Preferences, self-interest & morality: economics & ethics lesson plan

Economics & Ethics lesson plan

This lesson plan and notes are derived from [EconTalk episode "Michael Munger on Desires, Morality, and Self-Interest"]

Notes:

Roberts:

• what makes us do what we do. How we choose, how we make decisions.
• The economist's view of what is rational, morality.

> preferences

Munger:

• First, the way economists usually look at preferences is that we say preferences are rational.
• Now, all [that] rational means is complete and transitive.
  • Transitive means that I can't really say, you can't trade things for me and then have me want something else.
  • Complete means that I can make a choice between any different preferences

> any two alternatives > are preferences rational? > or do other things motivate preferences? > selfishness

Christopher Hitchens, who actually was on EconTalk at least once, famously said: The most selfish person he'd ever heard of was Mother Teresa. > Mother Teresa was only motivated by her preference to help the poor. > she only wanted to maximize her own goals--her own preferences. > Mother Teresa was selfish because she was acting in accordance with her own preferences and goals.

There's a whole different set of preferences that are completely morally or legally proscribed

And the most--the biggest restriction we're going to place on them is that they're relatively fixed, and that,as Becker and Stigler explained, it's not because we actually think preferences are fixed, but because invoking preference change as the first stage in an explanation, you could explain anything by what preferences change.

Roberts:

• Ariel Rubenstein's definition of rationality: he says What is feasible? What is desirable?
  • You ask yourself those two things; what is desirable, what is feasible?
  • And then you choose the most desirable of the feasible alternatives.
• Economists don't judge, it's subjective
  • not under the purvey or purview of economists
• discusses that changing preferences isn't something economists discuss or think about, they can change... but:
• When we look at ourselves, or our children, the idea that we should take preferences as given is absurd.

Munger:

additional notes

• Gary Becker wiki article:
  • He argued that many different types of human behavior can be seen as rational and utility maximizing. His approach included altruistic behavior of human behavior by defining individuals' utility appropriately. He was also among the foremost exponents of the study of human capital.

> ex. re. Discrimination Becker recognized that people (employers, customers, and employees) sometimes do not want to work with minorities because they have bias against the disadvantaged groups. He went on to say that discrimination increases a firm's cost because in discriminating against certain workers, the employer woud have to pay more to other workers so that work can proceed without the biased ones. If the employer employs the minority, low wages can be provided, but more people can be employed, and productivity can be increased. > Becker's insight was to recognize that deadweight losses put a brake on predation. > Deadweight loss, also known as excess burden, is a measure of lost economic efficiency when the socially optimal quantity of a good or a service is not produced. Non-optimal production can be caused by monopoly pricing in the case of artificial scarcity, a positive or negative externality, a tax or subsidy, or a binding price ceiling or price floor such as a minimum wage. wiki