by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Moral Hazard Problem?Moral hazard refers to the case when people engage in riskier behavior with insurance than they would if they did not have insurance. For example, if you have health insurance that covers the cost of visiting the doctor, you may be...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What are Risk Groups?Not all of those who purchase insurance face the same risks. Some people may be more likely, because of genetics or personal habits, to fall sick with certain diseases. Some people may live in an area where car theft or home robbery is more likely...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is the Fundamental Law of Insurance?The major additional costs to insurance companies, other than the payment of claims, are the costs of running a business: the administrative costs of hiring workers, administering accounts, and processing insurance claims. For...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How Does the Government provide Social Insurance?Federal and state governments run a number of insurance programs. Some of the programs look much like private insurance, in the sense that the members of a group make steady payments into a fund, and those in the group...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Is Consumer Behavior Rational in Economics?There is much human behavior that mainstream economists have tended to call “irrational” since it is consistently at odds with economists’ utility maximizing models. The typical response is for economists to brush these...
