I have struggled to fully define this situation from all aspects. I THOUGHT I has "moral hazard" misunderstood. It seems I didn't. But I didn't have the full explanation. So first, let me define some things. Then I will plug them in to real world situations.
Definitions.
Moral Hazard: The confusing definition is when asymmetrical information (One party has more extensive information than the other.) So when you agree to health insurance, both of you are taking a "risk". You are paying them expecting that they will pay the agreed portion of medical bills should they occur. The assess your premium and the risk of catastrophic health concerns based upon your behaviors. So they ask you "do you smoke" and you say "no" when you actually smoke like a stack. They are unaware of how great their risk is because you hold asymmetrical information.
The other more tangible version of this is stated from the "immoral operator's" perspective. This is defined as a "conscious choice to change your behavior because you know the consequences will be diminished or absolved." If you have ever said "f'k it, that is what insurance is for" or "That is why they have insurance." This is an example of the process of "offering insurance enable conscious bad behavior."
Morale Hazard: is the same thing as moral hazard, the only difference it that it occurs subconsciously. I often ask "what is worse, a leader who makes a choice that is self serving out of malice or ignorance." Because you know that you have insurance, you drive a truck with a frame that might be questionable. You don't think of it that way. Doing an oil change you just see something that without insurance would have alarmed you, There may even be a phycological trigger to repress it knowing that you have to get something done and can't afford to fix that issue at the moment.
Adverse Selection: This happens when a supplier/ seller has information that the consumer/ buyer doesn't have. Maybe the seller knows the frame is in bad shape. The seller has the car listed for normal market price. The buyer finds it to be a good deal and buys it not knowing the withheld information was being withheld for reason of exploitation.
Peltzman Effect: is when a policy, regulation, or remedy is introduced to the market diminishing one or more consequences but not all of them and not completely. This is often an attempt to remedy the results of a few members of the community who engage in a risky behavior. However the introduction of reduced consequences entices and/ or enables a greater number of the community to participate in the behavior. This increases the consequences that are not remedied and of course the cost on the community. It often will wipe out the consequences that were the target of the remedy. Though the community might have seen a lower number of adverse effects from the behavior as a result of the remedy, the sheer number of people engaging in the risky behavior increases the overall back to or exceeding the original problem. In short. this is "The road to hell is paved with good intentions." effect.
Considerations.
Most of the time these terms are used in referenced to insurance or strictly in the context of economics. However, that is in part because for leaders to admit that it applies to social policy, would get them to be scorned by their advocates. Like I said, this is about the road to hell. Politicians are selling "good intentions". But think for a moment about this.
Abortion: In this case "moral" and "morale" hazards are happening at the exact same moment. The teenaged self serving boy is thinking "If the bitch gets pregnant she can just have an abortion." The teenaged girl suffers subconscious pressure as a result of her peers having sex and knowing that "if it happens" but on a very subconscious level. Of course it quickly becomes conscious. \
Birth control: In a very similar fashion the more effective birth control became, the more "entitled" people felt to the very risky behavior of sex. At the turn of the 20th century 8% of women and 11% of men had more than one partner in a lifetime. Today that is 98% across the board. With it has come a greater number of "unintended pregnancies", STD's, and acts of sexual aggression. Not to mention the culture that has become addicted and preoccupies spending trillions per year on it (This will be the subject of a future post and hopefully podcast.)
SNAP: The first "food stamp" program was introduced in the 1939. Nationally less than 5% of children were born to single mothers the vast majority were widows caused by war or accidents. By 2015 they make up 30% of births (70% of children born to women under 30) and the majority are to women who were never married. I have yet to find somebody willing to make this connection in politics or academics. But the increases directly track with increases to the benefits.
While the liberal party is generally the ones who pride themselves on short sighted "good intentions" and it is easy to track their policies to the Peltzman effect, there are examples of Republican policies as well.
Protection of Gun industry: The number of guns in our society has grown at ludicrous rates. The inability to not sue the gun industry has not only lead to the increase in gun crimes and suicide, but also a partner in why we have an illegal immigrant problem. There are a few other puzzle pieces in that. However, 80% of guns confiscated from drug cartels in South America originated from the US.
Wars for humanity: As Carlin famously said "fighting for peace is like fucking for virginity". Yet republicans love to "free people from tyranny" by (dropping artillery ) the hell out of them. The cost of soldiers who fight unjust or irrational wars in physical damage should be unacceptable. The emotional costs can't be tallied because they effect generations to come after the fact.
So moral and morale hazards are a real issue that plagues our "democracy". But most psychologist leave them to the economist and fear speaking about them as a personal issue of a society of individualist. No politician will tell you that "by letting people drive cars that hide the carbon cost and throw plastics in a "Recycling bin" that doesn't recycle plastics increases their apatite for consumptions of using energy by driving and buying products wrapped in plastic.
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