Monthly Archives: December 2009

With regard to the controversial goal that has shattered Irish World Cup hopes, how would an economist have chosen to control the ball in Thierry Henry’s position? Given that the rewards so greatly exceed the risks, would it have made any economic sense not to handle the ball? Is this a form of moral hazard?
Rich Stevenson, Oxford

Dear Rich,

Allow me to answer the questions in reverse order. Moral hazard describes a situation where a decision-maker takes unwarranted risks because he or she has been provided with some kind of safety net. Examples include people who insure their cars and then don’t park securely, or financial traders who gamble because they get bonuses for profitable trades, but no real penalty for losing money. Thierry Henry committed a deliberate handball and set up the winning goal for France. I cannot quite see the parallel with moral hazard.

As for the risks and rewards, I think you are extremely confused. You say that the rewards exceed the risks, but we must ask to whom those risks and rewards accrue.

Henry has been selfless. The rewards of his cheating go largely to his team-mates, who get to go to the World Cup with their names unblemished, and to fans of French football, once they get over the embarrassment – which they will. Henry himself faced all the risks. He might have been cautioned or sent off, but surely the far greater risk was what happened: only the TV cameras noticed the handball and a great striker’s reputation was tarnished. His subsequent pronouncements of guilt, shame and remorse have hardly put matters right.

So, what would an economist have done? The answer is absolutely clear: economists would never cheat in front of the camera. Their fans and team-mates might be frustrated with them, but their sponsors would be delighted.

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Tim, also known as the Undercover Economist, writes about the economics of everyday life.