Questions of moral hazard cannot be put off for ever. Some will become more pressing as the pandemic ebbs
humanity with a host of testing moral decisions.
Rarely has the scope for moral hazard seemed as massive as now. To slow the spread of covid-19, countries have shuttered much of their economies. And in order to prevent lost sales and jobs from translating into spikes in bankruptcies and poverty, governments have pumped huge amounts of aid to households and firms. Economists at thereckon that governments across advanced economies could run fiscal deficits that, on average, exceed 10% of.
Moreover, moral-hazard worries apply to risks that may reasonably be reduced—by putting batteries in the smoke detector, say. Even the most prudent firm or household, though, would struggle to withstand a shock that deprives them of nearly all their income for months on end. Assistance in these times is less likely to distort future behaviour than are bail-outs during more mundane periods of hardship. Governments can claim that the help is a one-off, warranted by an unprecedented disaster.
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