WHAT'S SO MORAL ABOUT THE MORAL HAZARD?

A hazard is a market failure most commonly associated with insurance, but also associated by extension with a wide variety of public policy scenarios, from environmental disaster relief, to corporate bailouts, to natural resource policy, to health insurance. Specifically, the term hazard describes the danger that, in the face of insurance, an agent will increase her exposure to risk. If not immediately clear, such terminology invokes a moral notion, suggesting that changing one's exposure to risk after becoming insured is morally problematic. This paper challenges that position. It argues that there is nothing inherently moral about the moral hazard. It does so by arguing against three proposed claims regarding the wrongness of the moral hazard: first, the view that conceives of it as deception; then, the view that conceives of it as cheating; and finally, the view that conceives of it as stealing.