What's So Moral about
the Moral Hazard?
by Benjamin Hale
A "moral hazard" is a market failure most commonly associated with
insurance, but also associated by extension with a wide variety of public
policy scenarios, from environmental disaster relief, to corporate bailouts,
to natural resource policy, to health insurance. Specifically, the term "moral
hazard" describes the danger that, in the face of insurance, an agent will
increase her exposure to risk. If not immediately clear, such terminology
invokes a moral notion, suggesting that changing one's exposure to risk
after becoming insured is morally problematic. This paper challenges that
position. It argues that there is nothing inherently moral about the moral
hazard. It does so by arguing against three proposed claims regarding
the wrongness of the moral hazard: first, the view that conceives of it as
deception; then, the view that conceives of it as cheating; and finally, the
view that conceives of it as stealing.