What is Moral Hazard?

Moral hazard is that under the condition of asymmetric information, uncertain or incomplete contracts make the responsible economic actors not to bear all the consequences of their actions, and at the same time maximize their own utility, they make phenomena that are not conducive to others' actions. The concept originated from marine insurance. In 1963, American mathematical economist Arrow introduced this concept to economics and pointed out that moral hazard is the tendency of individual behavior to change due to the protection of insurance. It is an objective ex post opportunistic behavior relative to adverse selection. It is a risk caused by one party to a transaction because it is difficult to observe or monitor the other party's actions. ^[1]

Moral Hazard

The term moral hazard is a concept derived from the study of insurance contracts. Simply put, because

First, the risks of management and technology (inherent, control, inspection) are abominable, but it only affects the micro level

(1) Endogenous characteristics; that is, the prototype of risk is formed by the economic considerations and calculations of benefits and costs by economic actors; (2) Traction holds; all risk producers are tempted by interests and pursue profit for the purpose of;

(3) Characteristics of harming others;

1. Root cause: Since the 1980s, China has implemented "

1. Establish relevant legislative systems. "Faith, the treasure of the country, and the people." One of the direct results of establishing a credit system is to gradually eliminate the space for moral hazard. The establishment of the credit system, on the one hand, must be established in the corresponding

Moral risk factors ^[2] refer to intangible factors related to human character, that is, the causes and conditions of social wealth damage and personal injury or death caused by personal dishonesty, dishonesty, or misconduct attempts. If someone is dissatisfied with society or others, they intentionally carry out sabotage activities, such as arson, robbery, fraud, causing loss of social property or other people's property and life.