When government solves problems

When government gets involved, unintended consequences often ensue. One example is the so-called “moral hazard,” where people are insulated from the consequences of risk:

The person may behave differently from the way the person would behave if fully exposed to that risk. Here’s a familiar example: If you insulate people from the consequences of taking financial risks, they may behave recklessly and borrow or loan money for home mortgages which can’t be paid back.

See how moral hazards are rife in our health care system.

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