Term to Own: “Moral Hazard”

So,  it is taking me a little bit longer to get through Weingast, but here is at least something for the time being.

The term is “moral hazard” and I was unfamiliar with it.

It was in “The Autocrat’s Dilemma”.

Investopedia tells me it’s:

“The risk that a party to a transaction has not entered into the contract in good faith, has provided misleading information about its assets, liabilities or credit capacity, or has an incentive to take unusual risks in a desperate attempt to earn a profit before the contract settles.”

UNC Econ dept. tells me

“The tendency of a person or entity that is imperfectly monitored to engage in undesirable behavior”

But my favorite because it is short and sweet, from Nelson Keyterms:

“taking additional risks because you are insured”


Posted on June 21, 2011, in Uncategorized and tagged , , , , . Bookmark the permalink. Leave a comment.

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