Insuring against a risk can quietly make people take more of it

Once a cost is covered by someone else, behavior shifts — drivers with full insurance take fewer precautions, banks make riskier bets when they expect a bailout. Economists call this moral hazard, a term that originated in 17th-century marine insurance and now shapes how everything from healthcare to bank regulation is designed.

— Kenneth J. Arrow, Uncertainty and the Welfare Economics of Medical Care — The American Economic Review, 1963