Moral Hazard

In law and economics, moral hazard is the name given to the risk that one party to a contract can change their behaviour to the detriment of the other party once the contract has been concluded.

The most well known examples of moral hazard come from insurance. Fire insurance gives people an incentive to commit arson, especially if they are operating a failing business and decide that they'd rather have the cash from the insurance proceeds on the buildings than the buildings themselves. Many, perhaps most, police investigations of arson are the result of leads from suspicious insurance adjusters. Moral hazard appears in other insurance related areas as well: automobile insurance makes it safer for people to have accidents that cause injuries or property damage. Because of these hazards, actuaries are careful to avoid insuring any property for more than it is worth, or even for its replacement cost, and almost always require that there be a deductible, an initial up-front sum which the insured must pay out of his own pocket.

Moral hazard also appears in politics, especially as it regards welfare and similar programmes. The existence of unemployment insurance encourages people not to look for work; most such programmes require that the unemployed prove that they are seeking jobs, and some people will evade the intent of the rules by submitting sham applications for jobs they are unlikely to get. It has been argued, especially by political conservatives, that welfare payments to unwed mothers enourage children born out of wedlock. It could be argued along the same lines that military spending increases the risk of war.

See also: perverse incentive

Commercial Usage: Moral Hazard

Domain	Title
Books	Asymmetric Information, Efficient Resource Allocation and Moral Hazard in Capital Markets (reference) Can the Moral Hazard Caused by IMF Bailout be Reduced? Geneva Reports on the World Economy Special Report 1 (reference) Health Insurance: The Trade-Off Between Risk Pooling and Moral Hazard, December 1989 (R-3729-Nchsr) (reference) Moral Hazard of Social Benefits: A Study of the Impact of Social Benefits and Income Tax on Incentives to Work (reference) Reactive Risk and Rational Action: Managing Moral Hazard in Insurance Contracts (California Series on Social Choice and Political Economy, 6) (reference) (more book examples)
Source: compiled by the editor from various references; see credits.

Non-Fiction Usage: Moral Hazard

Subject	Topic	Quote
Economic History	Korea	The reforms aim at increasing transparency and investor confidence, and generally purging the sector of moral hazard, that is, the assumption that government would make good all losses and not permit large companies to fail. (references)
Trade	Korea	The result was high levels of non-performing loans in the Korean banking system, due to distortions in credit allocation due to government controls; limited risk-analysis; weak prudential oversight; tightly bound societal relationships; and moral hazard arising from the widespread belief that the government would make good any and all losses. (references)
Source: compiled by the editor from ICON Group International, Inc.; see credits.

Frequency of Internet Keywords: Moral Hazard

Modern Translation: Moral Hazard

Language		Translations for "moral hazard"; alternative meanings/domain in parentheses.
Danish		moralsk risiko. (various references)

Dutch		moreel risico. (various references)

Finnish		moraalinen riski. (various references)

French		risque moral. (various references)

German		moralisches Risiko. (various references)

Greek		ηθικός κίνδυνος. (various references)

Italian		rischio morale. (various references)

Japanese Kanji		モノカルボン酸 (dag coating containing molybdenum, mobile, mohair, Mohawk, Mohawk haircut, molybdenum, moment, momism, monaural, monaural record, monocarboxylic acid, monochrome, monoclonal, mono-fluorine, monogram, monograph, monographie, monolock, monologue, monomania, monomaniac, monomer, monopolize, monopoly, monorail, monosexual, monotone, monotype, moped, moral majority, moral pollution, moral risk, moral sense, moral support, morale, morale survey, moralist, morality, moratorium, Morris dance, person fond of using a mobile phone, unisex). (various references)

Japanese Katakana		モラルハザード . (various references)

Pig Latin		oralmay azardhay

Portuguese		risco moral. (various references)

Spanish		riesgo moral. (various references)

Swedish		moralisk risk. (various references)
Source: compiled by the editor from various translation references.

Anagrams: Moral Hazard

Scrabble® Enable2K-Verified Anagrams
	Words within the letters "a-a-a-d-h-l-m-o-r-r-z"
	-4 letters: armload, zamarra, zamarro.
	-5 letters: amoral, armada, dharma, hamada, hazard, holard, mahzor, mazard, ramrod.
Source: compiled by the editor from various references; see credits. SCRABBLE® is a registered trademark. All intellectual property rights in and to the game are owned in the U.S.A and Canada by Hasbro Inc., and throughout the rest of the world by J.W. Spear & Sons Limited of Maidenhead, Berkshire, England, a subsidiary of Mattel Inc. Mattel and Spear are not affiliated with Hasbro.

Alternative Orthography: Moral Hazard

Hexadecimal (or equivalents, 770AD-1900s) (references)

4D 6F 72 61 6C 48 61 7A 61 72 64

Leonardo da Vinci (1452-1519; backwards) (references)

Binary Code (1918-1938, probably earlier) (references)

01001101 01101111 01110010 01100001 01101100 00100000 01001000 01100001 01111010 01100001 01110010 01100100

HTML Code (1990) (references)

&#77 &#111 &#114 &#97 &#108 &#32 &#72 &#97 &#122 &#97 &#114 &#100

ISO 10646 (1991-1993) (references)

004D 006F 0072 0061 006C 0048 0061 007A 0061 0072 0064

Encryption (beginner's substitution cypher): (references)

Moral Hazard

Definition: Moral Hazard

Moral Hazard

Noun

Specialty Definition: Moral Hazard

Insurance

Specialty Definition: Moral hazard

Commercial Usage: Moral Hazard

Books

Non-Fiction Usage: Moral Hazard

Economic History

Korea

Trade

Korea

Frequency of Internet Keywords: Moral Hazard

moral hazard

Modern Translation: Moral Hazard

Danish

Dutch

Finnish

French

German

Greek

Italian

Japanese Kanji

Japanese Katakana

Pig Latin

Portuguese

Spanish

Swedish

Anagrams: Moral Hazard

Scrabble® Enable2K-Verified Anagrams

Alternative Orthography: Moral Hazard

4D 6F 72 61 6C 48 61 7A 61 72 64

01001101 01101111 01110010 01100001 01101100 00100000 01001000 01100001 01111010 01100001 01110010 01100100

&#77 &#111 &#114 &#97 &#108 &#32 &#72 &#97 &#122 &#97 &#114 &#100

004D 006F 0072 0061 006C 0048 0061 007A 0061 0072 0064

47818467782426792678470

INDEX

Domain	Definition
Insurance	A hazard caused by the insured's behaviour or by that of his family or employees, increasing the possibility of loss by reason of carelessness or dishonesty. Source: European Union. (references)
Source: compiled by the editor from various references; see credits.

Expression	Frequency per Day
moral hazard	15
Source: compiled by the editor from various references; see credits.