Moral Risk

The moral risk is a “ Perverse effect” of a lawful or contractual system comprising a legal Faille important which opens broad possibilities of Abus , even of Fraude S , or in current language, of “resquilles”, with those which will want to benefit from the Règlement or Contrat by diverting its spirit. The moral risk is the possibility for a person of exploiting in a way strategic, voluntary, a situation not envisaged by the originators of a system.

Economic and social incidences

This phenomenon, which arises from the field of the behavioral economy, can have economic and social effects important. Here some examples:

Insurance

In the Assurance S a policy-holder can

hide a risk with the insurer,
or take more risks once ensured,
or declare a disaster non covered with the contract by disguising his declaration,
even to defraud completely and even criminally by causing deliberately the disaster (arson…).

In addition the fact that only the high-risk people choose to ensure themselves, for example because of too high tariffs, can lead to the antisélection (or unfavourable Sélection), a perverse phenomenon related to the moral risk

Bank credit and markets financier

The rescue operations operated by the central banks in the event of financial crisis, can, if they are targeted directly on the failing establishments rather than on the liquidity of the banking system and financier in general, lead the banks to feel protected against their own imprudences and to take in the future more risks during the granting of credit or of the execution of operations of market. It is what certain summarize by the formula privatization of the profits, nationalizations of the losses .

Bankruptcies

In economy a too great support of the state in the case of companies in difficulty, in particular to save largest, can lead the companies to multiply the adventurous operations whose possible successes will be done with their profit and the possible failures will be deferred on the community. See also the section Bank credit and markets financier .

Social protection

Frauds with Social protection, where at least not-incentives (for example to resume work for an unemployed) can become current (Assistanat) and discourage the research of autonomy when the system is

not very limpid, too bulky, comportementalized, which multiplies the exploitable faults,
or on the contrary formulated in a too light and simplistic way
little controlled and sanctioned,
,
or badly conceived with effects of threshold (ex: chopper removing the allowance completely as soon as the income exceeds the ceiling of 1 euro).

See too

Random links: