One bit of economic reasoning says, "If there are no consequences, people will make bad choices."
Don't let big banks get bailouts, because if we do, bankers will take bigger risks.
So, make sure that the dentist is expensive (and painful) because that will encourage people to brush their teeth.
And don't make it too easy to collect on fire insurance, or people will be careless with matches.
Insurers call these behaviors 'moral hazards.' (And some call them 'morale hazards' fyi). In specific instances, people will make choices that cause harm to themselves and to society because they don't fear the consequences.
Without a doubt, this makes sense for organizations.
But the instances are more specific than you might guess. For example, awareness of the certainty of lung cancer forty years later doesn't do much to keep teens from smoking. The long-term consequences didn't matter—it was a tax on cigarettes that made the biggest difference.
And telling a mentally ill homeless person that he 'deserves' to live on the street because of bad choices along the way isn't doing anything for him, or to those that might be forced into his situation down the road.
Waiting for an employee to screw up so we can fire her seems a convoluted way to set a standard for the rest of the team.
Too often, we get confused about what people deserve vs. what they get. We use our instinctual, Calvinist understanding of moral hazard as an excuse to teach people a lesson, to callously embrace an efficient market. But of course, the market isn't efficient at all. It unevenly distributes rewards to people based on luck, and allows those with an early head start to amplify that lead with less and less effort.
Life's risky and it's played for keeps. We all benefit from a safety net.