Final Flashcards
(142 cards)
1
Q
Conflicts between: (moral standard and practical standard)
A
- conflicts between moral standard and moral standard: moral dilemma
- moral standard and practical standard: motivational dilemma
- practical standard and practical standard: practical dliemma
2
Q
economics v.s. ethics: desciptive v.s. prescriptive statements
A
- economics makes descriptive or positive statements about the economy: knowledge about ‘what is’
- ethics: makes perspective or value/normative statements: knowledge of “what ought to be done”
- both are connected, any policy advice is derived from:
- value statement: government should foster goal x
- positive statement: x is most effectively realized by using policy instrument y
- policy advice: implement policy instrument y
3
Q
example of policy advice by economists
A
- value statement: human happiness is an important goal
- positive statements: 1) unemployment has a strong negative impact on human happiness. 2) abolishing tax on dividends will attract multinational companies and reduce unemployment
- policy advice: the tax on dividends should be cancelled
4
Q
On what values are the classical defenses of the free market based? According to John Locke
A
John Locke: the free market economy respects the right to freedom and the right to private property
5
Q
On what values are the classical defenses of the free market based? According to Adam Smith
A
Adam Smith: the free market economy will produce the greatest benefit:
- market allow labor division, which generates higher productivity and innovation
- prices tend to be lowest possible level in copetitive market
- competition generates efficient allocatio through price signals
6
Q
theory of unintended consequences
A
greatest benefits are realized by self interest of economic agents
7
Q
criticism on free market economy
A
- lack of efficiency: companies have an incentive to reduce competition. Negative externalities: self interest is not always socially efficient
- lack of other ethical values: injustice; free markets generate unequal income distribution
8
Q
definition of capitalism
A
an economic system that combines private property of productive enterprises that aim at profit and a competitive environment
9
Q
2 models of capitalism
A
- Anglo saxon model (UK, US)
- Rhineland model (Germany, France)
10
Q
Anglo saxon model
A
One of the 2 model of capitalism, this one is for UK and US
- free market operation
- government secures private property and contract rights, but does not intervene or regulate the economic process
- shareholder model for companies: maximize stock value (bonus system for managers)
11
Q
Rhineland model
A
one of the 2 model of capitalism, this one is for Germany and France
- market operation, but within some limits
- government regulates the market and provides for welfare state
- stakeholder model for companies: balance of interest of stakeholders
12
Q
Verschillen tussen Anglo saxon model en Rhineland model
A
- Anglo saxon: free market operation. Rhineland: market operation, but within some limits
- Anglo saxon: government does not intervene or regulate. Rhineland: government regulates market and provdes for welfare state
- Anglo saxon: shareholder model. Rhineland: stakeholder model
13
Q
Method to study the morality of markets by applying ethics to the evaluation of market institutions
A
combine moral standards and economic knowledge
14
Q
should polluting industries be concentrated in third world countries?
A
Note of Lawrence Summers:
- poor countries have low wages: earnings foregone from increased mortality is lowest
- costs of pollution are progressive
- rich countries value clean environment more than poor countries
15
Q
What is the criterion for right in utilitarianism?
A
- the greatest hapieness of the greatest number (Jeremy Bentham)
- an action is right in and only if the sum total of utilities produced by that act is greater than the sum of utilities produced by any other act the agent could have performed in its place
16
Q
What does utilitarianism imply? 3 characteristics
A
- consequentialism: judges the ethical valuation of a policy only in terms of consequent effects. (disregards injustice in the past)
- welfarism: only goal is utlity / welfare
- sum ranking: total sum of utilities should be maximized with equal weight to utility of different individuals
17
Q
different types of welfarism
A
- Bentham: utilty is pleasure (hedonism / monism)
- Economists: utility is satisfaction of actual preferences (individual sovereignty: individuals are the best judges of their own welfare)
18
Q
Applying utilitarianism by cost benefit analysis:
A
cost benefit analysis: determine for all policies to be investigated
- who is affected and how?
- how much are they willing to pay for each policy? If they are negatively affected: how much compensation would they require
- determine the sum of these inidvidual valuation and select the alternative with highest net benefit
19
Q
Advantages of utilitarianism / cost benefit analysis
A
- systematic analysis of all consequences
- includes utlity effects that are not priced by the market
- it links to current interest in happiness research
20
Q
criticism on consequentialism
A
can violate individual rights of local population
21
Q
criticism on welfarism
A
preferences of leaders can be preserve
22
Q
problems of sum ranking
A
- trade leads to more inequality
- utilities are difficult to compare
- difficult to weight the consequences for animals
23
Q
What is Peter Singer’s standpoint on weighting consequences for animals?
A
- animals display intelligence
- their suffering should receive equal consideration
24
Q
scholars of free market perspective of the liberal school
A
Schumpeter, Hayek and Friendman
25
Free market perspective of the liberal school
- ideal is free market: free from government regulatons --> Anglo Saxon model
- economic welfare through innovation rather than price competition
- government should protect property rights (rule of law) --> creates incentive for innovation
- no other government intervention: lack of information and regulations protect specific interest
- monopolies allowed if due to unique skill, but may not be used to keep other companies out of the market.
- government should provide only minimum social safety net, to protect individual freedom
26
perfect market perspective of neoclassical school
- mainstream approach in Europe
- ideal is perfect market: no market imperfections
- equilibrium through price mechanism
- modest level of government intervention to fight market imperfections
27
what is the criterion for right in neoclassical welfare economics?
- central evaluative criterion is Pareto optimality
- a situation is Pareto optimal if no Pareto improvement is possible
- a measure generates a Pareto improvement if it makes one or more persons in society better off without making anyone worse off
- theoretical advantage: it requires no aggregation of the utlity of different persons. Argument: utlity of different individuals cannot be compared
- criticism: Pareto criterion is strongly biased in favor of the status quo
28
Pareto optimality and the defence of the perfect capital market, difference between first and second welfare theorem
- first welfare theorem: every perfect competitive market is Pareto optimal: focuses only on efficiency, not on fairness
- second welfare theorem: every Pareto optimum can be obtained as a competitive general equilibrium, given some distribution of inital endowments: allows redistribution in inital endowments, for example by education
- efficiency can be seperated from fairness
- neoclassical economists are commited to ideal of perfect market
29
Proposal of Varian: application of welfare theory:
- collect al bequets (wealth or property made through a will after someone dies) in fund, worldwide
- distribute this fund to all new born worldwide equally
30
conditions for free market and perfect market; market imperfections:
market conditions for perfect market ; market imperfection:
- no government regulation of price, quality or quantity (free market) ; government regulation
- many independent traders / free entry ; product differentiation
- goods are perfectly substitutable ; product differentiation
- full information ; lack of information
- no externalities ; externalities
- rational agents ; bounded rationality
31
moral ideas that are served by perfect market
- welfare: high consumer surplus
- freedom: free choice, no power relations
- justice: fair change for outsiders, do not have to pay for benefits of others (negative externalities) and cheating not possible (because of transparency)
- but free market is a risky ideal! Market imperfections are highly persistent
32
causes of the credit crisis
- shareholders: short term focus
- investment banks: bad risk management and excessive bonusses
- government and central banks: stimulate homeownership and lack of good supervision
- suppliers mortgages: shift risks to other market parties
- credit rating agencies: rating inflation
33
welfare state perspective of the Keynesian school
- Keynes / Beveridge
- Future is uncertain (animal spirits)
- markets are not self correcting: need for cooperation and coordination
- role of government: stabilization policy, market regulations and industrial policies
- Beveridge: welfare state arrangements, progressive tax system that reduces income inequality
34
Evaluation of free market from utilitarian point of view
indicator of free market institutions: index of economic freedom (Friedman)
35
5 subindices of the index of economic freedom (Friedman)
1. small size of government
2. rule of law (protection of property rights)
3. sound monetary policy: low money growth, low sd of inflation, low inflation most recent years
4. openness to international trade: no tariffs, no regulatory barriers
5. freedom from government regulation: no credit market regulations, no labour market regulations
36
influence of economic freedom on income per capita
literature identifies a positive relationship between overall economic freedom and GDP per capita
37
Income and happiness: Easterlin paradox
- in a given country at a given time, rich are on average happier than poor
- hapiness in rich countries do not increase during period of economic growth
- in a cross country analysis there is (at a given year) no relationship between income per capita and hapiness
38
Fred Hirsch on positional competition; distinction between:
- Material goods: satisfaction is independent from consumption level of others. This type of scarcity diminishes with economic growth: positive sum game
- Positional goods: satisfaction is derived from relative position alone. This scarcity is permanent: zero sum game
39
empirical research of positional goods
- Solnick and Hemenway (1998): 50% choses to be relatively rich, even if it means poorer in absolute sense
- Johansson-Stenman et al. (2002): most care about relative income of grand children rather than absolute income
- Alpizar et al. (2005): degree of positionality is 45%: 50-75% for cars and houses, 25% for insurance and number of vacation days
40
Thomas Hobbes on fear, power and insatiable needs
- basic motive: fear results in need to security
- only possible if one has power over others
- power is relative good: can only increase at the expense of others
- wealh is a means of power
- non competitive people are forced to participate in competition
- economy is war: need for government (Leviathan)
- insatiable needs: need that cannot be satisfied, always wanting more
41
Johan Stuart Mill on stationary economy
- "the best state for human nature is that in which, while no one is poor, no one desires to be richer nor has any reason to fear from being thrust back, by the efforts of others to push themselves forward"
- people will be content to be stationary, long before the exhaustion of the earthly resources would compel them to it
42
long term expectation of Keynes regarding continuous economic growth
Economic growth could continue long term due to:
- technological development
- capital accumulation
- productivity improvements
43
effects economic freedom on happiness: evidence of empirical studies
- overall economic freedom has the highest positive effect
- freedom from regulation and small government have negative effect
- freedom of trade, sound money and legal system and property rights also have significant positive effect
44
weaknesses of income and happiness as wellbeing indicators
income per capita does not take into account:
- respect of human freedom rights
- quality of products
- depreciation of capital and the degradation of the natural environment
- quality of government services
- defensive consumpion that has no direct benefit
- non market household and informal production, leisure and other non-material aspects of quality of life
45
consequentialism v.s. deontological ethics
- consequentialism: consequences
- deontological ethics: deon = duty. Respect certain principles, independent from consequences
46
the relevance of intention in the ethics of duty of Immanuel Kant, when is a act morally right?
- Kant: act is morally right if motivated by a good will, not if the outcome is good
- Good will: action is done from a sense of duty. An act motivated by self interest has no moral value
- Duty: act out of respect for the moral law
47
categorical imperative (CI): first formulation
what is moral law? Reason teaches:
- categorical imperative: act in such a way that you can also will that your maxim should become universal law
- test of universalizability: can we wish all people to act upon this principle we act on?
- test on reversibility: would you like it if others would treat you in this way?
48
categorical imperative (CI): second formulation
- treat in such a way that you always treat humanity, both in your own person and in any other, never simply as a means, but always at the same time as an end
- substantial norm: respect each person's freedom by treating people only as they have freely consented. And does not deny that we also use other persons as a means to realize our own goals
49
perfect duties
obligations that must always be fulfilled and are morally blameworthy if violated
- allow no exception
- mostly negative duties (e.g. do not steal)
- can be enforced by law
- correlate to rights
- most easily derived from the first formulation of categorical imperative
- in the economic model, included as constraints
50
imperfect duties
- some latitude in executing
- mostly positive duties (e.g. make a donation to help others)
- cannot be enforced by law
- no correlating rights
- most easily derived from second formulation of categorical imperative
- in economic model is included as preferences in utility function
51
implications of Kantian duty ethics for anti trust policy
- anti trust policy serves welfare by increasing competition
- however, it violates the perfect duty to respect the right of freedom of companies with no parallel justification
- because companies that limit competition by merging do not violate perfect duties, they have no perfect duty to keep prices low
- hence, there is no violation of perfect duties which antitrust law should offset
52
prima facie duties
a duty that should be followed unless it conflicts with a stronger moral obligation. Like duty to keep a promise
53
all things considered duty
the greatest balance of right over wrong
54
ethics of rights
- deontological
- moral right: every human has certain rights that should be respected
- protects the individual against the majority
- higher priority than utilitarianism
55
Libertarianism: Robert Nozick
- only basic right is the right to be free from coercion of others
- Nozick only defends a negative right: duty of others not to interfere with certain activities of the person who holds a given right
- Implies right to private property, right to conclude contracts and market without government regulaton
56
negative rights and neoliberal economics: Friedrich Hayek
- individual freedom as moral principle
- no responsibility for the collective
- opposes central planning by government
- government coercion be limited to providing a legal framework: rule of law
- everyone is free, within the known rules of the game
57
implication for corporate social responsibility of companies
- milton friedman: shareholder model
- the only social responsibility of the company is to increase profits
58
John locke: the Lockean proviso
- defends property rights: earth is common property of humanity. However, property rights are needed to enable persons to appropriate the yields of the earth to sustain their lives
- restriction: lockean proviso: there be enough and as good left in common for others
59
freedom and positive rights
- criticism on dominance of negative rights
- positive rights: others have a positive duty to provide the holder of the right with what he needs to pursue his rights
- Henry Shue: subsistence is a basic right; basic right is a right that is essential to the enjoyment of other rights.
60
positive rights and the stakeholder model
- freeman: stakeholders have a right to be treated as an end
- balance conflicting rights of multiple stakeholders
- ensure the survival of the firm rather than the highest profits
61
what is justice?
- linked to the concept of rights: rights protect the vital interest of the individual
- but, justice is a comparative principle: balancing when different person have conflicting rights
- formal criterion: equals should be treated equally
- this leaves open the condition for equality
62
Procedural justice; Nozick. entilement theory of justice
- 'entitlement theory' of justice: the protection of the fundamental rights or entitlements of the citizens is the cornerstone of his theory
- any distributions is just if it is the result of free choices of individuals: "from each as they choose, to each as they are chosen"
63
Procedural justice: Nozick
justice consist in the unhindered operation of just procedures:
- justice in acquisition: appropriation of un-held things - Lockean proviso
- justice in transfer: by voluntary transactions
- justice for rectification: rectification on injustice in acquisition or transfer
- not the outcome is decisive (end result principle), but how the outcome came into existence (process)
64
John Rawls: hypothetical social contract
procedure to determine of justice: assumes original position with hypothetical social contract:
- social contract: what would rational self interested people choose --> no ethical pre-assumptions
- hypothetical, a veil of ignorance: people do not have information about their own position in society --> assures impartiality
65
Rawl's principle of justice
hierarchy of 3 (substantive) principles
1. principle of equal liberty: Everyone should have equal basic rights and liberties
2 and 3 are two parts of the second principle
2. fair equality of opportunity: people with similar talents and willingness to use them should have equal chances to attain positions, regardless of their social background.
3. difference principle: Inequalities in wealth and income are justified only if they benefit the least advantaged members of society.
66
Difference principle, one of the 3 principles of Rawl's principles of justice
inequalities in primary social goods should be arranged so that they are to the greatest benefit of the least advantaged person:
- primary goods: goods that every rational person wants
- primary social goods: primary goods under control of institutions
- least advantaged: broad group of 30% lowest income group
67
4 types of inequality in the Netherlands
- economic capital: education, job, income
- social capital: strong ties, personal contacts, professional network
- cultural capital: cultural activities, digital ability, english speaking
- personal capital: physical health, mental health, esthetic capital
68
criticism on difference principle
- Nozick: tax is forced labor, true reason: not justice but envy. However, redistribution does not diminish envy.
- Parfit: problem of strong difference principle is that the quest for equality rather throws away goods that cannot be evenly divided than let some have more than others, it is against Pareto optimality
- problem of weak difference principle: any small harm to the least off is allowed to nullify any benefit, however large, to other groups
69
Rawl's law of peoples
- Rawl's principle of justice is within nations, not between nations
- for justice between people of different nations, Rawls defines the following difference principle: least advantaged have sufficient all purpose means to make effective use of their freedoms and to lead worthwhile lives
- this principle is less demanding this Rawl's difference principle for justice within nation states: because there is no duty of assistance once the poor country has a well ordered society
- contrasting with the cosmopolitan view: all individuals are equal, worldwide, without regard of the societies in which they live
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implication of Rawl's theory for intergenerational justice
- hypothetical social contract: not knowing to which generation one belongs
- we should hand to the next generation a situation no worse than we received from the generation before us: compare Brundtland's definition of sustainability
- problem: Rawl's theory implies that current generation should not save to make next generation beter off than current generation
71
social justice (Karl Marx)
social justice is achieved when a classless society is created.
This involves recognizing the inherent value and potential of all individuals, and ensuring everyone has equal opportunities to develop their potential and contribute to society.
- "from each according to his abiltiy, to each according to his needs"
- example: progressive income tax system to finance
- example: welfare states: basic assistance, child benefits
72
capability approach (Amartya Sen)
The Capability Approach is about expanding people's real freedoms to lead lives they have reason to value.
Rather than merely measuring wealth or utility, it asks:
What is each person actually able to do and be?
- capabilities that increase freedom
- example: handicapped people need more commodities in order to be have same capability to move compared to healthy people
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capabilities justice / meritocracy
- principle: distribution is fair if it is in accordance to contribution to society
- broader vision: contributions include moral and civic vitrue
- technocratic version: contribution is the value of people's contribution to the economy
74
capitalistic justice v.s. negative rights: inheritance. John Stuart Mill
- John Stuart Mill: capitalistic justice requires steep progressive tax on gifts and inheritance
75
Example why relevance of justice principles is dependent on the context
example: in 2009 AIG paid $165 in employess bonusses, while it received $175 billion in government support. Does this make these bonusses unfair?
76
economic freedom is in line with negative rights ethics, examples:
- protection of property rights
- small government, low taxes
77
freedom from government regulation may enforce market imperfections that violate negative freedom rights
- example: if there is not transparency, customers may be deceived
- deception violates negeative right to freedom
78
indicators of positive rights
- no absolute poverty: positive right to subsistence requires absence of absolute poverty.
- human development index: indicator for income, education, and life expectancy
79
evaluation of free market from justice ethics: indicators
- indicators for free market: index of economic freedom
- indicators for income inequality within countries: net gini coefficient of income distribution in countries. Share of income of 1% richest income group
- indicators for income inequality between countries: differences in GDP per capita. Gini coefficient of income distribution of all world citizens
80
inquality within countries is measured by
kuznets curve, income inequality rises with income, but for rich countries it decreases
81
Why does kuznets curve does not hold anymore in the US
- from 1775-1935: income inequality rose
- from 1935-1970: income inequality declined
- from 1970 again an rise in income inequality
82
Effects of economic freedom on income inequality: estimation results
Order in most positive (more inequality) to most negative (least inequality):
- free international trade
- no government regulation
- small government
- quality of property law
- sound money
83
income inequality within countries vs income inequality between countries: income inequality at world level is for:
- 30% dependent on income inequality within countries
- 70% dependent on income inequality between countries
84
research provides a nuanced view on the relationship between free markets and inequality:
- free market economies reduce poverty and contribute to positive rights
- the effect of free markets on income inequality is ambiguous (open voor interpretatie)
85
Why is the effect of free markets on income inequality ambiguous
- some aspects of economic freedom reduce income inequality (rule of law, sound monetary policies) and others increase income inequality (small government, trade freedom, freedom from regulation)
- free market model tends to increase income inequality within countries, but the impact on inequality worldwide tends to be positive
86
Virtue ethics
What kind of person should I be?
- focus on moral character instead of actions: without moral character no ethics
- virtue: acquired disposition that is socially valued as part of the character of a morally good person being exhibited in the person's habitual behavior
87
Virtue ethics of Aristotle
- virtues enable a person to obtain a good life: happiness (telos - goal of human life). Link with utilitarianism and with Kant's duty ethics
- virtues are acquired by habit formation. Spiral: actions - character - actions. Cannot change overnight
- choose the reasonable middle ground between two vices of going too far and not going far enough
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some of Aristotle's virtues stimulate sustainable behavior
- temperance
- self command
- benevolence
- justice
89
Prudence and self command
- prudence is careful attention of the consequences of every action insofar they affect
- self command: abstain from present pleasures to obtain greater pleasures in some future time. Without self command, a person cannot act prudently
- prudence and self command comprise several lower virtues (industry, cautiousness, temperance, honesty)
90
Benevolence:
care for happiness of others
- different degrees
- benevolence to strangers is relatively small
- care of universal happiness of all retional and sensible beings is the business of god, and not of man. Man is allotted to care of his own happiness, that of his family, his friends and his country
91
Macintyre's virtue ethics
- Importance of good character and habits for living a morally good life, focusing on virtues as essential components of a flourishing community
- A practice is any complex, cooperative human activity shaped by society, where people gain valuable outcomes unique to that activity
- virtue is an acquired human quality, possession and exercise which enables us to achieve goods unique to that practive
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Examples of three professional virtues (from banks)
- Integrity: (goldman sachs)
- due care (RABO)
- quality and accuracy (Deutsche bank)
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market virtues: Bruni and Sudgen
Markets are not just mechanisms for exchang, they are also arenas of human interaction. People relate to each other not just as buyers and sellers, but as mutual benefit seekers.
- purpose of market: mutual benefit through voluntary transactions
- link to Smith's virtue of prudence
94
Bourgeois virtues: McCloskey
- libertarian virtue ethicist
- combines classical virtues with christian virtues. Classical virtues: courage, temperance, prudence, justice. Christian virtues: love, faith and hope
- McCloskey's scheme is supported by psychological research of main traditions in the world by Peterson and Seligman
95
Care ethics
- not impartial
- criteria: we should preserve concrete and valuable relationships with specific persons.
- tension with rights and justice ethics
96
Hirschman: debate on effects of market operation on virtues
Doux commerce thesis: commerce has a favorable impact on the manners of men. David Hume, Montesquie, Florida, McCloskey, Keynes
Self-destruction thesis: market undermines the virtues that are essential for the good functioning of the market. Artistotle, Marx, Hirsch, MacIntyre, Putnam, Sennet, Layard
Smith supports both with wealth of nations
97
Smith's support of doux commerce thesis
wealth of nations: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."
- Commerce doesn’t eliminate self-interest, it redirects it in socially beneficial ways
98
Smith's support of self-destruction thesis
wealth of nations:
- workman, when they are liberally paid by the piece, are apt to overwork themselves, and to ruin their health and constitution
warning that unregulated
Commerce can degrade moral values, increase inequality, and allow powerful interests to corrupt society. Thus threatening the long-term viability of capitalism itself.
99
long term orientation as a proxy of virtue
long term orientation is "the degree to which individuals in organizations or societies engage in future oriented behaviors such as planning, investing in the future, and delaying individuals or collective gratification" It is related to the following virtues:
- self command
- temperance
- patience
- perseverance
- prudence
100
Is trust a virtue
Trust depends on trustfulness of others persons (trustees). Persons to be trusted are virtuous
- moral virtues: trusfulness, integrity, honesty and temperance
- non moral virtues: accurateness and competences
101
trust requires following virtues of the trustor
- courage to face uncertainty
- belief (leap of faith)
102
Mutual sympathy and moral self criticism
- mutual sympathy: we do not only sympathize with others, but also want others to sympathize with us because of a neutral desire to be regarded positively by others
- induces moral self criticism. How? By imagination in the position of other persons as a mirror glass
103
4 types of societies
1. virtues (Smith) and virtues (doux commerce): flourishing virtuous society
2. virtues (Smith) and Vices (self-destruction): stagnating vicious society
3. vices (mandeville) and virtues (doux commerce): stagnating virtuous society
4. vices (mandeville) and vices (self-destruction): flourishing vicious society
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Overview of Smith's views in wealth of nations
Market economy --> virtues (top) and vices (bottom) --> societal flourishing
105
robert reich as example of liberal: critical about corporate social responsibility
- consumers sell their soul to the devil
- i do not want to be the only idiot
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hierarchy of ethical principals
- if different theories yield the same conclusion: no problem
- in case of conflicts: hierarchy. Prefer one of the theories, which one? Mill: utilitarianism and Rawls: equal rights > equal opportunities > difference principle
- relationship between liberal theories and virtue ethics: in most cases no problem
- relationship with care ethics: depends on the culture
107
integration: rule of thumb
- reject alternatives that substantially conflict with perfect duties and correlating human rights: negative rights, basic liberty rights of Rawls and positive right to minimum subsistence
- reject alternatives that substantially conflict with authentic cultural norms (western countries: equal opportunities, capitalistic justice. non-western countries: maintain community)
- select the alternative that maximizes x. x can be social primary goods of least advantaged (difference principle), capacities (extra-welfarism) or sum of utlities (utilitarianism)
108
applied ethics
application or further specification of moral action guides to a certain field is commonly referred to. Examples are: medical ethics, engineering ethics and journalistic ethics
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general normative ethics
philosophical attempt to formulate and defend basic moral principles
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microeconomic ethics
belongs to the broader category of individual ethics that studies the individuals as the subject of ethical considerations and actions, often in direct relations with other individuals
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difference macro- and microeconomic ethics
- micro: evaluates for individuals, households and businesses their actions given the economic structures or institutions. How should the individual economic agent behave on the market?
- macro: considers the morality of economic structures. does the economic order respect ethical standards?
112
3 types of institutions: regulatory, normative and cognitive
1. regulative: elements include rules, sanctions and regulations. Promote certain types of behavior and restrict others, such as government regulations (ECB)
2. normative: elements are values, social norms, beliefs and assumptions about human nature and human behavior that are socially shared (SER)
3. cognitive: elements include cognitive structures and social knowledge shared by people in a given country that shape inferential sets that people use when selecting and interpreting information. models that shape how people perceive and act.
113
cost benefit analysis
- Klador and Hicks proposed a compensation test, that tests whether the winners (those whose utility increases by a certain policy) might be able to overcompensate the losers (those whose utility decreases).
- For each policy, ask winners how much they would like to pay and losers how much they would like to be compensated.
After summing up prices for all who are affected by the policies, policy with largest net benefit is best
114
hedonism
- since all pleasures and all pains are structurally similar sensations, it should be possible to calculate a net sum total of utility.
- differences of experience could be reduced to standard units of pleasure/pain.
- Bentham gave some simple rules for their measurement. This would imply that if the quantity of pleasure experienced during a circus performance is equal to the pleasure from reading a poem, a circus performance is as good as a poem.
115
liberalism rests on two pillars
1. individual sovereignty
2. rationalism
116
individual sovereignty
implies that individuals are the best judges of their own welfare. any assessment of individual welfare should be based on a person's own judgement. it rejects paternalism, the notion that a third party may know better than the individuals themselves what serves their interests.
117
monism
means that the value of every action can be measured in terms on one dimension, because there is just one good. Hence, we can compare various actions and determine which action generates the most value
118
difference in punishment: retributive justice and utilitarianism
Retributive justice: fairly punishing people who do wrong based on what they deserve.
Utilitarianism focuses only on future outcomes, not past actions. So, it says punishments should be just enough to prevent more harm. Going further would make the criminal suffer more than it would benefit others.
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René Girard on demand of goods
individuals want certain goods or services only because other people want these goods or services. The value an individual attaches to a certain good is derived from the value he or she supposes other people attach to this good. He calls this type of desire ‘mimetic’, because individuals copy the wants of other individuals.
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Immanuel Kant on assessing whether an action is morally good
action is morally good only if the intention of the person who performed the action is good (the so-called ‘Gesinnungsethik’). The outcome of that action does not matter.
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Paternalism
Actions or policies that limit a person's autonomy or freedom, with the justification that these actions are for the person's own good.
Example: law requiring seatbelts or banning harmful drugs
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One of the criticism of libertarianism is that the concept of freedom is too narrow. Explain this
- In particular, besides coercion by others, lack of freedom will occur if a person has insufficient power, skill, opportunity or resources to act (lack of real freedom)
- or if one is psychologically impaired in a way that prevents controlling one’s own actions (lack of autonomy).
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Capitalist principle of justice
refers to the idea that economic rewards (like income or wealth) should be distributed based on individual actions within a free market. It emphasizes merit, efficiency, and voluntary exchange—rewarding people according to what they produce, contribute, or bargain for, not according to need or equality.
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Components of capitalist justice
- Reward to effort: people should be compensated in proportion to how hard they work or the effort they put in. Not for their output
- Reward to contribution: people should be rewarded based on what they actually produce or contribute to society. Ignores social contribution.
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cosmopolitan view
considers all individuals equal, worldwide, without regard for the societies in which they live. Is not supported by Rawls’s concept of global distributional justice.
“We must treat everyone as equals in moral worth, regardless of where they live.”
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Absolute egalitarianism
all people are equal in all aspects. There are no relevant differences that justify unequal treatment. This principle implies an equal share in the benefits and burdens.
“Everyone should have the same, no matter what.”
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example of economic application
strict communist system in which each person obtains an equal income (absolute egalitarianism). Such a system requires that all incomes be taxed for 100% and that the revenues of the tax are completely equally distributed to all by a central authority.
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how does Meritocracy distribute benefits according to moral desert.
- each person should obtain that which she or he deserves. Central to the meritocratic ethics is the idea that economic goods are vested in individual people on the basis of talent, effort and achievement and not based on factors beyond their control.
- The principle is therefore closely related to the principle of equal opportunities of Rawls, which distributes the better positions in society in accordance with talent and ability.
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gluttony
voracious use of food and drink. although this vice seems less important than the other vices, it may cause great harm to the bodily and spiritual health (greed, over-consumption)
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Haughtiness
A misplaced self-confidence that denies one’s own weakness and vulnerability. Related vices are pride, arrogance, conceitedness and self-complacency.
Unfriendly behaviour that shows you consider yourself better than other people
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Indignation
concerns our feelings with respect to the pleasure and pain of other people.
anger about a situation that you think is wrong or not fair
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Indolence
- a person experiences a kind of emptiness
- the state of showing no real interest or effort
- laziness
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Alienation
the source of other vices such as greed, egoism and avarice, and lack of respect for other people and mental degradation of the working class increase.
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Civic virtues
can be defined as “those social norms, ethical commitments, and other-regarding preferences that facilitate the workings of the institutions advocated by liberals”
examples: voting in elections, volunteering, respecting the rights of others, and contributing to the common good
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Explain what Mandeville argued in his Fable of the bees
the practice of private virtues leads to societal disaster and therefore, ultimately, to human unhappiness.
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crowding in
the market may generate positive effects on intrinsic motivations to work. An example of such a ‘crowding-in’ effect is the motivating power of a good salary.
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Noxious markets
markets that are considered morally, ethically, or socially harmful, even if they function economically. This are markets where buying and selling certain goods or services leads to injustice, exploitation, or the erosion of important human values.
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examples of nuxious markets
- child labor
- sex trafficking
- vote selling
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Key characteristics of Noxious markets
- Weak agency: People in desperate conditions may "choose" to sell things they shouldn’t have to
- Harm to others or society: market causes broader harms, like corruption from vote selling
- Undermines equality: it reinforces unjust inequalities or power imbalances.
- Corruption of value: degrades the meaning or dignity of certain goods
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Rule of thumb for weighting moral standards
- One should not cause any harm
- One should prevent that other people cause harm
- One should oppose existing harm
- One should foster the good.
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7 step method of moral evaluation
1. gather facts of the decision problem. How did the situation occur?
2. identify the options
3. identify affected parties
4. identify consequences of each option for each of the affected parties
5. identify moral standards that are met or violated by the options or their consequences
6. if various moral standards are involved and the different options cannot be completely ordered, determine the hierarchy of moral standards that should prevail and identify the option that optimally meets his hierarchy
7. check the outcome
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Economic problem according to Keynes
Keynes was optimistic that economic growth would eventually solve the “economic problem” that is, the struggle for basic survival.
Once this was solved:
- Societies would have enough resources to meet everyone’s basic needs.
- People would only need to work 15 hours a week to maintain a comfortable standard of living.
