Economics 101: Moral Hazard

Executive Summary: This CF&P Foundation’s Economics 101 video discusses the Moral Hazard, which occurs when bad choices are subsidized. This often happens when government intervention lets people take risks while having little or no skin in the game. Housing policies, for instance, subsidized mortgages, thus enabling irresponsible borrowing and leading to bubbles and bailouts. Politicians may be setting the stage for the next crisis with a too big to fail policy that will subsidize the biggest financial institutions.