Editing Moral hazard (section)

==History ==
According to research by Dembe and Boden,<ref>{{Cite journal|last1=Dembe|first1=Allard E.|title=Moral Hazard: A Question of Morality|year=2000|last2=Boden|first2=Leslie I|journal=Journal of Occupational and Environmental Medicine*|volume=42|issue=1|pages=15–20|doi=10.1097/00043764-200001000-00005}}</ref> the term dates back to the 17th century and was widely used by English insurance companies by the late 19th century. Early usage of the term carried negative connotations, implying [[insurance fraud|fraud]] or immoral behavior (usually on the part of an insured party). Dembe and Boden point out, however, that prominent mathematicians who studied decision-making in the 18th century used "moral" to mean "subjective", which may cloud the true ethical significance in the term.
The concept of moral hazard was the subject of renewed study by economists in the 1960s,<ref name="Arrow 1963 941–732">{{Cite journal|last=Arrow|first=Kenneth|year=1963|title=Uncertainty and the Welfare Economics of Medical Care|publisher=American Economic Association|volume=53|issue=5|pages=941–73|jstor=1812044|periodical=[[The American Economic Review]]}}</ref><ref>{{Cite journal|last=Pauly|first=Mark V|year=1968|title=The economics of moral hazard: comment|publisher=American Economic Association|volume=58|issue=3|pages=531–37|jstor=1813785|periodical=The American Economic Review}}</ref> beginning with economist Ken Arrow,<ref name=":0">{{Cite book|last1=Finkelstein|first1=Amy|title=Moral Hazard in Health Insurance|last2=Arrow|first2=Kenneth J.|last3=Gruber|first3=Jonathan|last4=Newhouse|first4=Joseph P.|last5=Stiglitz|first5=Joseph E.|date=2015|publisher=Columbia University Press|doi=10.7312/fink16380|jstor=10.7312/fink16380|isbn=9780231538688}}</ref> and did not imply immoral behavior or fraud. Economists use this term to describe inefficiencies that can occur when risks are displaced or cannot be fully evaluated, rather than a description of the ethics or morals of the involved parties.

Rowell and Connelly offer a detailed description of the genesis of the term moral hazard,<ref>{{Cite journal|last1=Rowell|first1=David|title=A History of the Term 'Moral Hazard|year=2012|last2=Connelly|first2=Luke B.|journal=Journal of Risk and Insurance|volume=79|issue=4|pages=1051–75|doi=10.1111/j.1539-6975.2011.01448.x }}</ref> by identifying salient changes in economic thought, which are identified within the medieval theological and probability literature. Due to the different approaches taken by economics and philosophy in interpreting the concept of “moral hazard,” there are significant differences in their understanding of its underlying causes. In economics, “moral hazard” is often attributed to the malignant development of utilitarianism. In contrast, philosophy and ethics view “moral hazard” from a broader perspective that includes the moral behaviour of individuals and society as a whole. The root cause of “moral hazard” is due to the immoral behaviour of economic agents from a social perspective. Their paper also compares and contrasts the predominantly normative conception of moral hazard found within the insurance-industry literature with the largely positive interpretations found within the economic literature. Often what is described as "moral hazard[s]" in the insurance literature is upon closer reading, a description of the closely related concept, [[adverse selection]].