Comments on: Maybe “moral hazard” should be taken more literally http://scripts.mit.edu/~birge/blog/maybe-moral-hazard-should-be-taken-more-literally/ Monkey #121643810 reporting for duty... Wed, 18 Nov 2009 20:43:49 -0500 http://wordpress.org/?v=2.8.5 hourly 1 By: Jonathan http://scripts.mit.edu/~birge/blog/maybe-moral-hazard-should-be-taken-more-literally/comment-page-1/#comment-3685 Jonathan Mon, 02 Mar 2009 02:10:55 +0000 http://scripts.mit.edu/~birge/blog/?p=150#comment-3685 Thanks for the interesting comment. I didn't mean to propose any system, I simply wanted to point out that there is no system that will render all bad behavior unprofitable. How could there be? When I said people should hate these guys, I wasn't suggesting that, in and of itself, would do anything material. I meant that the fact that we don't is a symptom of why it happened. Namely, most people have no moral code. There is no system I know of that causes people to be honest. It's a miracle anybody is honest, if you ask me. Are you suggesting there is some perfect set of laws that would actually lead to everybody acting morally, just because the set of rules makes it in their best interest through clever use of punishment and effective enforcement? I can't believe that. There will always be people clever enough to screw with any system, and take advantage of others. I don't think there is a system that will eliminate the possibility of people profiting from doing bad. My point was that if you quit fooling yourself into thinking otherwise, you can at least hope to mitigate the consequences of that fact. For one, we should quit wasting their time trying to come up with regulations and spend more time taking responsibility for looking out for ourselves. Caveat emptor has a lot more wisdom than people give it credit for. Second, honest people should quit trying to control everybody through laws, and realize that integrity is inexplicable, uncontrollable and priceless; instead of trying to induce it in others through the government, we should instead seek to form social and business circles of like-minded folks. Not a cure all, of course, but better than the false security of regulation and "correct inducements." Thanks for the interesting comment. I didn’t mean to propose any system, I simply wanted to point out that there is no system that will render all bad behavior unprofitable. How could there be? When I said people should hate these guys, I wasn’t suggesting that, in and of itself, would do anything material. I meant that the fact that we don’t is a symptom of why it happened. Namely, most people have no moral code. There is no system I know of that causes people to be honest. It’s a miracle anybody is honest, if you ask me.

Are you suggesting there is some perfect set of laws that would actually lead to everybody acting morally, just because the set of rules makes it in their best interest through clever use of punishment and effective enforcement? I can’t believe that. There will always be people clever enough to screw with any system, and take advantage of others.

I don’t think there is a system that will eliminate the possibility of people profiting from doing bad. My point was that if you quit fooling yourself into thinking otherwise, you can at least hope to mitigate the consequences of that fact. For one, we should quit wasting their time trying to come up with regulations and spend more time taking responsibility for looking out for ourselves. Caveat emptor has a lot more wisdom than people give it credit for. Second, honest people should quit trying to control everybody through laws, and realize that integrity is inexplicable, uncontrollable and priceless; instead of trying to induce it in others through the government, we should instead seek to form social and business circles of like-minded folks. Not a cure all, of course, but better than the false security of regulation and “correct inducements.”

]]> By: CSMR http://scripts.mit.edu/~birge/blog/maybe-moral-hazard-should-be-taken-more-literally/comment-page-1/#comment-3684 CSMR Mon, 02 Mar 2009 01:22:27 +0000 http://scripts.mit.edu/~birge/blog/?p=150#comment-3684 Yes you're probably wrong. It's not true that cheating always pays off. If you have arranged the probability of detection and the corresponding punishment so that it doesn't pay off in a given situation, you have reduced the risk of cheating in that situation. The solution you propose is unclear. If you want a system based on crooks being detested, that's one form of punishment, just like the above, but difficult to achieve because you need to convert a large body of people to your particular religion (non-pious social mindedness which detests crooks). If you want people to be inherently less attracted to cheating, you have the same difficulty, although if you were successful in creating large-scale social-mindedness then the results would be dramatic. There is certainly an effect of social-mindedness but it is just hard to create via policy especially if the government is not able to use overt indoctrination programs. The fact that systems generate behavior via incentives and other forces doesn't mean that you can't blame people if you so wish, although it does undermine notions of blame based on free-will. (Here for your F# posts but got distracted!) Yes you’re probably wrong.
It’s not true that cheating always pays off. If you have arranged the probability of detection and the corresponding punishment so that it doesn’t pay off in a given situation, you have reduced the risk of cheating in that situation.
The solution you propose is unclear. If you want a system based on crooks being detested, that’s one form of punishment, just like the above, but difficult to achieve because you need to convert a large body of people to your particular religion (non-pious social mindedness which detests crooks).
If you want people to be inherently less attracted to cheating, you have the same difficulty, although if you were successful in creating large-scale social-mindedness then the results would be dramatic. There is certainly an effect of social-mindedness but it is just hard to create via policy especially if the government is not able to use overt indoctrination programs.

The fact that systems generate behavior via incentives and other forces doesn’t mean that you can’t blame people if you so wish, although it does undermine notions of blame based on free-will.

(Here for your F# posts but got distracted!)

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