‘Moral Hazard” exists in politics

Opinion

September 4, 2010

By Thomas Sowell, Syndicated Columnist The Picayune Item Picayune Item Sat Sep 04, 2010, 08:13 PM CDT

PICAYUNE — One of the things that makes it tough to figure out how much has to be charged for insurance is that people behave differently when they are insured from the way they behave when they are not insured.

In other words, if one person out of 10,000 has his car set on fire, and it costs an average of $10,000 to restore the car to its previous condition, then it might seem as if charging one dollar to all 10,000 people would be enough to cover the cost of paying $10,000 to the one person whose car that will need to be repaired. But the joker in this deal is that people whose cars are insured may not be as cautious as other people are about what kinds of neighborhoods they park their car in.

The same principle applies to government policies. When taxpayer-subsidized government insurance policies protect people against flood damage, more people are willing to live in places where there are greater dangers of flooding. Often these are luxury beach front homes with great views of the ocean. So what if they suffer flood damage once every decade or so, if Uncle Sam is picking up the tab for restoring everything?

Television reporter John Stossel has told how he got government insurance “dirt cheap” to insure a home only a hundred feet from the ocean. Eventually, the ocean moved in and did a lot of damage, but the taxpayer-subsidized insurance covered the costs of fixing it. Four years later, the ocean came in again, and this time it took out the whole house. But the taxpayer-subsidized government insurance paid to replace the whole house.

This was not a unique experience. More than 25,000 properties have received government flood insurance payments more than four times. Over a period of 28 years, more than 4,000 properties received government insurance payments exceeding the total value of the property. If you are located in a dangerous place, repeated damage can easily add up to more than the property is worth, especially if the property is damaged and then later wiped out completely, as John Stossel’s ocean-front home was.

Although “moral hazard” is an insurance term, it applies to other government policies besides insurance. International studies show that people in countries with more generous and long-lasting unemployment compensation spend less time looking for jobs. In the United States, where unemployment compensation is less generous than in Western Europe, unemployed Americans spend more hours looking for work than do unemployed Europeans in countries with more generous unemployment compensation.

People change their behavior in other ways when the government pays with the taxpayers’ money. After welfare became more readily available in the 1960s, unwed motherhood skyrocketed. The country is still paying the price for that — of which the money is the least of it. Children raised by single mothers on welfare have far higher rates of crime, welfare and other social pathology.

San Francisco has been one of the most generous cities in the country when it comes to subsidizing the homeless. Should we be surprised that homelessness is a big problem in San Francisco?

Most people are not born homeless. They usually become homeless because of their own behavior, and the friends and family they alienate to the point that those who know them will not help them. People with mental problems may not be able to help their behavior, but the rest of them can.

We hear a lot of talk about “safety nets” from big-government liberals, who act as if there is a certain pre-destined amount of harm that people will suffer, so that it is just a question of the government helping those who are harmed. But we hear very little about “moral hazard” from big-government liberals. We all need safety nets. That is why we “save for a rainy day,” instead of living it up to the limit of our income and beyond.

We also hear a lot of talk about “the uninsured,” for whose benefit we are to drastically change the whole medical-care system. But income data show that many of those uninsured people have incomes from which they could easily afford insurance. But they can live it up instead, because the government has mandated that hospital emergency rooms treat everyone.

All of this is a large hazard to taxpayers. And it is not very moral.

Text Only

Opinion

Hood loses hired counsel fight
By Sid Salter/Syndicated columnist
The impact on John Q. Public from the passage of the so-called “sunshine law” regarding the implementation of restrictions and oversight of the hiring of outside counsel attorneys by the Mississippi Attorney General’s office has been vastly overstated by Attorney General Jim Hood and, to a degree, by Hood’s Republican political antagonists who passed the law over his objections.

May 26, 2012
Remembering war dead on Memorial Day
By Wyatt Emmerich/Northside Sun The photo of Billy Elmore has always haunted me. It pops up every now and then as my computer screen rotates through thousands of stored photos.

May 26, 2012
‘Calico Joe’ evokes memories
By Sid Salter/Syndicated columnist
The new “small” novel “Calico Joe” — John Grisham’s much-anticipated paean to the game of baseball — was the perfect traveling companion on a long drive from Mississippi to Fayetteville, Ark., to witness my niece’s graduation from the University of Arkansas last week.

May 19, 2012
Is there a censored race war?
Thomas Sowell/Syndicated columnist
When two white newspaper reporters for the Virginian-Pilot were driving through Norfolk, and were set upon and beaten by a mob of young blacks — beaten so badly that they had to take a week off from work — that might seem to have been news that should have been reported, at least by their own newspaper. But it wasn’t.

May 19, 2012
The virtues of grunt work
By Cokie and Steven V. Roberts/Syndicated columnists
Occasionally a really bad idea gains currency and credibility. Here’s one: College students who work at unpaid internships are unfairly exploited by money-grubbing capitalists. In fact, goes this argument, the whole system is not only immoral but probably illegal and should be abolished.

May 19, 2012
Once, there were no words
By Rhetta Grimsely Johnson/Syndicated columnist
No matter how many times I stand in front of a group to speak, I get nervous. One of the reasons I went into print journalism was because I figured I’d never have to do any public speaking or wear grown-up clothes.

May 19, 2012
‘Finding Your Roots’ good show
By Cal Thomas/Syndicated Columnist
“Finding Your Roots with Henry Louis Gates Jr.” is another of the Harvard professor’s wonderful television series for PBS. This is “must-see TV” and a more than worthy sequel to three previous projects Gates has hosted about how some of us came to be what and who we are.

May 17, 2012
Moral duties in a muddied world
By Kathryn Jean Lopez/Syndicated columnist
In an election season in which the White House has instituted a policy that puts unprecedented limits on the constitutional right to freedom of religion, questions of conscience, duty and spiritual and moral obligation are of critical importance.

May 17, 2012
Colleges, development intertwined
By Sid Salter/Syndicated columnist
At his speech here to the movers and shakers in the Mississippi Delta’s business, agricultural, educational and political circles, Gov. Phil Bryant’s remarks were met with more than polite applause. Bryant, the mechanic’s son from Moorhead, understands the Delta region’s challenges as lessons from his boyhood.

May 16, 2012
Prolific circuit judge relieved of duty
By Wyatt Emmerich/Southside Sun
Relieving the best criminal judge of all his criminal cases is not the way to exercise responsibility as senior circuit judge. What on earth is Hinds County Senior Circuit Judge Tomie Green doing?

May 16, 2012
More Opinion Headlines

Opinion

Search Results

‘Moral Hazard” exists in politics

Site Map

Contact Us