendor) have very good reason to believe would be expressly forbidden if the teacher had even known it existed.

None of these examples are about business purchasing assets from each other or exploiting weaknesses in corruptible financial institutions. The niche field of Finance has absolutely supplanted the general concept of "moral hazard," which does a tremendous disservice to people coming of age in 2025. I think this article should be rewritten to center the general concept, with the economic subspecies spun off as such. — Preceding unsigned comment added by 50.33.26.150 (talk) 22:51, 21 September 2025 (UTC)