When we lose sight of the basic rule, the big thing that bites us on the ass is "moral hazard."
Recent discussions about UBI, state "healthcare," &c., are all good case studies about moral hazard.
In economics, moral hazard occurs when one person takes more risks because someone else bears the cost of those risks. : https://en.wikipedia.org/wiki/Moral_hazard
The Political Economy of Moral Hazard
Moral hazard is the incentive of a person A to use more resources than he otherwise would have used, because he knows, or believes he knows, that someone else B will provide some or all of these resources. The important point is that this occurs against B's will and that B is unable to sanction this expropriation immediately. The mere incentive to rely on resources provided by others is not per se problematic. For example, the announcement of a future inheritance might prompt the prospective heir to spend more in the present than he would otherwise have spent. In such cases we would not speak of moral hazard. A genuine moral-hazard problem appears however if A has the possibility to use B's resources against B's will and if he knows this. Laymen would call A's incentives a "temptation to steal" or a "temptation to act irresponsibly." Economists, ever weary of moralizing, have espoused the technocratic expression "moral hazard."
Thus the essential feature of moral hazard is that it incites some people A to expropriate other people B. The B-people in turn, if they realize the presence of such a moral hazard, have an incentive to react against this possible expropriation. They make other choices than those that they would consider to be best if there were no moral hazard.
Discuss.
