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Moral hazard is an economics term.
It has a variety of accepted meanings, but most commonly
refers to the fact that people may take undue risks if others
will bear the consequences if things do not go well.
For example, people who have purchased fire insurance
policies for their houses may not be as vigilant in
preventing fires as those who have no such insurance.
Insurance company's attempt to mitigate the moral hazard
problem by doing things like requiring deductible payments
by the homeowners, and giving discounts if homeowners
install fire alarms.
The term moral hazard has been all over the news lately
because it arguably has a lot to do with how current
economic problems came about, and how we should try to
remedy them.
Many believe, for example, that Wall Street banks took
unwise gambles knowing that they were too big to fail, and
suspecting that the government would bail
them out if they faltered.
And it did bail out some of them.
Those may be examples of moral hazards.
The risks were taken by the banks, but the consequences
fell upon the taxpayers.
Today, the government is pressuring bankers to
renegotiate the terms of home loans that are delinquent.
That is likely to cause at least some homeowners to stop
paying on their loans, even if they can, in order to qualify
for the new, better deals.
That would be another example of moral hazard in action.