How to think about moralhazard during a pandemic

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COVID-19 CONFRONTS humanity with a host of testing moral decisions. When hospital capacity is limited, which patients should get access to life-saving equipment? For how long should virus-limiting restrictions on public activity remain in place, given the immense cost of such measures? To this list, some add another: how generous should public assistance to struggling households and firms be, when such aid could encourage the abuse of state-provided safety-nets? Worries like these, concerning what social scientists call moral hazard, have been relatively muted during the pandemic, and appropriately so. But hard questions about risk and responsibility cannot be put off for ever.

Moral hazard describes situations in which the costs of risky behaviour are not entirely borne by those responsible for that behaviour, so encouraging excessive risk-taking in the future. A fire-insurance...



via The Economist: Finance and economics Business Feeds

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