Fuzzy knowledge: an historical exploration of moral hazard and its variability

This paper revisits Baker's historical work on moral hazard, which argues that Pauly's 1968 intervention represents a clear break in an otherwise linear history of the term. For Baker, Pauly redefined moral hazard fundamentally, shifting the term from an insurance industry definition which centred on character and temptation to an economics definition that emphasized maximizing agents and incentives. This paper takes issue with that assessment and instead presents a revisionist genealogy of the term. The paper makes two critical observations of Baker. First, it questions the linearity of Baker's history by demonstrating empirically that Pauly's influence only took hold in the late 1980s and early 1990s. This finding suggests that the history of the term should be understood as a process of perpetual discovery and reordering, rather than as a linear, forward progression towards greater clarity and rationality. Second, drawing on archival material, it questions the idea that the meaning of moral hazard was ever clear and unitary either before or after Pauly. The paper argues that moral hazard, in contrast to other forms of economic knowledge, is ‘fuzzy’, not ‘precise’. Finally, in an attempt to theorize this ‘fuzziness’, the paper argues that moral hazard is both mutable and mobile, characterized by constancy and variance. It concludes that this mutability in part explains the ubiquitous appeal of the term across the political spectrum.