Philosophy Of Economics And Economic Ethics (30L210B6)
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Tilburg University (UVT)
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Philosophy Of Economics And Economic Ethics (30L210B6)
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Philosophy of economics and economic ethics list of definitions
Week 1: chapter 1
Anglo Saxon model (sheets chapter 1) = this model is operated in USA and UK. There are free
market operations. The government does not regulate the market but only secures the private
property and contract rights. The shareholder model for companies is valid here.
Descriptive statement = to describe or explain the economy without reaching conclusions about
what ought to be done. Economics provides knowledge of ‘what is’ that can be used to make correct
predictions about the consequences of any change in circumstances.
Economics: neoclassical definition = the science which studies human behaviour as a relationship
between ends and scarce means which have alternative uses. Any human act has an economic aspect
insofar as persons must make a choice between scarce material and/or non-material means.
Ethics: Ethics is the study of morality. Morality concerns the standards that an
individual or a group has about what is right and wrong.
- Applied ethics = application or further specification of moral action guides to a certain field.
- Definition of ethics = a normative study that attempts to reach normative
conclusions about what things are good or bad.
- Economic ethics = ethics applied to economics.
- General normative ethics = philosophical attempt to formulate and defend basic moral
principles (utilitarianism, justice and virtue ethics, etc.).
- Individual ethics = studies the individuals as the subject of ethical
considerations and actions, often in direct relations with other individuals.
- Macroeconomic ethics = considers the morality of economic structures. Does
the economic order respect ethical standards?
- Microeconomic ethics = evaluates the actions of individual economic agents
given the economic structures or institutions. How should the individual
economic agent behave on the market?
- Social ethics = the morality of the societal relationships and structures. It
studies the collective decisions of groups (families, action groups, states)
and the structural relations (social systems) that connect these groups.
Extrinsic (values) = values that are merely good as a means to something else.
Intrinsic (values) = One intrinsically values something when one values it in itself,
that is, apart from valuing anything else.
Invisible hand = a metaphor for the idea that if people interact freely, the pursuit
of their self-interest is not incompatible with serving the common good (Peil,
1995).
Locke, John = English political philosopher (1632-1704) that defends the free market. The market
system is based on a theory of moral rights. The two rights that free markets are
supposed to respect are the right to freedom and the right to private property.
John Locke derives these basic rights from a state of nature, as if there were no
governments. In this state, each man would be equal to all others and perfectly
free of any constraints other than moral principles that God gave to humanity
according to Locke.
Morality = Velasques (1998) gives the following definition: ‘Morality concerns the
standards that an individual or a group has about what is right and wrong.’
Moral standards (characteristics) = moral standards are prescriptive statements. They are action-
guiding imperatives that do not describe state of affairs but what people should do. Moral standards
should overrule non-moral standards. Moral standards are impartial. It goes further than just looking
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,at individuals. Moral standards deal with issues that have serious consequences for the welfare of
human beings.
Moral dilemma = a conflict between different moral standards, including values
(Anderson, 1997), ideals (Railton, 1996), and duties (Brink, 1996; Donagan,
1996). One has to weight two important standards.
Motivational dilemma = dilemma that arises from a conflict between a moral and a practical
standard. A moral motivation is needed: what motivates people to act in accordance with their moral
standards?
Normative statement = ethics attempts to reach normative conclusions about what
things are good or bad.
Norms = the rules or conventions that should be followed up in order to realize
moral values (give an answer to: “what should we do”?). Whereas values are
rather global in nature and hold in most situations, moral norms are often
dependent on the context of the situation.
Positive statements = one that can be tested and verified and is not based on a value judgment.
Practical dilemma = dilemma that arises from a conflict between two practical standards. A wide
range of practical dilemmas are conceivable: from the dilemma of deciding on
the colour of the new company vehicles to the dilemma of deciding what
amount of money should be invested in the next year.
Practical standards = examples include profitability, self-interest and pride.
Prescriptive statement = action-guiding imperatives that do not describe states of
affairs but what people ought to do.
Rhineland model (sheets chapter 1) = this model is operated in Europe. There are market
operations, but within some limits. The government regulates the market and provides for the
welfare state and the stakeholder model for companies is valid here.
Robbins, Lionnel = economist that provides the neoclassical definition of economics in his book
Essays on the Nature and Significance of Economic Science.
Shareholder model (sheets chapter 1) = Maximize the stock value and bonus systems for
managers.
Smith, Adam = defender of the free market (1723-1790). Rests on utilitarian argument that
market institutions will produce greater benefits than any other institution that
coordinates the demand and supply of goods, like central planning by the
government or the unpaid economy in which people offer services to each other
for free.
Stakeholder model (sheets chapter 1) = Balance the interest of different stakeholders (e.g.,
employees, customers, and suppliers).
Unintended consequences = although the businessman intends to serve his own
interest, the consequence of his action also serves the interests of his
customers and the community.
Values = ends or ideals that persons pursue and give content to how they define
the good life.
Virtues = personal character traits that enable a person to realize certain values.
Examples are patience, attentiveness, concern, humility, honesty, integrity and
self-control.
Week 2: Chapter 2
Agent neutrality = not a matter of preferences.
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, Bentham = he argues that two ‘sovereign masters’, pleasure and pain, regulate all human behavior
and that all human experience might theoretically be measured in terms of these basic units.
Capability principle (Amartya Sen) = he argues for a consequentialism, which sees consequences
in very broad terms, including the value of freedom or the disvalue of violated rights. Capabilities
that foster freedom play a more important role than happiness.
Commensurability = Two concepts or things are commensurable if they are measurable or
comparable by a common standard.
Compensation test (Kaldor and Hicks) = tests whether the winners might be able to
overcompensate the losers. This is to overcome the lack of comparability of utilities of different
people. It asks winners how much they would like to pay for a certain policy and ask losers how
much they would want to be compensated.
Consequentialism = actions, choices or policies must be judged exclusively in terms of resulting, or
consequent, effects, rather than by any intrinsic features they may have.
Cost benefit analysis = in utilitarianism, we apply cost-benefit analysis. That is, we compare the
costs and benefits of the consequences of a certain action, and then base our conclusion on this
analysis.
Hedonism (Bentham) = pleasure is a kind of sensation, common to all those experiences described
as enjoyable or as contributing to the value of a life to the person living it. Pain refers to all those
experiences which people find objectionable. Since all pleasures and all pains are structurally similar
sensations, it should be possible to calculate a net sum total of utility (pleasure = +, pain = -).
Individual sovereignty = individuals are the best judges of their own welfare. Individual utilities
are the sole base for evaluating an action or policy.
Interpersonal comparison = Comparing the welfare of one individual with that of another.
Mill = 1871. Distinguishes higher and lower pleasures (such as pleasure of intellect and moral
sentiments) that are qualitatively different from the lower pleasures such as eating: the intellectual
pleasures of writing an academic article are such that no amount of mere physical enjoyment could
counterbalance them.
Monism = monistic concept is that all values can be measured on the same scale of pleasure (and
pain). A view that there is only one kind of ultimate substance.
Ordinal comparisons = compares strictly on the numeric character values, stopping at the first
difference.
Overdemandingness = a certain utility should matter to me equally, whether it is to be experienced
by me or anyone else. This implies that utilitarianism becomes over demanding, especially if other
people are not living up to the moral duties implied by utilitarianism. E.g., if parents do not provide
their children with enough food, it is my duty to provide them with enough food.
Pleasure - pain (Bentham) = see hedonism part.
Pluralist utilitarianism (Mill) = Utility is defined in terms of whatever has intrinsic (non-moral)
value, not just pleasure and pain-including, for example, knowledge, love, friendship, courage,
health, beauty, states of consciousness other than pleasure and pain. This type of utilitarianism
measures two types of pleasures, instead of the monistic scale.
Preference = a greater liking for one alternative over another or others.
- Immoral preference
- Non-rational preference
Paternalism = the notion that a third party may know better than the individuals themselves what
serves their interest.
Problems of consequentialism = page 23 in book. See table 2.1. The problems are:
- No intrinsic value of rights: no intrinsic importance is attached to the fulfillment of rights.
Actions can violate people’s rights.
- No considerations of intentions
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