MORAL HAZARD SMORAL HAZARD: Why the Moral Hazard Argument is Dumb!
Isn’t it funny how the Bankers, Civil Servants, Accountants, Auditors, Politicians who caused the current financial crisis are the ones arguing against the necessary steps to stop the bleeding?
Moral hazard, while real sometimes and in some places, is vastly overrated as an effect.
Granted, it’s seductive in the same way that risk homeostasis is — the notion that, for example, people drive faster and take more risks because they have seatbelts — but like risk homeostasis, moral hazard is vastly over-diagnosed.
People don’t project five years into the future and say, “Leverage up, boys and girls. We’ll either make a lot of money now, or be bailed out later.”
Real people in real situations don’t think that way. Matter of fact, if anything, they’re short-sighted in that regard to a fault.
http://www.cato.org/pubs/journal/cj29n1/cj29n1-12.pdf See below for an extract.
My question who failed who!
Isn’t it funny how the Bankers, Civil Servants, Accountants, Auditors, Politicians who caused the current financial crisis are the ones arguing against the necessary steps to stop the bleeding?
Moral hazard, while real sometimes and in some places, is vastly overrated as an effect.
Granted, it’s seductive in the same way that risk homeostasis is — the notion that, for example, people drive faster and take more risks because they have seatbelts — but like risk homeostasis, moral hazard is vastly over-diagnosed.
People don’t project five years into the future and say, “Leverage up, boys and girls. We’ll either make a lot of money now, or be bailed out later.”
Real people in real situations don’t think that way. Matter of fact, if anything, they’re short-sighted in that regard to a fault.
http://www.cato.org/pubs/journal/cj29n1/cj29n1-12.pdf See below for an extract.
My question who failed who!