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.
