Talk:Morale hazard
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[edit] Moral versus Morale Hazard
I think the distinction made on this page between moral hazard and morale hazard is a false one, and derives from a misunderstanding of the nature of moral hazard. Moral hazard does not imply any conscious or malicious intent, but can simply indicate an indifference to loss, as the Wikipedia article on moral hazard correctly states. The author of this page has not found any reputable economist using the term morale hazard, but merely refers to something called Rupp's Insurance & Risk Management Glossary, whose definition of moral hazard [1] is confusing and incorrect.--RichardVeryard 14:09, 10 October 2006 (UTC)
- Hi Richard, in insurance there is a crucial distinction between the two - which is important in insurance theory, since the idea of risk reduction hinges on whether the insured can do anything consciously to reduce a loss. Also, the concept of moral hazard is something that could cause the denial of an insurance claim (because of the outward falseness of the claim), whereas a morale hazard would not. The reference listed was put by the first user, and I have been meaning to add a reference from an insurance textbook that distinguishes well between the two. Cheers, Bellemichelle 14:50, 11 October 2006 (UTC)
- Hi Bellemichelle. My understanding of the term "moral hazard" comes not from the insurance industry but from economic theory, which is where I believe the term originates. There appears to be a significant divergence between two different notions of moral hazard, and we may need to find a way of explaining both notions on Wikipedia. However, I don't currently have the time to look up the economic literature. I believe that even if there is a difference between Moral Hazard and Morale Hazard (which I am not yet convinced) it would be easier for the reader if this difference were explained in a single article rather than spread across two articles. Therefore I still believe that a merger would be a good idea.--RichardVeryard 13:38, 2 November 2006 (UTC)
- As far as I can make out on a quick survey, the term moral hazard was introduced into economics by the Nobel-prize-winning economist Kenneth Arrow in 1963, and refers to the fact that the existence of insurance changes people's behaviour, without their necessarily doing anything immoral or fraudulent. I believe this is what Bellemichelle wants to call Morale Hazard. I should prefer to stick with Arrow's terminology. (Try a google search for "moral hazard arrow". There are some good recent interviews with Professor Arrow, and an enormous amount of economic literature that refers to his work.) --RichardVeryard 14:17, 2 November 2006 (UTC)
[edit] Different Terminology?
Richard, here is what I posted on Talk:Moral hazard, I don't know if you saw:
In insurance, at least, the two need to be distinguished. From "Property and Liability Insurance Principles", by Ludhard & Wiening (published by the AICPCU):
Moral hazards are conditions that may lead a person to intentionally cause or exaggerate a loss. The threat from moral hazard is the possibility that the insured may intentionally cause a loss or file a false claim. For example, an insured may intentionally cause a fire or an auto accident to collect a claim payment on a building or car and unjustly enrich himself or herself.
Attitudinal hazards, also known as morale hazards, involve carelessness, or indifference to, potential loss on the part of an insured or applicant. Such hazards are more subtle and thus more difficult to detect than are moral hazards. A particularly dangerous attitudinal hazard is an insured's attitude that "I don't need to be careful because I have insurance."
This is a huge problem in insurance, and they are two categories that are often distinguished in this industry - a moral hazard-induced loss could end an insured in prison!. Although they might be the same in economics, we can distinguish in the two articles that the terminology used in each field is quite different (and in fact, perhaps contradictory). Bellemichelle 20:18, 2 November 2006 (UTC)
- Yes I did see this. The problem is that we seem to have one set of definitions used within the Insurance industry, and a conflicting set of definitions used by economists. Within economics, moral hazard does not involve immoral or illegal conduct. I accept your view that the insurance industry definitions should be presented in Wikipedia, provided it is made clear that these definitions are not the same as those prevailing in the economics literature, and it seems you accept my view that the economics definitions should also be presented. How I propose we resolve this is by having a single article that contains three sections: (1) Moral Hazard as used in Economics. (2) Moral Hazard as used in Insurance. (3) Morale Hazard as used in Insurance. The reason I'd prefer to have all three definitions in one place is because I believe Wikipedia readers will need to see the concepts together in order to understand them properly. So Morale Hazard would redirect to the appropriate section within the combined article on Moral Hazard. At the other extreme, we could produce three articles: Moral Hazard (Insurance), Moral Hazard (Economics) and Morale Hazard (Insurance). But this would involve a lot of repetition and disambiguation between the three articles explaining the differences, and I'd prefer to avoid this if possible. --RichardVeryard 15:41, 3 November 2006 (UTC)
Hi again Richard. When you put it that way, does make sense to put it in one giant article together: Moral hazard, with subsections for "in Economics" generally, then "in Insurance", followed by an explanation of Morale hazard as used in Insurance and the importance of that distinction. Thanks and cheers! Bellemichelle 18:01, 10 November 2006 (UTC)
