Moral Hazard and Morals and Hazards

While the phrase "moral hazard" does not, I think, come from ethics (the concept originated in the insurance industry), moral hazard is actually a central and yet not-well-addressed concern in ethics. That is, moral behavior is almost always subject to abuse. That includes both mean-spirited abuse (con-artists targeting do-gooders, or bullies picking on someone who won't hit back), but also the more common, passive abuse displayed by homeless people who become content to live off of the goodwill of others who might otherwise be working--though, as a liberal, I guess I'm supposed to pretend like that is very rare. A better, and much more pervasive case of the latter emerges in Ezra Klein's discussion of Yglesias and Cowen's back-and-forth over replacing Medicare with block grants:

[Providing cash to be used at the recipients will instead of Medicare] has a lot of wonkish allure, particularly if you think, as I do and Matt does and Tyler does, that medical care is overvalued. But it misses the problem that leads to universal health-insurance systems: As a society, we are not willing to let people die painfully in the street, even if they have previously made decisions that would lead to that outcome. In reality, what terrifies all of us is what happens after someone takes the cash and then gets sick. .....

This is why Medicare is universal and the health-care law has an individual mandate. If we were willing to let people simply live with the consequences of their decisions, we could have a very different health-care system than we do. But we’re not — and, as a compassionate, rich society, I don’t think that’s such a bad thing. This is why we, like every other developed nation, are moving toward insurance solutions that assume an eventual need for health care. If we can’t say no credibly, then we need to say yes responsibly, and in advance. 

It's a fascinating point, and I think Ezra nails it. To understand Medicare, you have to go back to the reasons we care at all. For a true ethical consequentialist, the cash grant idea is probably right, since letting someone die isn't a problem if they received all the cash they were entitled to, and their choice to spend their healthcare money on something else made them happier on net. But for most people, the driving moral concern for Medicare is the one Ezra highlights--we don't like hearing about people dying when it could have been avoided. Period. And that is more of a deontological view--regardless of the greater universe of consequences, many people feel it's just wrong to let someone die.

But in reality, these "it's just plain wrong"  types aren't totally unconcerned with consequences, at least when they have some experience with the world--and that's because of moral hazard. Maybe at first we can maintain the moral stance that "it is always necessary to give money to those in need of urgent medical care"--but the truth tends to be not that we consider the statement in quotes is a categorical imperative, but rather that we can't stand unnecessary deaths, perhaps at a gut level. And thus as we learn that people might abuse fungible cash, the imperative becomes "provide cash when explicitly used to prevent unnecessary death". In a sense, we look for the most efficient means to avoid gut disgust, and to allow us to sleep easily. Welfare programs like Medicare should be understood in this context.

I wish more people involved in philosophy or policy research wrote more often about the detailed calculations people make--not in pursuing a consequentialist ethics--but rather in merely alleviating gut-level moral disgust. In particular, I wish we knew more about the implications of moral hazard-type situations for deontological views. Or at least were more willing to apply what we have been learning from psychological/neurological studies. I think that line of work would prove invaluable in understanding the dynamics of the policy debates that are typical of the modern welfare state.