The expression "moral hazard" is frequently used today to describe economic decisions that have been influenced by government programs. It's generally recognized that with a government policy that insulates against risk, individuals might react differently than they otherwise would have. These changes in behavior are sometimes subconscious and seem natural, yet the consequence turns out to be hazardous to all parties involved.
Our society and economic system is now engulfed with moral hazard and its many serious unintended economic consequences.
Ron Paul explains the historical and modern usage of the term, and clarifies that this chapter means to focus on the immorality caused by moral hazard, something he remarks is usually absent from conventional usage of the term.
He relates how moral hazard is very directly related to the cause of the housing boom and subsequent bust, yet Congress' Financial Crisis Inquiry Commission, which he refers to as "The New Pecora Commission", didn't even ask anyone who predicted the calamity:
A solution can't possibly be found by talking only to the people whose policies caused the disaster and who never anticipated the crisis.
Do read in full.
The government is now expected to protect us from ourselves. This should be offensive to anyone who loves liberty.
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