Scott Alexander linked the name to the concept in his eponymous post, Meditations on Moloch. The post intersperses lines of Allan Ginsberg's poem, Howl, with multiples examples of the dynamic including: the Prisoner's Dilemma, dollar auctions, fish farming story, Malthusian trap, capitalism, two-income trap, agriculture, arms races, races to the bottom, education system, science, and government corruption and corporate welfare.
It happens when "In some competition optimizing for X, the opportunity arises to throw some other value under the bus for improved X. Those who take it prosper. Those who don’t take it die out. Eventually, everyone’s relative status is about the same as before, but everyone’s absolute status is worse than before. The process continues until all other values that can be traded off have been – in other words, until human ingenuity cannot possibly figure out a way to make things any worse." - Scott Alexander