At least, most of us don’t.
Every time I pick up a chainsaw, I am the person bearing the risk and the person who will bear the cost of whatever happens next. Hopefully, it’s just tree limbs falling to the ground.
If it’s some part of me, well, I have health insurance, and yes, there is an ambulance nearby. But it’s faint comfort knowing that, so I’m super careful.
That is NOT Moral Hazard.
Moral Hazard is the opposite: the person taking the risk stands to gain all the upside while someone else will bear some or all the costs of the downside. Given that, it would be crazy not to take the risk, right?
We see lots of examples at work in the economy today. Exhibit one is anyone buying risk assets and then looking to blame someone when the trade goes the other way. If you’ve got political or economic juice, you may even be able to get Congress, a Presidential candidate, or a central bank to come to your rescue!
It’s likely too much to ask the economically and politically powerful to do otherwise, but what about you and me?
What would you do, what decisions would you make, and how would you navigate if you had to take full responsibility for your actions?
I’m not arguing against taking action and taking risks. I am wondering aloud the value of doing it more consciously.
Something to think about.