Moral hazard run amok

Many Australians are rightly concerned about the health risks posed by arrival of the coronavirus on our shores. Elderly people and cancer patients with compromised immune systems are self-isolating to avoid infection. Doctors are worried about the availability of facemasks. Some people may be getting a bit obsessive about stockpiling toilet paper, though that’s perhaps understandable given the threat of mass quarantines.

But university Vice-Chancellors are in a class all their own.

What keeps them awake at night is the loss of Chinese student tuition revenue. At a time when the rest of the country is hunkering down, universities are preparing to airlift thousands of Chinese students to Australia the moment the travel ban is lifted. The University of Sydney has even prepared to evict students from their dormitory in order to reserve an entire apartment building for incoming Chinese students needing quarantine.

For these VCs, moral hazard is a bigger risk than the coronavirus. Moral hazard is the expectation that organisations (and their leaders) will reap the rewards of their successes while others will bear the burdens of their failures. It’s heads I win, tails you lose. And it’s reached epidemic proportions in our universities.

If our Chinese students come back and no one gets infected, the VCs will look like heroes for having stood up to the supposed racism of those who wanted the travel bans maintained. But if the universities unleash chains of infection on their students and the wider community, the hospitals and health system will bear the burdens (both human and financial) of managing the outbreak. That’s moral hazard.

Even worse, several VCs are encouraging their students to enter Australia via the back channel of two weeks spent in a ‘third country’ like Thailand, Malaysia, or Dubai. If these students dodge the virus bullet, universities win. If any of them get sick while in transit, then they will be stranded in developing countries, far away from loved ones, perhaps without access to healthcare. Heads the VCs win; tails the students lose.

I teach at a university, and I certainly don’t want to bite the hand that feeds me. My own university has announced $200 million in coronavirus austerity measures. I face a real financial hazard from coronavirus-related cuts. But better a financial hazard than a moral one. If I’ve learned one thing from a lifetime of scholarship, it’s that money isn’t everything. Morals matter more.