Archive for the ‘social safety net’ Category

Moral Hazard at Qdoba

February 15, 2009 2 comments

Americans Could Learn a Lot from Dwight Schrute

Drudge always happens to find a way to capture outrageous stories that reflect the times we’re living in. To this end, I could not believe this nugget regarding a worker at Qdoba. Apparently, in order for one to receive unemployment insurance, one needs to be officially fired. So the brilliant fellow in this story decided that the best way to do this was to wreak havoc on the restaurant, throwing pots and pans along with food all over the place. This is reminiscent of the type of scene one would find in my fraternity house common room on a weekend morning.

What this reflects however is moral hazard at its lowest common denominator. A man is so desperate to receive compensation for being laid off that he tries to intentionally get himself fired. Honestly, what is the world coming to? And I would bet that this is not an isolated incident. Because we have built in a social safety net to our society, we have created the conditions for people to become lazier, less hard working and more profligate. We feel that because the government has X, Y and Z programs that we will have nothing to fear come retirement; or even be rewarded if we rowdy a Qdoba restaurant (why would you ever denigrate an institution that makes such a delectable burrito!?). It is akin to the way a high school student drives a car bequeathed to him, versus a car that he purchases with his own money. Trust me, I speak from experience here.

The fact of the matter is that in the case of the nation, the social safety net devours the very system that was able to support it, until it kills the system from within. The social safety net would have never been considered had we not been able to develop an economy wealthy enough to sustain it. Yet it is this socialist system that has grown so big that it may cause our government to default someday — either that or print up enough money to devalue the massive unfunded liabilities lurking over the next twenty years. Moral hazard has placed a debt burden on future generations. The Ponzi scheme of everyone paying into a system to distribute advantages to certain people will collapse because it will be unsustainable.

Thankfully, the laws of economics are color-blind and class-blind. They are just in that they weed out failed operations, fraudulent schemes and profligate people. They provide pain when a government immorally tries to stop the markets from functioning as they should. In the long run, they reward the savers, the prudent businessmen and the innovators. But you can be sure that until such time as things collapse to the point where we abandon a mixed economy and the welfare state, there will be far more people like the man above who seek to con the system for personal gain. Only after the fall will the deserving people prosper.