Sunday, November 22, 2009

A Good Definition of "Moral Hazard."

The definition that I like appears on pp. 783-4 in the masterful biography of Ludwig von Mises, Mises: The Last Knight of Liberalism, written by Guido Hulsmann. Here it is:

"Artificial markets would make managers irresponsible. Some of the benefits of successful management would still be private (the increased reputation and career advancement of successful managers), but all of the costs of mismanagement would have to be borne by the citizenry at large. As a consequence, the managers of the state could take excessive risks; they would squander society's capital."

Follow me on Twitter @DivineEconomy

For more information go to my newly renovated website.

If you know of anyone interested in ethics and economics,
or liberty and justice, please send them this link:

No comments: