Moral Hazard

I gotta admit, sitting on this AI bubble has reignited my obsession with economics. Well, not so much economics as the history of economics in the United States. The boom and bust cycle. The creation of the Federal Reserve. And of course, the crash of 1929.

If you spend any time studying this history, you run across the idea of moral hazard. If you are unfamiliar with the term, the idea is simple. An economic actor has an incentive to increase their exposure to risk because they will not bear the full cost associated with the risk.

The term is big in the insurance industry and came back to the foreground with the Great Recession. However, I have been thinking about it a little differently. What if moral hazard was a core mechanical element of a game?

Welcome to my thought experiment...

Let’s take a game everyone is familiar with, Dungeons & Dragons. In D&D, when I roll dice, the hazard is born by me, the player. I declare an action, and my character, which is simply an extension of the self, carries the risk. There is, of course, some nebulous collective risk to the party, but a party isn’t a union and I can make a new character.

This risk/reward matrix is effectively mine alone to bear. If I open that door or attack that bugbear in that way, I reap the reward or the consequence. However, what happens if I am unaware of who eats the consequence.

That is the key to moral hazard. The party that absorbs the consequences is abstracted from the perpetrator of the action in the moment. So what would that look like in D&D?

The core mechanic of D&D is the combat mechanic. The slow attrition of hit points over time balanced against the accumulation of wealth. How much you choose to push this is tied to effectiveness, but if it wasn’t, how would that work?

Would it mean that you endanger the town you have a vested interest in back home? Would your lost hit points mean children get polio in the capital of the kingdom you call home? Would it mean that people die in the next kingdom over?

Would you do anything different as a player if you knew someone abstracted from you carries the burden of your decisions?

Roleplaying games like to enforce the illusion of personal agency to change the world. It is the hero fantasy we have been carrying in the US and Europe since Arrian wrote the Anabasis. Of course, the world doesn’t work that way. Others more often pay for our choices than we do.

With all the games out there attempting to “capture experience” I’ve yet to see one capture how often we make choices that hurt others no where near the choices we make...