"Of Football Helmets and Government Bailouts"

"This, of course, is a textbook example of what economists call “moral hazard.”  That’s a situation in which insuring against a bad outcome leads to more of that outcome precisely because the insured expects the consequences to be less severe than they would have been without the insurance." 

---From Steven Horwitz recent article, Of Football Helmets and Bailouts, appearing in The Freeman.

In a truly free, competitive capitalist environment, entrepreneurs and businesses operate within a profit and loss system.  When the risk of loss is artificially removed by government bailouts, business activity takes on unnecessarily risky behavior, behavior that leads to risk to the taxpayers and consumers.

Think of General Motors, Chrysler, Fannie and Freddie, and AIG.

The possibility of profit and loss provides the incentive to efficiently and ethically provide the masses with what they want and need.  When the possibility of loss is artificially removed the economic environment can no longer be called "capitalism" but one of "privatized profit and socialized risk."