The effect that occurs when people are rewarded for being
victims, and hence cease to
take reasonable steps to avoid becoming victims.
The most obvious example is governments paying
compensation to people who are victims of domestic violence. While this may
seem quite just, fewer people remove themselves from the situation as a
result. The result is greater domestic violence, and more compensation being paid.
Other examples are
- Governments paying victims of crime generally -
there are people who actively associate with criminals knowing that they will
be paid many thousands of dollars in compensation if they are bashed.
- Governments giving money for foreseeable property damage (bushfire, floods
and so on). People would be more inclined to build outside flood zones, or
build fire-resistant homes, if no such money were given.
- Drought relief. People would be more inclined to borrow less, and make
themselves less vulnerable to a bad cropping year if they knew there were
no government drought relief. Many farmers would also pay for their own drought
insurance (expensive though it that would be).
- Paying unemployment benefits. People are
less inclined to get a job if they are paid for not getting one.
- Paying single parents benefits. People are more likely to make themselves
single parents if they are paid for it.
Subsidizing anything makes it more popular.
Moral hazard can be seen as manufacturing need.