Moral hazard

Moral hazard is when people have insurance against a certain event, they are less likely to guard against that event occurring.

Definition

According to Principles of Economics by Timothy Taylor (3rd edition),

Moral hazard. When people have insurance against a certain event, they are less likely to guard against that event occurring.

According to Macroeconomics by Mankiw (7th edition),

Moral hazard. The possibility of dishonest behavior in situations in which behavior is imperfectly monitored; for example, in efficiency-wage theory, the possibility that low-wage workers may shirk their responsibilities and risk getting caught and fired.

According to Cost Accounting by Horngren, Datar, Rajan (14th edition),

Moral hazard. Describes situations in which an employee prefers to exert less effort (or to report distorted information) compared with the effort (or accurate information) desired by the owner because the employee's effort (or validity of the reported information) cannot be accurately monitored and enforced.