Moral hazard is a circumstance which increases the likelihood of loss, or a larger than normal loss, because of an individual’s indifferent attitude after issuance of an insurance policy. In common usage, moral hazard indicates that the insured unconsciously changes their behavior, as opposed to deliberately changing to cheat the system or benefit from his or her circumstances.
In 2008, prior to his eventual support for the Wall Street bailouts, Treasury Secretary Henry Paulson expressed his concern that a bailout would install moral hazard. Paulson understood that once the risk of catastrophic failure for poor business decisions was taken off the table, the incentive gained in avoiding overtly risky behavior would be removed.
In spite of his proper knowledge pertaining to the moral hazard principle, Paulson eventually gave his full throated approval of the installment of corporate welfare. The consequence was a beginning mentality of “too big to fail.” Corporate America had convinced Federal America that if they didn’t get the bail out, the nation, thereby the world, would fall. It’s not a whole lot different than a mugger holding a convincing water gun to their victim’s head and telling the victim that not turning over the money would cause the victim’s death. However, the sordid relationship between big business and big government, regardless of party affiliation, is not the point here.
Reality, reason, common sense, and objective thought, easily teaches us that the moral hazard principle, while referred to in a corporate sense in the instance of the bailouts, in reality, creates a change in mind set of each individual person that makes up the commercial entity. Therefore, it is understood that corporate bailouts for some of the nation’s most risky business behaviors was a rescue from the consequences for the culpable who had become the newest beneficiaries of America’s welfare state.
If corporate welfare does indeed serve as an encouragement of risky business behavior, it is not difficult to extrapolate the idea to risky personal behavior. Everyone makes mistakes, but the choices that we make in life, inevitably, for better or worse, lead to consequences. If we are denied the benefit of the right to learn from our mistakes, we will never learn to act in a more responsible manner.
Inherent in human liberty is the right to fail. There are no promises that life is going to be fair to us. There is no right to equality of results. The equality lies in the opportunities, and the possibilities are realized when we overcome something that we had not previously been able to accomplish.
Some might say that the citizens of the welfare state are similar to animals in a zoo. The caged animal may be fat, happy, and content, but the cage still looms. The captive animal may begin to fear what lies outside the cage, and rather than eagerly awaiting the opportunity, the liberty that lies beyond the comfortable confinement of bondage, the animal cowers for fear that it cannot make it on its own. In this very manner, we citizens of America have grown too accustom to all governments’ fondness of sway over our lives.
From the state-ordained light bulb, to literal government control over life and death that is misleadingly called healthcare, we turn over our own sovereignty for a bought and paid for lie of a life without fault or pain brought to you not by God, but by government. Just as so many may believe it is foolish to place their faith in a non-existent god, those who seek liberty know that expectation of the state to solve all of our problems and meet all of our need is a misplaced confidence.
Instead of sureness in government to solve our problems, we must take responsibility for ourselves. Unlike the confined animal, we have no need for caution in regards to entering the wilderness, for we do not rely on absent instinct for survival. Rather, we learn, adapt, and modify in order to survive. It is through the realization that we can survive on our own, with each other and without government interference and partisan propaganda, that our republic will rise again and return to prosperity, political stability, and peace.