Moral Hazard

Imagine you take your car in to the shop for routine service and the mechanic says you need a number of repairs. Do you really need them? The mechanic certainly knows more about car repair than you do, but it’s hard to tell whether he’s correct or even telling the truth. You certainly don’t want to pay for repairs you don’t need. Sometimes, when one party has an information advantage, they may have an incentive to exploit the other party. This type of exploitation is called moral hazard, and can happen in many situations - a taxi driver who takes the “long route” to get a higher fare from a tourist, for example. In this video, we cover moral hazard and what is known as the principal-agent problem.
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Help us caption & translate this video!
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[@andrewstrauss7586]

I am starting a petition to get all econ classes in the US to be taught by these guys.

[@aertybhujm1]

I am a Taiwanese English tutor in Taichung,Taiwan.
After watching this video and learning this concept, I suddenly realized why I was sacked by a client 1.5years ago.
She was in fear of being ripped off by me due to asymmetric information and moral hazard.

[@Randor11]

This is a really precise and concise way of describing a moral problem which afflicts many many millions of people.

[@danwroy]

:/

[@alinaasif2455]

explanation was really clear and helpful. thank you.

[@kemalonatdursun7240]

My big brother, you explained very well, we undrestood thanks to your amazing examples on your videos

[@eisernfront8549]

Grate example is current situation of the Corona Virus. Here in the states, most event organizers or employers arent preparing for the outcome of the outbreak. They will let their workers work until they get sick. Also,, their employees cant afford to get sick anyways coz they have bills to pay, cant afford to go to a doctor, and almost all dont have paid sick leave.

[@treywright1743]

you explained this much better than my Pearson textbook, thanks.

[@FirebirdCamaro1220]

moral hazard is the reason that insurance companies like to collect premiums, but not pay claims

[@lindachen5179]

Thank you. Love the examples and visuals

[@tjaryma]

There is a nice paper by Benjamin Hale What's so moral about moral hazard? in philosophy. He writes : In this paper, I argue that
there is nothing inherently moral about the moral hazard, and in fact, that the
so-called moral hazard is better understood as a central and inextricable feature
of insurance and public policy more generally

[@ronturford5744]

This is not the normal use of the term moral hazard. Moral hazard is lack of incentive to guard against risk. That it not what what is being described here.

[@linkns1]

I have no idea why he's using this term for that definition. It's just not correct. Surely he knows this.

[@A.HF86]

To my knowledge, moral hazard is defined as "when one party takes actions that the other party can't observe but which affect both of them." The examples mentioned in this video all align with this definition. It's true that these examples aren't common, though.

[@ronturford5744]

​@@A.HF86this is the normal definition en.wikipedia.org/wiki/Moral_hazard

[@saideepak969]

What’s the word for the thing he’s describing?

[@alisaroo2234]

What is the difference between priciple-agent prblems and moral hazards?

[@lulugao1531]

Love the video. Great content and easy to be understood!

[@zubairkhan-hz1vz]

Moral hazard is after the contract problem as per my knowledge.

[@arvinthm6018]

Isn't it a moral hazard, only if the mechanic does not fix my car properly though i have paid him for the damage to be fixed?
otherwise wouldn't it be an example of adverse selection?

[@gfadhilla]

Thank you so much, THIS IS REALLY HELPFUL. I'm going to present about this topic next week, wish me tons of luck!

[@beliziabrito]

great content.

[@thekingprajna]

Thanks a lot sir

[@Stray0]

1:58 very relatable :D

[@LIMJINGHENGJURGENHCI]

thanks bruv u saved my butt the econs notes buggy 😢

[@brokentombot]

I like he used the Johnson Rod example from Seinfeld.

[@shiivanibhatt]

Omg i knew i heard it somewhere😂

[@deforesttthompson9299]

Got me googling "what is a johnson bar"

[@Themistocles425]

+1 for the Seinfeld reference!

[@MarginalRevolutionUniversity]

You should check out this one. Loaded with Seinfeld!
th-cam.com/video/L-GouzQaAno/w-d-xo.html
-Roman

[@dylanroberts3869]

Which of the following is NOT an example of ‘moral hazard’?
A. Amy does not always bother to lock her bicycle, knowing that it is well insured.
B. Knowing that he has comprehensive life insurance in favour of his family, Bill chooses to ski down the dangerous ‘black’ slopes on holiday instead of the safer ‘green’ ones.
C. Caroline takes out life insurance, knowing that her smoking habit has given her terminal lung cancer.
D. Having been granted debt forgiveness from the World Bank, the government of a developing country incurs new debt, expecting to be bailed out again if necessary.
E. Knowing that his company has limited liability, a manager borrows heavily to pursue maximum growth.

[@jatindersinghbhatti4308]

I think the answer is C. She takes insurance after she finds out she has cancer. If she had taken life insurance first and then started smoking & gotten cancer then it'd be considered a moral hazard issue. Am I right?

[@stevennaavee7519]

C right?

[@DTSemaphore]

yeh its C although im sure you needed the answer 3 years ago. C is adverse selection not moral hazard

[@R2D6_10]

Ayy-symetric not ahh-symetric.

[@RahulKumar-wy8eq]

Ur words are very similar to kotlers well i would gladly say at least i understood the video 🙏

[@MasBrosh]

Top

[@EdwinRiveraTheOneThatGotAway]

Aha!Thanks(*_*)
BTW:DR.SCOTT MCQUATE Is The TRUTH!!

[@athulcj3200]

Woww