moral hazard

6 7.2

Someone takes more risk because they are safe from losses, often because of insurance

noun
/ˈmɔrəl ˈhæzərd/

Specialized

: riesgo moral

Many experts believe that the government's intervention in the economy may lead to a significant moral hazard among large corporations.
moral hazard problem
create a moral hazard
moral hazard and adverse selection

In the case of Chinese lending markets, moral hazard underpins everything.

Autoplay Next

Examples

Now there is, I think, growing concern that there's quite a bit of moral hazard in the workers comp program.
I think the more insidious impact of moral hazard is on the creditors and lenders.

Blog text (8)
Of course, there is a lot of moral hazard built into government actions as well.

Blog text (2)
These are efforts to solve the moral hazard problem and to manage risks.
In addition, it can create a moral hazard problem with respect to controlling government spending.

Academic text (1997)
So here's a model, a simple model of moral hazard investment choices.
The OBR scheme reduces moral hazard while enabling the financial system to continue to function during a crisis.

Academic text (2016)
As a result of this moral hazard problem, the expected costs of contamination are not minimized.

Academic text (1995)
Among the better-known impediments to effective top-down control are "moral hazard" and "information asymmetry."

Academic text (2014)
Researchers examining special servicers identify the determinants of foreclosure workout strategies and examine the moral hazard problem.

Academic text (2016)

Surface Forms

moral hazard singular

moral hazards plural

Morphology

moral + hazard

The constituents 'moral' (ethical) and 'hazard' (risk) give a clue that the phrase concerns risky or problematic behavior, so a learner can guess something about risk and behavior. However, the specific economic sense — that people take greater risks because they are protected from consequences (e.g., by insurance) — is a specialized, non-obvious inference not directly derivable from the words alone, so prior exposure or explanation is usually needed.

Etymology

The term moral hazard comes from old insurance talk: moral here means a person's behaviour and hazard means a danger or 'risk'. If someone is 'protected' by insurance or a bailout, they may act less carefully and take more risks, so the phrase means 'a situation where protection makes people take more risks'.