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In Defense of A Mandatory Public Service Requirement
- Debra Satz
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- Royal Institute of Philosophy Supplements / Volume 91 / May 2022
- Published online by Cambridge University Press:
- 04 April 2022, pp. 259-269
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- May 2022
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This paper defends mandatory national service as a response to democratic decay. Because democracy cannot be maintained by laws and incentives alone, citizens must care about the quality and attitudes of their society's members. In an age of increasing segregation and conflict on the basis of class and race, national service can bring citizens from different walks of life together to interact cooperatively on social problems. It offers a form of ‘forced solidarity’. The final sections of the paper consider objections to this proposal.
The Coxford Lecture Do Markets Drive Out Traditional Values?
- Debra Satz
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- Canadian Journal of Law & Jurisprudence / Volume 32 / Issue 1 / February 2019
- Published online by Cambridge University Press:
- 08 February 2019, pp. 159-172
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- February 2019
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This article explores the claim that markets can undermine the traditional values and motivations upon which a liberal society depends. Markets are alleged to do this through producing and distributing human motivations as well as goods and services. If this is correct, then this consequence gives us reason to protect non-market spheres of life. This concern finds little place in standard economic models. However, an earlier tradition—which includes Adam Smith as well as Karl Marx—addressed the corrosive effects of economic incentives on non-market values. I assess their earlier arguments and examine the contemporary evidence that markets provide individuals with incentives to be self-centered, unreliable and base. I conclude that we have much to learn from this earlier tradition.
2 - Social Progress: A Compass
- from Introductory Chapters
- Edited by International Panel on Social Progress (IPSP)
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- Rethinking Society for the 21st Century
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- 05 July 2018
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- 19 July 2018, pp 41-80
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Preface to the Third Edition
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp xv-xvi
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Summary
The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.
John Maynard KeynesIn undertaking a third edition of this text, the authors of the first and second editions, Dan Hausman and Michael McPherson, set themselves a series of tasks: to update the discussion, especially in the context of the financial crisis of 2007–2009; to address issues that have become prominent in the decade since the previous edition such as growing social and economic inequality; to fill in some of the gaps in the range of issues covered previously; and to take cognizance of developments within ethics and relevant areas of economics. This is a tall order, for the relevant literature is immense and the conceptual challenges in selecting materials to discuss and synthesizing their insights are daunting. To help with this task, Hausman and McPherson asked Debra Satz to join them as a third author, and this third edition is the result of our three-way collaboration. It has been extremely rewarding for us three, and we have learned a great deal from one another in writing together. We hope that our efforts will be rewarding to our readers, too.
Although some sections of the second edition have made their way into this third edition with few changes, the book has been extensively rewritten with a great deal of new material. One unfortunate consequence is that it has grown longer, and bigger books are often more expensive, more intimidating, and less likely to find readers. But we believe that the new material is as important and timely as it is interesting (to us, at least). We hope that it will stimulate more economists and philosophers to learn from each other. We also hope that it will intrigue and delight our readers and more than compensate them for the greater investment of time and money that this edition demands. Among the most obvious differences between this edition and the second edition are the addition of questions for study and discussion at the end of each chapter and a completely new chapter on the limits of markets.
Dedication
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp v-vi
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PART III - LIBERTY, RIGHTS, EQUALITY, AND JUSTICE
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 173-174
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Summary
Though well-being is obviously important, other moral considerations, such as freedom, rights, equality, and justice, are also important. Some people risk their lives pursuing these values. Even if economists had no interest in any values except welfare, they would still need to understand these other values in order to comprehend the goals of policy makers and to help devise policies to achieve them.
In fact, we suspect that economists care as deeply about freedom and justice as do other people, even if these values are absent from their models. Adam Smith objected to most government interference in the market as diminishing welfare, but at the same time he maintained that to prevent people “from employing their stock and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind” (1776, book IV, chapter 7, part 2). Values such as freedom, rights, and justice may be difficult to understand, but welfare is not a simple notion either. In assessing economic outcomes, processes, institutions, and policies, normative economics should encompass a much wider range of moral concerns than welfare.
In Part III we shall be discussing important moral notions other than welfare, under the separate headings of liberty and rights (Chapter 10), equality (Chapter 11), and justice (Chapter 12). Although it is convenient to divide the discussion in this way, these considerations are closely related. For example, different theories of justice have implications for what liberties and rights are important and for the extent to which inequality should be viewed as a moral problem. Our way of classifying the issues is an expository convenience, and readers should not take it too seriously. Readers should also not consider our discussion of other important moral notions exhaustive. For example, the deepest moral commitments of many of those concerned to protect wilderness areas or of those concerned with community are not captured in these chapters. In these chapters, we also discuss three kinds of moral theories: libertarianism (Chapter 10), egalitarianism (Chapter 11), and contractualism (Chapter 12). It is natural to link libertarianism with liberty and rights, but liberty and rights are also important to nonlibertarians. It makes sense to discuss egalitarianism while discussing concepts of equality, but concepts of equality are important in theories of justice that are not egalitarian.
Appendix: How Could Ethics Matter To Economics?
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 337-352
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We hope in this book to have shown how knowing moral philosophy can help one to do economics better and how economics can contribute to ethics. The most persuasive way to make this case is the one we pursued in the main text: by describing important aspects of moral philosophy and showing their bearing on economics. Many economists are nevertheless inclined to deny that moral philosophy has anything to contribute to economics. Why? In this Appendix, we explore some of the arguments and reaffirm the central thesis of this book – that ethics is relevant to economic inquiry.
We shall assume that those economists who would deny that moral philosophy is relevant to economics distinguish positive economics, which addresses factual questions, from normative economics, which addresses evaluative questions, and that they recognize that moral philosophy is relevant to normative economics. But they deny that moral philosophy is relevant to positive economics. We respond to three key arguments in support of their position. Section A.1 considers the role of positive economics in policy making and argues that normative questions are almost always implicated in such work. The second section turns to the general question of what it means to say that positive economics is “value free” and then sketches what we call “the standard view” of the relation between positive and normative economics. Section A.3 comments briefly on the exaggerated distinctions sometimes drawn between positive and normative inquiries, criticizing in particular the view that evaluative claims cannot be rationally addressed. The fourth section revisits the standard view and discusses some problems it faces. Having argued that economic work presupposes ethical commitments, that normative inquiries are subject to reasons, and that the standard view is overly strong, we return to the question of whether positive economists have anything to learn from studying ethics.
Objection 1: Economists as Engineers
There are economists who deny that ethics is relevant to economics and go on to repudiate normative economics as the bastard offspring of completely distinct inquiries that ought to be completely separate. And yet they do not deny that economics is relevant to policy making.
2 - Ethics in Welfare Economics
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 19-38
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Summary
This book will be filled with arguments, but we shall begin with examples to bring them down to earth. One good example may do more to clarify how ethics matters to economics than would a hundred pages of argument. Furthermore, ethical reasoning is not just a matter of logic. Emotion has its part to play, too, and examples help to engage the emotions. In this chapter and the next, our concern is not to argue that ethics matters in economics but to exhibit through examples how important ethics is.
In this chapter we will focus on two examples, which will enable us to identify the main moral assumptions that characterize mainstream normative economics. The first example caused an uproar.
A Shocking Memorandum
Consider the following confidential World Bank memorandum, which was published in The Economist (February 8, 1992, p. 62). Larry Summers, then the World Bank's chief economist, absorbed the criticism the memorandum provoked, but he was probably not the author:
Just between you and me, shouldn't the World Bank be encouraging more migration of the dirty industries to the LDC's [less developed countries]? I can think of three reasons:
(1) The measurement of the costs of health-impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health-impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest-wage country is impeccable and we should face up to that.
(2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always thought that under-populated countries in Africa are vastly under polluted; their air quality is probably vastly inefficiently low [sic] compared to Los Angeles or Mexico City. Only the lamentable facts that so much pollution is generated by non-tradable industries (transport, electrical generation) and that the unit transport costs of solid waste are so high prevent world-welfare-enhancing trade in air pollution and waste.
10 - Liberty, Rights, and Libertarianism
- from PART III - LIBERTY, RIGHTS, EQUALITY, AND JUSTICE
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 175-193
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Summary
Many people have a passionate commitment to individual liberty or freedom (which we here take to be the same thing). Some object to paternalistic laws (such as those requiring the use of seat belts) as infringements on freedom, regardless of whether these laws increase human welfare. Many favor protecting the freedom of those with unusual lifestyles or unpopular religious convictions even if doing so diminishes welfare. Social deliberation often treats protecting freedom and enhancing welfare as independent goals.
It is ironic that normative economics focuses exclusively on welfare, because most economists value individual freedom very highly. When leading economists criticized socialism, for example, they not only questioned whether it is efficient but also argued that economic and political power must be kept separate in order to protect individual liberty (Friedman 1962, ch. 1; Hayek 1944). Economists also value the prosaic liberties that are part of market life such as the freedom to change jobs, to start a business, or to move from place to place within a country. They worry about measures that increase the power of the state. Consider that many economists favor taxes or exchangeable emission rights over direct state regulation of pollution not only because the taxes or exchangeable emission rights are purportedly Pareto superior to the regulation but also because state regulation limits freedom directly rather than via prices and property rights. By increasing the reach of government, such regulations may also threaten freedom indirectly. Similarly, economists often favor cash over in-kind transfers both because cash transfers are more efficient and because they leave the recipients with more choices.
The efficiency case has been a part of “scientific” welfare economics because it has appeared to rely only on uncontroversial moral premises, while the argument in terms of freedom usually has been reserved for “unscientific” essays because its moral premises have appeared to be controversial. The focus on efficiency has also been fostered by a belief that Pareto efficiency itself promotes liberty, because it values outcomes that fully accommodate the voluntary choices of individuals. But the link between efficiency and liberty is tenuous. For example, consider a problem such as homelessness.
List of Figures
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp xiii-xiii
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12 - Justice and Contractualism
- from PART III - LIBERTY, RIGHTS, EQUALITY, AND JUSTICE
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 223-244
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Summary
Among the questions of justice that are important to economists are those that concern the distribution of benefits and burdens among members of a society. What claims can persons legitimately make upon one another or upon the state? What burdens can the state place on its citizens, or individuals on one another? Because justice is concerned with the distribution of scarce resources in society, its subject matter overlaps with economics.
Economists, like philosophers, cannot decide what principles of justice to rely on by consulting public opinion, because people are committed to different principles, and even when there is a social consensus, it may not be well considered, or it may be so abstract as to offer little practical guidance. As an example of poorly considered agreement, consider that for centuries people believed that women were the natural inferiors of men. Consider as an example of ambiguity and overabstractness, equality of opportunity: almost everybody accepts this value, but there is little agreement about what it entails. Economic evaluation presupposes at the very least well-defined principles of justice. The principles of justice that guide policy should also be well considered.
Many issues of justice are controversial, and economists would like to avoid them. But controversial questions are often unavoidable. Suppose, for example, economists are called upon to describe the economic consequences of alternative policies affecting families. Should they evaluate these policies by looking at their effects on the household or on each individual member? Should economists include the unpaid contributions women make to the household in GNP? Do changes in family law such as no-fault divorce that harm women and children in terms of standard of living, while also allowing women and men to leave unhappy marriages more easily, increase or decrease social welfare? All these questions involve matters of justice, and one cannot choose among policies without answering them.
Libertarian and utilitarian moral theories, the subjects of Chapters 7 and 10, imply theories of justice. For most libertarians, justice primarily involves respecting property rights and negative freedom. For most utilitarians, principles of justice are utility-maximizing general rules that facilitate cooperation and regulate conflicts of interest. But there is a different idea of justice than the libertarian or the utilitarian that appeals to the idea of agreement.
5 - Rationality and Morality in Positive Economics
- from PART I - RATIONALITY, MORALITY, AND MARKETS
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 70-91
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Positive economics is concerned with the explanation and prediction of economic phenomena, while normative economics is concerned with their evaluation. It is hardly surprising that moral considerations are important in normative economics. But as the examples of involuntary unemployment and overlapping-generations models illustrate, moral considerations are important within positive economics, too. Rationality is itself a normative notion concerning how people ought to choose, prefer, believe, or reason and, as this chapter explains, it plays a very large role in positive economics. As we shall see later, rationality is also crucial to normative economics, and its use in both domains forges a deep connection between positive and normative economics.
Rationality and Positive Economics
Economists regard people's preferences as rational if they are complete and transitive, and economists regard choices as rational if they conform to people's preferences. If one adds to this theory of rationality the generalization that consumers are in fact rational and the assumption that they prefer more commodities to fewer, then one has the central principles of the theory of consumer choice. Similarly, the traditional theory of the firm maintains that firms or entrepreneurs are rational and that they combine inputs so as to maximize the difference between revenues and costs. Although the theory of consumer choice and the theory of the firm make additional claims concerning the motives of consumers and entrepreneurs, they both take the theory of rational choice to be the foundation of their accounts of actual choices.
Positive economics on both the consumer and the producer side can be formulated without using the word “rational.” Rather than first defining “rational” and then stating that individuals are rational, economists can assert that the preferences of consumers are complete and transitive and that individuals choose whatever affordable bundle of commodities they most prefer. On the production side, economists can simply assert that firms aim to maximize profits. But the identification of what is actual with what is rational remains. This identification reflects the fact that economics simultaneously provides a theory of the causes and consequences of people's economic choices as well as a theory of the reasons for them.
6 - The Ethical Limits to Markets
- from PART I - RATIONALITY, MORALITY, AND MARKETS
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 92-106
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In Chapter 5, we considered whether moral norms constrain what people do and whether they constrain, or ought to constrain, what it is rational to do. In this chapter, we turn from questions about how morality affects individual behavior to questions about how morality limits and ought to limit the use of and scope of markets.
Markets are, of course, the central institution that economists study. Despite this, there is little attention paid to explaining exactly what a market is: most introductory economics textbooks do not even bother to define it. Markets may seem simple – a set of easy equations that can be depicted by supply and demand curves – and natural – a spontaneous form of ordering relationships between people. But in reality, Adam Smith's “simple system of natural liberty” is a complex social institution. Any market presupposes property rights, so that trade and theft can be distinguished. All markets are governed by rules. These rules specify what the basic elements of a market are: Who counts as a trader? What counts as a commodity? What counts as a contract? These rules also specify how these elements may interact: How frequently may any one individual make trades? What kinds of actions may traders take against one another? In every developed economy that uses markets, law plays an important coordinating, regulating, and enforcing function (Satz 2010). The completely “free market” is an illusion.
Most market transactions are also “arm's length” in that the players in a market are strangers to one another. Because of this, and because it is often hard to judge the quality of tradable goods (think of used cars), markets depend on the availability of information and on social norms demanding trustworthiness. While Homo economicus may be self-interested, he must not lie, cheat, or steal if markets are to function well. This point is often overlooked, but it is important, especially when exchanges are spread out in time and space. The creation of the more or less trustworthy, self-interested trader is a social achievement, which plays an important role in the functioning of contemporary markets; untrustworthy agents can undermine markets, especially when they have disproportionate market power.
11 - Equality and Egalitarianism
- from PART III - LIBERTY, RIGHTS, EQUALITY, AND JUSTICE
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 28 May 2018
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- 15 December 2016, pp 194-222
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Summary
Human beings differ in countless ways. These differences can be described as inequalities in particular traits, skills, circumstances, or resources. Most of these inequalities are not ethically troubling: indeed, it would be undesirable if everyone had the same skills or the same aesthetic tastes. The world is richer for the differences among people. Nor is there anything ethically objectionable in the fact that professional athletes are more fit than college professors. Indeed, many authors (confusingly) use the term “inequality” only for differences that are morally problematic.
There are, unfortunately, many morally problematic inequalities. Consider that the median wealth of American families of African ancestry is just a bit more than one-twentieth (!) – that is, 5 percent – of that of families of European ancestry. In 2013, according to the World Health Organization, life expectancies were below age fifty in fourteen countries (all in sub-Saharan Africa, except Afghanistan). At the other end of the spectrum, in nineteen countries, life expectancies were above age eighty.
Inequalities in wealth and income have been growing in the United States and abroad. According to Bloomberg News, in 2013, corporations in the Standard and Poor's 500 index paid their CEOs more than four hundred times the minimum wage, while in 1950 the ratio was 20:1. The bottom 40 percent of the U.S. population has only one-fifth of 1 percent of all the wealth in the United States. International inequalities are even larger (although with rapid development in India and China the proportion of the world's population that is desperately poor has declined). To give some idea of the magnitude of the global gap, in 2012 the income of the one hundred richest people in the world was greater than the combined income of half a billion of the world's poorest.
These inequalities in income and wealth, along with inequalities in health and education, are now flash points for public debate. The ephemeral “Occupy Wall Street” movement was a massive protest against the income and power of the richest 1 percent. Some of the best-selling recent books in economics such as Joseph Stiglitz's The Price of Inequality (2013) Thomas Piketty's Capital in the 21st Century (2014), and Anthony Atkinson's Inequality: What Can Be Done (2015) scrutinize the sources and consequences of income and wealth inequalities and suggest ways to reduce them.
PART IV - MORAL MATHEMATICS
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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- 15 December 2016, pp 245-246
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Morality and mathematics may seem as unrelated as martyrdom and MTV. But it is possible to characterize moral notions formally and to prove theorems. Doing so does not banish controversy or replace moral argument, because abstract mathematical characterizations of moral notions require interpretation and defense. Just as there are disagreements concerning the formal definitions of rationality, so are there controversies about formal definitions of moral concepts and principles.
Over the last seventy-five years economists, decision theorists, and game theorists have made exciting progress in characterizing features of human interactions and principles to govern them. This work is linked to moral philosophy. Formal models of rationality and game-theoretic studies of incentives hold out the hope of transcending ancient conundrums concerning the relations among morality, rationality, and self-interest. Concepts of envy-free allocations can facilitate the articulation of egalitarianism. Solution concepts in game theory may enrich the contractarian view that morality can be justified in terms of agreement. Theorems in social choice theory explore the implications of plausible moral axioms and test the consistency of traditional principles concerning how social policies should respond to individual interests. There is an embarrassment of riches in the work on these topics, and we can only comment on a few of these developments.
Frontmatter
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- Economic Analysis, Moral Philosophy, and Public Policy
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PART V - CONCLUSIONS
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- 15 December 2016, pp 293-294
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Summary
We opened this volume with four examples that show the influence of ethical assumptions and commitments on work in economics. If this book has served its purpose as an analysis of the ethical presuppositions of economics and as an introduction to a range of ethical concepts and theories relevant to economic research, it should make the ethics implicit in these cases easier to understand. It should also suggest how economic analyses can benefit from subjecting their ethical presuppositions to reflective consideration. We have also – especially in the last two Chapters 13 and 14 – described some of the tools that economists have developed that may be of use to moral philosophers. In this last part of our book, Part V, we wish to consider ways that the insights of economists and philosophers can complement one another.
Accordingly, in Chapter 15 we revisit the four cases discussed in Chapters 2 and 3. In Chapter 16, we present ways in which grasping both ethics and economics can help in identifying good policies and principles.
Preface to the Second Edition
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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This book is a heavily revised and retitled version of Economic Analysis and Moral Philosophy. We added “Public Policy” to the title to emphasize the relevance of this analysis to policy questions. The book is a descendant of a survey essay, “Taking Ethics Seriously: Economics and Contemporary Moral Philosophy,” which we published in the July 1993 issue of the Journal of Economic Literature. Though now dated, that survey essay may still be of use to readers for its extensive references to relevant literature. We would like to thank John Roemer for commissioning that essay and for the detailed criticisms he offered of several drafts. Others who were of tremendous help with the first edition were Richard Arneson, Henry Bruton, Nancy Cartwright, Marc Fleurbaey, John Kautsky, Eric Kramer, Philippe Mongin, Amartya Sen, Julius Sensat, Max Steuer, Hamish Stewart, Alain Trannoy, Gordon Winston, students at Williams College and the London School of Economics, and anonymous referees. Harry Brighouse, Henry Bruton, Lester Hunt, Andrew Levine, Patrick McCartan, Jonathan Riley, David Ruben, Larry Samuelson, and Daniel Wikler read drafts of chapters of the first edition and offered valuable assistance. The research and writing of the first edition were supported by a collaborative research grant from the National Endowment for the Humanities, and Hausman also gratefully acknowledges the support of a Vilas Associate Award from the University of Wisconsin–Madison.
Since philosophical reflection on ethics continues apace, as does the development of economic concepts and tools that may be of use to moral philosophers, we thought that a new edition was called for. Although we have preserved the overall structure and many of the specific analyses, distinctions, and arguments of the first edition, we have brought the discussion up to date and added examples that we hope will further illuminate the issues we discuss. We aim to reach a large audience of those interested in economics and policy analysis, and we have tried to avoid unnecessary jargon and complexities.
In preparing this revised edition, we were aided by and would like to thank Elizabeth Anderson, Mavis Biss, Richard Bradley, Harry Brighouse, Michel De Vroey, Jeffrey Friedman, Francesco Guala, David Hausman, Joshua Hausman, Bernd Irlenbusch, William Jaeger, Philippe Mongin, Colin Patrick, David Schmitz, Russ Shafer-Landau, William Thomson, Peter Vanderschraft, Joel Velasco, and David Zimmerman for detailed criticisms and suggestions for improvement.
7 - Utilitarianism, Consequentialism, and Justice
- from PART II - WELFARE AND CONSEQUENCES
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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Consequentialism is the doctrine that one should judge things morally by their intrinsic value and by the value of their consequences. It specifies a particular structure for ethics. In a consequentialist framework one must first decide what is intrinsically valuable. Questions of intrinsic value are not necessarily the most important moral questions, but they must be answered first because everything else depends on their answers. Then one assesses actions, policies, and institutions in terms of their “results” – that is, their own value and the value of their consequences. Welfare economics presupposes a consequentialist moral theory in which only welfare has intrinsic value.
Consequentialist assessment is always comparative: an action, policy, or institution is morally right or permissible if its net results are no worse than the results of any alternative. If the results of a particular policy are better than those of any alternative, then the policy is morally obligatory. Whether a policy or action is right or wrong depends on both what state of affairs will obtain if it is implemented and what the state of affairs will be if any feasible alternative is implemented. Nothing is absolutely impermissible. The right action may have terrible consequences when the consequences of all of the alternatives are even worse, and even a policy with terrific results is impermissible if there is a better alternative.
A utilitarian is a consequentialist who says that what is intrinsically good is individual “welfare” or “well-being.” Is individual welfare a mental state like happiness, the satisfaction of actual preferences, the satisfaction of “rational” or “informed” preferences, or something else not tied to preferences or mental states? Different utilitarian theories disagree about what well-being is.
The fundamental principle of utilitarianism is that one should do whatever maximizes overall welfare, taking everyone into account. This formulation masks a disagreement between those utilitarians who favor the maximization of total welfare and those who instead support maximizing average welfare. However, both average and total utilitarians agree that the distribution of welfare does not matter: all that matters is its total or average amount.
Adding up or averaging well-being requires measuring the well-being of different individuals on the same scale. One must be able to compare the increases or decreases in one person's well-being to the increases or decreases in the well-being of others.
9 - Welfare Economics
- from PART II - WELFARE AND CONSEQUENCES
- Daniel Hausman, University of Wisconsin, Madison, Michael McPherson, Debra Satz, Stanford University, California
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- 15 December 2016, pp 146-172
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Mainstream economists evaluate economic institutions, policies, and outcomes by asking whether they make people better off, and, as we have seen in Chapter 8, they measure whether people are better off by how well their preferences are satisfied. Although focused on welfare and consequences, few economists are utilitarians, because most deny that evaluations should rely on comparisons of how well satisfied are the preferences of different individuals. Following Robbins (1935, ch. 6), many mainstream economists have regarded interpersonal comparisons as untestable subjective value judgments, although this is changing.
We grant that making interpersonal comparisons of the extent to which preferences are satisfied is difficult. On the other hand, appraising economic outcomes, institutions, and policies exclusively by their consequences for welfare without interpersonal comparisons would tie normative economists’ hands behind their backs. They need to be able to compare the consequences of policies for winners and losers in a nonarbitrary way, and they must make room for other important normative concerns, such as justice. This chapter examines how economists tackle these challenges, including the ethical assumptions they make along the way, and it discusses whether the form of economic appraisal that they construct – that is, welfare economics – succeeds.
Without the possibility of interpersonal comparisons, it seems impossible adequately to encompass moral considerations that should influence policy such as justice, rights, and equality. Accordingly, traditionally normative economists have favored a division of labor whereby welfare economics confines itself to addressing only the welfare consequences of economic institutions and policies and leaves the appraisal of policies with respect to other normative criteria to others. This exclusive focus on welfare is by no means universal among economists, and in later chapters, we will review some of the work that economists have done developing other normative dimensions of assessment. In addition, as we noted in the Chapter 8, there is increasing interest among economists in measuring welfare in terms of happiness or life satisfaction. But in this chapter our focus is on standard welfare economics, which assesses outcomes, policies, and institutions exclusively by how much they enhance or diminish welfare, as measured by the extent to which preferences are satisfied.