The Economics of Moral Hazard¶
Pauly, M. V. (1968). The Economics of Moral Hazard: Comment. American Economic Review, 58(3), 531-537.
Cited by¶
6 citations across 6 artifacts.
Each citation links to the sentence it supports in the citing article.
Primes¶
- Anticipatory Neutralization
- Insurance deductibles and co-pays exist to counter moral-hazard pre-adjustment.
This sourceFoundational treatment of moral hazard as a rational behavioral response to insurance coverage, motivating deductibles and co-pays to preserve the insured party's stake.
- Insurance deductibles and co-pays exist to counter moral-hazard pre-adjustment.
- Information Asymmetry
- Listed in the references but not attached to a specific claim.
- Moral Hazard
- Risk Pooling
- Modern managed care tries to manage both: cost-sharing (copays, deductibles) reduce moral hazard, as Pauly (1968) shows in his rational-economic reformulation of moral hazard in health insurance; actuarial screening reduces adverse selection.
This sourceReformulates moral hazard as rational economic response to insurance pricing; shows why copays, deductibles, and cost-sharing are necessary complements to health-insurance pooling.
- Modern managed care tries to manage both: cost-sharing (copays, deductibles) reduce moral hazard, as Pauly (1968) shows in his rational-economic reformulation of moral hazard in health insurance; actuarial screening reduces adverse selection.
- Severed Accountability Via Unearned Revenue
- The same pattern governs VC-funded startups optimizing for investor narrative rather than customer satisfaction, inherited-wealth recipients whose skill development weakens, cost-plus-reimbursed providers facing no patient price-discipline, transfer-funded state monopolies, and regulators funded by the entities they regulate.
This sourceFoundational analysis of how insulating a payer from marginal price (cost-plus / third-party reimbursement) removes price discipline and produces predictable over-consumption and inefficiency — the price-discipline severance behind cost-plus-reimbursed providers.
- The same pattern governs VC-funded startups optimizing for investor narrative rather than customer satisfaction, inherited-wealth recipients whose skill development weakens, cost-plus-reimbursed providers facing no patient price-discipline, transfer-funded state monopolies, and regulators funded by the entities they regulate.
Mechanisms¶
- Co-Insurance or Risk-Pooling Arrangement
- Higher pooled shares soften the blow but weaken each member's incentive to prevent losses (moral hazard); a retained deductible keeps skin in the game.
This sourceModels the benefit of insurance coverage together with the way retained cost sharing restrains insurance-induced overuse.
- Higher pooled shares soften the blow but weaken each member's incentive to prevent losses (moral hazard); a retained deductible keeps skin in the game.
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