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regulation leads to people suspending critical judgement about risks. We have a name for that. http://en.wikipedia.org/wiki/Risk_compensation http://en.wikipe
by gravitycop 18y ago
regulation leads to people suspending critical judgement about risks.
We have a name for that.
http://en.wikipedia.org/wiki/Risk_compensation http://en.wikipedia.org/wiki/Risk_compensation
risk compensation is an effect whereby individual people may tend to adjust their behaviour in response to perceived changes in risk. It is seen as self-evident that individuals will tend to behave in a more cautious manner if their perception of risk or danger increases. Another way of stating this is that individuals will behave less cautiously in situations where they feel "safer" or more protected.
- grandalf 18y agoThanks for the link. I thought I'd invented it :)
- gravitycop 18y agoRisk compensation is also called "moral hazzard": http://www.econlib.org/library/Enc/bios/Mirrlees.html http://www.econlib.org/library/Enc/bios/Mirrlees.html Mirrlees also did highly theoretical work on another incentive problem: “moral hazard.” As is well known to those who study insurance, insurance coverage gives the beneficiary an incentive to take more risks than would be optimal. This is called “moral hazard.” Mirrlees’s insight, based on a complex mathematical model, is that the problem can be solved with an optimal combination of carrots and sticks. Insurance payments are essentially a carrot. But “sticks” could be designed also, so that an insured person who takes risks pays a penalty for doing so. With this combination of carrots and sticks, the insured person acts almost as if he is uninsured, and the insurer acts almost as if he were the insured.