Nearly a thousand years ago, William the Conqueror brought across the English Channel the French word “hasard” which meant a game of dice.
Several centuries later, we find it anglicized in an expression first used by insurers before becoming a pillar of contemporary capitalism: “moral hazard”, which we have translated into French as “moral hazard”.
Moral hazard is to lay down the principle that companies must be left to pay the price for their bad choices, right up to bankruptcy.
Shareholders, lenders and perhaps even customers must lose money, and managers lose their jobs.
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It is morality in the sense that the alternative is taxpayer bailout.
In other words, the nationalization of losses while profits have been privatized.
It's also about efficiency, because there has to be a possibility of loss for the risk-taking to be reasoned and reasonable.
"Capitalism without bankruptcy is Christianity...
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