160. "Moral hazard"

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With the Greek bailouts and the Wall Street shenanigans we're certainly seeing a lot more references to a "moral hazard" than we did.  

Wikipedia tells us that in economic theory "a moral hazard is a situation where there is a tendency to take undue risks because the costs are not borne by the party taking the risk."

The hazard part is clear.  It's to the party bearing the cost and "hazard" is the right word.  It says to insurers (the people the theory was devised for), "Indemnify people who become more reckless after they're insured and you'll get hurt."  It's like a sign on a hiking path:  "Danger here."

What does "moral" say?  Enough to keep you thinking about it all week.  It seems to say, "These reckless people are immoral."  You hear it and say, "Oh yes, on this path we have physical hazards, falling rocks, and spiritual hazards, decaying ethics."  It's unethical to take chances with other people's money. The word makes recklessness a character fault or, in the old vocabulary, a sin.  And, if the recklessness is deliberate, a grave sin, fraud.

But apparently you'll only hear it say and do that if you are living in the past and are hypersensitive to words.  I say "hypersensitive" because many people now who are sensitive to words in every other connection are not sensitive to this one in this connection.  To the analysts on CNBC "moral hazard" regularly means only "commercial hazard" — on the way, maybe, to just "hazard."  "Moral" is dead, a throw-in.

How did it die?  We learn, from the same Wikipedia article, that for the actuaries who first spoke of this hazard "moral" still "carried negative connotations."  It implied "fraud or immoral behavior."  And we learn that economists of the sixties dropped such connotations in their use of the expression.  "Moral hazard" just referred to "inefficiencies" in the system.  The judgment adjective was dead.

Judgment words are not killed easily.  Would you like to know how it's done?  How to strangle an adjective, like "moral," that has come down to us with so much life?  There's a demonstration right in front of us, in that Wikipedia article.  There we're told that moral hazard, as understood by economists, is "a special case of information asymmetry" in which, most broadly, "the party [to a transaction] with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information." 

See how it's done?  First you quietly make a human being into a "party to a transaction," then you have that party, instead of making a choice, have a "tendency or incentive," and finally you call the result "inappropriate behavior."  "Moral" falls limp but, just to make sure ("inappropriate" does suggest a standard) you note that by "inappropriate" you mean only "from the perspective of the party with less information."  There goes the last twitch of judgment.

Kill the word, though, and you kill the past.  And oh what bodies lie on the field around this one.  Bodies of the judgmental.  There are all the Victorians who thought that if you gave money to the "undeserving poor" (the reckless, the freeloading) you'd encourage bad character.  That was the hazard they saw, and would have called "moral."  There, strangle-marks still on their throats, are all the Protestant preachers who for years had encouraged that view.

And don't I see (hypersensitivity alert!) a lot of other spokesmen for Christian ethics?  In literature?  Isn't that Henry James, the author who spoke to the fictional aunt about to bail out her spendthrift nephew: "I think if he made the debts himself he should pay the debts himself."  And Dante.  Talk about judgment.  Remember the way his underworld judge assigned con artists to their place of punishment: "You.  Fraud.  Eighth Circle.  Next?"  And oh Milton.  Do you think the reckless (his sinners) just show "poor judgment" and should have a second chance?  Remember what God's messenger told Adam after he argues please, please to be allowed to stay in Eden: "Out."  You think you know judges?  Try God.

One thing about those figures from the past, though: if you're a banker trying to slip your shenanigans past the public, you'd better keep them out.  And you'd better damp down the sensitivity that breathes life into them.  They'll get you thrown out of the Garden.  You could wind up in Hell.  But no doubt, with your PR skills, you know what to do.  Or at least where to start: with that damn word "moral" some dumbbell let slip into a perfectly scientific discussion.