Smithsonian Magazine ran an article on moral hazard on the 50th anniversary of the invention of the 3-point seat belt. There are some aspects of moral hazard that I agree with but I don't know if seat belts make drivers more reckless. (Though it is possible that drivers of SUVs or larger and stronger vehicles may behave more aggressively. For instance, I don't think I've seen an aggressive SmartCar driver yet though it may change when there are more SmartCars around.)
There has been a lively debate over risk compensation ever since, but today the issue is not whether it exists, but the degree to which it does. The phenomenon has been observed well beyond the highway—in the workplace, on the playing field, at home, in the air. Researchers have found that improved parachute rip cords did not reduce the number of sky-diving accidents; overconfident sky divers hit the silk too late. The number of flooding deaths in the United States has hardly changed in 100 years despite the construction of stronger levees in flood plains; people moved onto the flood plains, in part because of subsidized flood insurance and federal disaster relief. Studies suggest that workers who wear back-support belts try to lift heavier loads and that children who wear protective sports equipment engage in rougher play. Forest rangers say wilderness hikers take greater risks if they know that a trained rescue squad is on call. Public health officials cite evidence that enhanced HIV treatment can lead to riskier sexual behavior.
In K1 and K2's school, all the metal posts and poles on their playground equipment is wrapped with padded foam I assume to prevent injuries. It is so padded that kids now run into them just to see how far they can bounce backwards. Playground supervisors and teachers put a quick stop to this, however. Playground supervisors? Never had those when I was growing up.