On Nov 30, 2007 12:47 PM, David B. Shemano <[EMAIL PROTECTED]> wrote: > As a good free-marketer, I am against Subsidized Moral Hazard, but am > entirely neutral regarding Moral Hazard.
If I understand correctly in your first case that you call "Moral Hazard" everyone understands the risks including the behavioral ones and presumably the insurance will be appropriately priced taking it into account. So in that sense there is no problem. It is the case that you call Subsidized MH that is popularly referred to as simply Moral Hazard. This is what Martin Wolf finds objectionable about the NR bailout. > After saying all of this, I can't quite figure out what exactly you are > criticizing regarding capitalist society and what will be different in a > socialist society. In capitalist society subsidized moral hazard is pervasive. A lot of capitalist activity would simply not be profitable (and therefore would not exist) if it wasn't for government subsidies. Wall St's business model depends on unpaid liquidity insurance from the Fed. Corn farmers can overproduce all they want because the government insures them (for free) against a price collapse with its ethanol policy. And so on and on. > Do you think the problems of Subsidized Moral Hazard will be less in a > socialist society than a capitalist society? Yes. The above subsidies will have no place in a non-capitalist society. -raghu.
