Moral hazards

“If you are continually willing to protect people from the consequences of their own errors, your benevolence will be factored into the future decisions of the persons rescued. In the long run, they will make even more errors.........(You are) creating a moral hazard.” This quotation from Jeffrey Tucker of the Ludwig von Mises Institute summarizes quite well the essential problem with many of the government’s social and international aid programs, and the reason why, despite the best intentions of well-meaning people, such programs more often than not exacerbate problems instead of solving them.

If the government will take care of me in my old age, why should I save money now for my retirement? If welfare will pay my bills, why should I work? If hospital emergency rooms have to treat everyone, regardless of ability to pay, why should I spend money on insurance? If colleges give scholarships on the basis of need rather than aptitude, why should I put any money aside for my children’s college bills? If government policies make it hard to fire me, why should I try to excel in my work?

The problem with the sort of cradle-to-grave “nanny state” that many European countries have, and that some would like to emulate in this country, is that protecting people from the consequences of their own shortsightedness does nothing to encourage them to improve.

But the situation is far worse than that. Such programs are unsustainable in the long run. These days the demographics (an aging population) work against us. So having lured people into depending on the government instead of their own foresight and efforts, we will someday (perhaps soon) have to pull the rug out from under them because we can no longer afford to maintain these programs. That is the real immorality of such programs!

Remember, the road to hell is paved with good intentions…….