Saturday, November 29, 2008

Moral hazard

If the expression moral hazard refers to the prospect that a party insulated from risk may behave differently from the way he, she or it would behave if he, she or it were fully exposed to the risk, then, Malaysia's economic management has had embedded features of moral hazard for the past several decades.

It is said that moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions.

In case the above is found to be too wordy or conceptually too far-reaching, here are three stark examples of moral hazard:

Bailouts

Subsidies

Economic policies that eschew merit in favour of ethnicity.

Get the picture?

4 comments:

Anonymous said...

Moral hazard to whom?

It would be immoral not to save yr buddies, who support u politically & financially.

It would be immoral not to profit from deals when others in yr circuit r doing so openly.

After all, god only help those who help themselves!

So?

Who r those people around the fringes of the socio-political games? Sorry, at the moment they r of inconsequential. These shadowy figures can only be visible coming election time. & Majority of them r happy with Rm200 + a piece of sarong!

Like someone said these diggers of Malaysian economic pit r just don't care/not self-conscious about (1) that the pit is getting deeper, (2) there r no exit plan by way of ladder or external climbing rope.

Yet the saddest part is that they r still self-praised for doing a good & deep pit as a cocoon!

anomie

de minimis said...

anomie

What you are saying is the phenomenon of denial. This is something that needs to be addressed head on.

Many within the BN superstructure are aware of the urgency of the situation. Most, however, are complacent. It is this complacency that you are probably aggravated over.

The biggest challenge for the BN powers that be is to wake themselves up and, to have the courage to change or reform. This is where BN is truly at the crossroads, especially UMNO.

If you bother to read blogs like Sakmongkol AK47, you will immediately realise that there are pockets of people within the BN superstructure that deserve better recognition. But, the fact that they are not bodes a bleak future for BN.

Worse still, it bodes a bleak future for Malaysians as this denial prevents our economy from breaking away from the drag of competitiveness, lack of productivity, poor quality of education, absence of innovation all of which lead to loss of major economic opportunities and wealth-creation.

Malaysia has operated over four decades on the principle of an expanding economic pie. How to keep this pie expanding while BN is in denial of the need for serious reform at every level is the greatest issue at hand.

The March 8 General Elections bore all these messages. But instead of galvanising reform and change, all we see at the moment is the move towards repression and criticism, even constructive criticism.

Instead of cynicism, some of us are choosing to continue to frame the push for reform by highlighting the several paths forward for the sake of the country, not any particular political leader or party or coalition. We need to press on so that our voices, the voices of reason, can eventually be heard even if zero credit is given to us.

walla said...

Readings
http://tinyurl.com/6ogoyw
http://tinyurl.com/5khnlh
http://tinyurl.com/6eny3o

Patricia said...

I agree: Denial is the biggest problem we have to deal with now. Every press conference, every speech, every time someone in power opens his mouth - it is to say we are 'in the well', like my students used to say!

You know what? I shouldn't have corrected them. We memang are in the well, man!

Pat