One of the mysteries of the English language finally explained.
Lack of incentive to guard against risk where one is protected from its consequences, e.g. by insurance.
- ‘He is creating moral hazard by making investors think that investment risks are minimized simply by skimming an independent stock research report.’
- ‘For example, if moral hazard is associated with deposit insurance, the greater risks banks take may demand stronger preventive techniques.’
- ‘The recent history of the credit system can be thought of as the evolution of increasingly successful methods of reducing the risk premium caused by hidden information and moral hazard.’
moral hazard/ˈmôrəl ˈhazərd/
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