Moral Hazard
In economic theory, moral hazard is a situation
in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the
risk. In short, since it’s not your money (or you’re not held accountable for your actions), you might take
more risks.
Moral hazard arises because an individual or
institution does not take the full consequences and responsibilities of its actions, and therefore has a tendency
to act less carefully than it otherwise would, leaving another party to hold some responsibility for the
consequences of those actions. For example, a person with insurance against automobile theft may be less cautious
about locking his or her car, because the negative consequences of vehicle theft are (partially) the responsibility
of the insurance company.
Other examples: Unemployment benefits, Welfare,
Disability insurance, Warranties, Gov’t bailouts (why should I look for a job or not lend to this person with no
credit history to buy a house when the US Gov’t will pay me or will bail us out).
Moral Hazard of
Marriage
Promise to endure all things for the sake of your
spouse and you’re giving him/her a free pass to do what he wants.
Two sides of Moral Hazard:
1) a world where you let yourself go completely, you assume your spouse will pick up
your socks, will always bail you out, and will never, ever abandon you. You don’t bother showing affection
(take for spouse for granted) and you settle into a comfortable indifference.
2) Paranoia. You never let down your guard, you clean up after yourself, and
you follow your spouse’s rules to the letter. You dote, you second-guess, you never provoke. You avoid
conflict entirely, out of fear that the minute you bring up tough topics your spouse will shut down the marriage
and walk away.
You wouldn’t want a marriage devoid of moral
hazard, on the other hand you need to know you can mess up from time to time and that your spouse won’t quit on
you. Some moral hazard is key the functioning of a marriage, but you don’t want it ruling your life.
Goal is to be in the middle, a safe harbor, not a safety net.
• Recommended reading: “Spousonomics: Using Economics to Master Love, Marriage and Dirty Dishes” (Paula Szuchman, Jenny
Anderson. Random House)
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