An economic concept called “moral hazard” divides Americans and helps to define political philosophies.
After Sunday school last week, I carpooled with other members of our church up to Dallas. We went to help serve the noon meal at The Bridge, the homeless shelter there. What a powerful experience. Without exception, the clients were respectful and appreciative, especially when they themselves were shown respect in any way. Several actually offered me blessings as I filled their glasses with ice water. Many bowed their heads in silent prayer before eating.
When the meal was over and the clients had all left the dining facility, I spoke for awhile with the supervisor of the “Stew Pot” mission team http://www.thestewpot.org/sz.asp which volunteers to run the dining facility. The facility, by the way, is aptly named The Second Chance Cafe. Our discussion led me to deep introspection about the plight of a growing number of homeless in this economy.
Our youngest son, suffering from a laundry-list of psychological problems, is a homeless person notwithstanding how much we continue trying to help him. Our granddaughter, a high school graduate and trained cosmetologist, still reeling from the aftermath of an abusive relationship with the father of her little girl, has told us that she too would most likely be in a shelter if it were not for our intervention and on-going help. So, if it can happen in our family, it can happen in yours.
On my way out to return home, I picked up a printed copy of the local version of an international publication, Street Zine. It was filled with thought-provoking articles about the poor, the homeless and disabled – the sheep I believe Jesus was talking about when He told his disciple, Simon son of John, also known as Peter, to take care of them (John 21:16). One particular article, from which I have borrowed title of this post, struck me hard. You can read the whole thing for yourself on-line if you wish. It’s at http://www.streetnewsservice.org/news/2011/june/feed-286/%E2%80%9Cmoral-hazard%E2%80%9D-%E2%80%93-a-deceitful-double-standard.aspx. Below, combined with my thoughts on the subject, is an abstract of the article which was written by Domink Jenne, a citizen of Freiburg, Germany.
The term, “moral hazard,” according to Herr Jenne, means something similar to moral temptation. It’s actually an abstract term from the insurance industry. In economic theory, it describes a situation in which a party insulated from risk behaves differently from how it would behave if it were fully exposed to the risk http://en.wikipedia.org/wiki/Moral_hazard. According to the theory, a driver with insurance, for example, will drive with less care because he knows he won’t have to pay in the event of an accident. The term has now become a social slogan among conservatives who refer to it as a destructive mentality that results from knowing someone will take care of you.
The welfare state, conservatives claim, promotes “moral hazard” because it removes personal responsibility and diminishes the motivation to search for work whilst living comfortably on welfare. Cutbacks are therefore necessary, even perhaps the complete removal of spending on social programs to eliminate the danger of moral temptation and damage to the economy. But you know what? I’d bet that most, if not all, of the clients I served in the Second Chance Café Sunday would jump at the chance to have a job that would pay them enough to just get by on. Unfortunately, most have issues, their own fault, somebody else’s fault or nobody’s fault, that prevent them from successfully competing in the job market.
Didn’t Jesus say that the poor would always be with us (Matthew 26:11)?
To conservatives, who perceive themselves to be the injured party, “moral hazard” threatens to affect not only those who apparently don’t want to find employment, but also those who are lucky enough to have a job – this to justify the surveillance of employees who might pilfer from stock shelves and cash drawers. So broad is conservatives’ perception of the danger of moral temptation, according to the article’s author, that it is necessary to introduce counter measures against it. Anyone who tries to counter the argument with terms such as “mutual trust” or “social responsibility,” is likely to be laughed at as a worldly innocent. Mistrust is the foundation of the argument.
The concept not only encompasses the malicious viewpoints of social deceivers and hypochondriacs, it also affects the financial sector and is a concern for us all. Consider the executives of too-big-to-fail investment banks and insurance companies who have made such horrible decisions in recent months and years, even committing fraud but not being held accountable. Still, they continue to receive huge bonuses and severance packages! Is this too not “moral hazard”?
When banks with millions, even billions in debt are saved from collapse, then it actually becomes possible that the lack of regulation and oversight encourage a high risk attitude. But conservatives don’t seem to see it this way. In Congress they resist the passage of laws and the enactment policies to prevent future fraud. The difference here is that the amounts stolen from investors by investment bankers are significantly higher than the amounts paid to alleged welfare fraudsters. Is this not A Deceitful Double Standard?
The Nobel Prize winner Kenneth J. Arrow – the man who first popularized the concept of moral hazard back in 1990 – has written and said much about the importance of spending on social programs http://gatton.uky.edu/Faculty/hoytw/751/articles/arrow.pdf. And he should know.
Please feel free to post a comment whether you agree or disagree.