Congressman Snowball, having read Chapter 11 of this text, informs his colleagues that people who have higher levels of education have higher earnings capacities. He argues, based on Chapter 17, that one way to reduce the moral hazard of welfare is to pay larger benefits to those with limited earnings capacities. Therefore, according to Congressman Snowball, a way to accomplish this would be to provide large welfare payments to poorly educated Americans. Does this eliminate moral hazard?
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