Martin Gaynor, Deborah Haas-Wilson, and William Vogt, cast in doubt the
very notion of "abuse" as a result of moral hazard in their NBER paper
titled "Are Invisible Hands Good Hands?":
"Moral hazard due to health insurance leads to excess consumption,
therefore it is not obvious that competition is second best optimal.
Intuitively, it seems that imperfect competition in the healthcare
market may constrain this moral hazard by increasing prices. We show
that this intuition cannot be correct if insurance markets are
competitive.
A competitive insurance market will always produce a contract that
leaves consumers at least as well off under lower prices as under
higher prices. Thus, imperfect competition in healthcare markets can
not have efficiency enhancing effects if the only distortion is due to
moral hazard."
Whether regulation and supervision - of firms, banks, countries,
accountants, and other market players - should be privatized or
subjected to other market forces - as suggested by the likes of Bert
Ely of Ely & Company in the Fall 1999 issue of "The Independent Review"
- is still debated and debatable. With governments, central banks, or
the IMF as lenders and insurer of last resort - there is little
counterparty risk.
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