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Economics
Moral Hazard
When people take bigger risks because they know someone else will pay the cost if things go wrong.
Moral hazard happens with insurance, bailouts, and big corporations. It makes the whole economy riskier because people stop being careful when they don't feel the pain of bad decisions.It's like driving recklessly because you know your insurance company will cover the crash instead of you.
Real world: Banks made risky loans before 2008 because they believed the government would bail them out if everything collapsed — and they were right.
💡 Moral hazard is why economists worry about government rescues — they can teach people and companies to keep taking dumb risks.