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Article: The gospel according to moral hazard
- Article from:
- The Boston Globe (Boston, MA)
- Article date:
- March 21, 2008
- Author:
CopyrightCopyright 2008 The Boston Globe. Provided by ProQuest LLC. (Hide copyright information)
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I DON'T know too many economists who get confused with preachers.
But there are times when they talk about virtue and temptation as if
they were free-market holy rollers.
Consider the phrase that has been popping up all over the Bear
Stearns debacle: "moral hazard." No, Moral Hazard is not the name of
a country-western singer. It's the phrase economists use to explain
why people shouldn't be protected from the consequences of their
actions. In The Wall Street Journal's definition, moral hazards are
"the distortions introduced by the prospect of not having to pay for
your sins."
The idea began as an argument against insurance. If you had fire
insurance, you would be careless around matches. ...