The perils of Moral Hazard

August and September have provided so much material for a blog that I am struggling to decide where to start. I feel like a seven-year old who has been given the keys to a sweet shop as a birthday present. So I opted for the Northern Rock episode and its implications for moral hazard. Moral hazard describes an action that can result in the deterioration in the quality of peoples’ behaviour. Perhaps the best example is the moral hazard associated with insurance. A family with home contents insurance may take less precaution against theft of their property than a family with no contents...