Wallstreet: Money Never Sleeps

Last night I rented the latest incarnation of Oliver Stone's Wallstreet. Money might not sleep, but as irony would have it I fell asleep half way through money never sleeps. I had to watch the rest this morning. As an economist I did find it mildly interesting, but I can't see the non-economic minded enjoying this film. It was overly idealistic with plenty of bad acting. Susan Sarandon was awful.

My biggest problem was that they grossly misused and over-used the term "moral hazard", which they attempted to define as people not being responsible with other people's money. In reality moral hazard is the effect of an insurance policy which actually increases the probability of incurring a loss. A great example is employment insurance. If you make it too easy to get, it increases the probability that certain people will quit their job.If you make welfare payouts too high, it creates an incentive for the people on the margin to make claims and leave the workforce. Why work when you can get paid not to work? Then a segment of the population goes from adding economic value to our economy to draining value. That's moral hazard. The larger the incentive, the larger the hazard.

Bottom line, if you are interested in financial markets you should enjoy at least parts of the movie. If you don't think that you will enjoy "Wallstreet: Money Never Sleeps", you won't.