Chapter 1
Descriptive statement: A statement that makes a description how different policies would affect and to what
extent they realize the desired state of affairs.
Positive statement: Application of …. Will improve the realization of goal ….
Normative statement: What should / ought to be
Economic freedom: Economic freedom means that individuals are free to use, exchange or give their property
to another as long as their actions do not violate property rights of others.
Low taxes and hence a small government
Protection of individual property rights
Absence of restriction on free trade and no government interference
Economics Neo-classical description: “the science which studies human behavior as a relationship between
ends and scarce means which have alternative uses” (Robbins 1935)
Ethics: study of morality. Morality concerns the standards that an individual or a group has about what right and
wrong.
1. Applied ethics: The application or further specification of moral action guides to a certain field
a. Medical ethics, Lawyer ethics
2. Economic ethics: Reflect on the moral standards that apply to economic phenomena
a. Economics explains the relationship between economic phenomena, economic ethics evaluates
them from a moral point of view.
b. Microeconomic ethics
c. Macroeconomic ethics: considers the morality of economic structures
3. General normative ethics: philosophical attempt to formulate and defend basic moral principles
a. Utilitarianism, duty ethics, ethics, justice ethics
4. Individual ethics: study of individuals as the subject of ethical considerations and actions, often in
direct relations with other individuals
a. Microeconomic ethics: encompasses both individuals and individual households and business
and evaluates the actions of these individual entities given the economic structures or
institutions.
i. How should the individual economic agent behave on the market?
5. Social ethics: Morality of the societal relationships and structures. It studies the collective decisions of
groups and the structural relations that connect these groups
a. Economic ethics: Macroeconomic ethics
Note: the distinction between macroeconomic- and microeconomic ethics is not clear. They are both dependent
on each other. They cannot be isolated.
,Morality:
Moral values
Intrinsic value: One intrinsically values something when one values it in itself, that is, apart from
valuing anything else
Extrinsic values: Values that are merely good as a means to something else
o Example given: Money
o Extrinsic values can be therefore called: Instrumental values
Institutions
1. Regulative
a. The regulative institutions that shape the free market system can be characterized by the
concept of economic freedom.
i. It includes rules, sanction and regulations which tend to codify socially accepted
behavior and promote certain types of behavior and restrict others such as government
regulations
2. Normative
a. Normative elements are values, social norms, beliefs and assumptions about human nature and
human behavior that are socially shared.
3. Cognitive
a. 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
Adam Smith; invisible hand:
in a free competitive market, the price will tend to what Smith calls the Natural price.
competition will also efficiently allocate the resources of the economy (capital and labor) among the
various industries of a society.
An interesting aspect of Smith’s theory is that this optimal situation is realized by self-interested actors.
Motivated by their own micro-goals of maximum utility or maximum profits, consumers and producers carry out
plans that simultaneously serve the macro-goal of maximal economic utility of the society at large
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.
Moral standards: imperative in nature and may imply moral duties. They do not refer primarily to what people
actually do or how the worlds is, but rather what people ought to do, how the world should be.
Moral standards are prescriptive statements
We feel that moral standards should overrule other, non-moral standards
Morality sets rules for everyone’s conduct. A moral judgement must, for any person who accepts the
judgement, apply to all relevantly similar circumstances.
, Moral standards deal with issues that have serious consequences for the welfare of human beings.
Norms: Rules or conventions that should be followed up in order to realize moral values. They relate to values
as means relate to ends. Without norms values remain unattainable.
Norms give answer to a question: what should we do?
Values concern ends or ideals that persons pursue and give content to how they define the good life.
Virtues are personal character traits that enable a person to realize certain values. Examples are patience,
attentiveness, concern, humility, honesty, integrity and self-control
Moral dilemma: Conflict between different moral standards, including values, ideals and duties.
Chapter 2
Jeremy Bentham is the founder of utilitarianism. The basic principle of utilitarianism is ‘the greatest
happiness of the greatest number’. Or, more formally: an action is right if and only if the sum total of
utilities produced by that act is greater than the sum total of utilities produced by any other act the agent
could have performed in its place.
Consequentialism: Consequentialism asserts that actions, choices or policies must be judged exclusively
in terms of the resulting, or consequent, effects, rather than by any intrinsic features they may have.
Outcome and not the process matters.
Since outcomes are almost always uncertain, use of expected outcomes
Problems with consequentialism
No intrinsic value of rights
o in the utilitarian approach, rights are viewed as merely instrumental to achieving other goods.
It implies that certain actions are morally right when in fact they violate people’s rights.
Torture and pleasure example
No consideration of intensions
o It only considers the consequences of that actions
Disregards redistributive justice
o Retributive justice refers to the just imposition of punishments upon those who do wrong.
Utilitarianism only considers future consequences; it does not look back to the past.
Descriptive statement: A statement that makes a description how different policies would affect and to what
extent they realize the desired state of affairs.
Positive statement: Application of …. Will improve the realization of goal ….
Normative statement: What should / ought to be
Economic freedom: Economic freedom means that individuals are free to use, exchange or give their property
to another as long as their actions do not violate property rights of others.
Low taxes and hence a small government
Protection of individual property rights
Absence of restriction on free trade and no government interference
Economics Neo-classical description: “the science which studies human behavior as a relationship between
ends and scarce means which have alternative uses” (Robbins 1935)
Ethics: study of morality. Morality concerns the standards that an individual or a group has about what right and
wrong.
1. Applied ethics: The application or further specification of moral action guides to a certain field
a. Medical ethics, Lawyer ethics
2. Economic ethics: Reflect on the moral standards that apply to economic phenomena
a. Economics explains the relationship between economic phenomena, economic ethics evaluates
them from a moral point of view.
b. Microeconomic ethics
c. Macroeconomic ethics: considers the morality of economic structures
3. General normative ethics: philosophical attempt to formulate and defend basic moral principles
a. Utilitarianism, duty ethics, ethics, justice ethics
4. Individual ethics: study of individuals as the subject of ethical considerations and actions, often in
direct relations with other individuals
a. Microeconomic ethics: encompasses both individuals and individual households and business
and evaluates the actions of these individual entities given the economic structures or
institutions.
i. How should the individual economic agent behave on the market?
5. Social ethics: Morality of the societal relationships and structures. It studies the collective decisions of
groups and the structural relations that connect these groups
a. Economic ethics: Macroeconomic ethics
Note: the distinction between macroeconomic- and microeconomic ethics is not clear. They are both dependent
on each other. They cannot be isolated.
,Morality:
Moral values
Intrinsic value: One intrinsically values something when one values it in itself, that is, apart from
valuing anything else
Extrinsic values: Values that are merely good as a means to something else
o Example given: Money
o Extrinsic values can be therefore called: Instrumental values
Institutions
1. Regulative
a. The regulative institutions that shape the free market system can be characterized by the
concept of economic freedom.
i. It includes rules, sanction and regulations which tend to codify socially accepted
behavior and promote certain types of behavior and restrict others such as government
regulations
2. Normative
a. Normative elements are values, social norms, beliefs and assumptions about human nature and
human behavior that are socially shared.
3. Cognitive
a. 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
Adam Smith; invisible hand:
in a free competitive market, the price will tend to what Smith calls the Natural price.
competition will also efficiently allocate the resources of the economy (capital and labor) among the
various industries of a society.
An interesting aspect of Smith’s theory is that this optimal situation is realized by self-interested actors.
Motivated by their own micro-goals of maximum utility or maximum profits, consumers and producers carry out
plans that simultaneously serve the macro-goal of maximal economic utility of the society at large
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.
Moral standards: imperative in nature and may imply moral duties. They do not refer primarily to what people
actually do or how the worlds is, but rather what people ought to do, how the world should be.
Moral standards are prescriptive statements
We feel that moral standards should overrule other, non-moral standards
Morality sets rules for everyone’s conduct. A moral judgement must, for any person who accepts the
judgement, apply to all relevantly similar circumstances.
, Moral standards deal with issues that have serious consequences for the welfare of human beings.
Norms: Rules or conventions that should be followed up in order to realize moral values. They relate to values
as means relate to ends. Without norms values remain unattainable.
Norms give answer to a question: what should we do?
Values concern ends or ideals that persons pursue and give content to how they define the good life.
Virtues are personal character traits that enable a person to realize certain values. Examples are patience,
attentiveness, concern, humility, honesty, integrity and self-control
Moral dilemma: Conflict between different moral standards, including values, ideals and duties.
Chapter 2
Jeremy Bentham is the founder of utilitarianism. The basic principle of utilitarianism is ‘the greatest
happiness of the greatest number’. Or, more formally: an action is right if and only if the sum total of
utilities produced by that act is greater than the sum total of utilities produced by any other act the agent
could have performed in its place.
Consequentialism: Consequentialism asserts that actions, choices or policies must be judged exclusively
in terms of the resulting, or consequent, effects, rather than by any intrinsic features they may have.
Outcome and not the process matters.
Since outcomes are almost always uncertain, use of expected outcomes
Problems with consequentialism
No intrinsic value of rights
o in the utilitarian approach, rights are viewed as merely instrumental to achieving other goods.
It implies that certain actions are morally right when in fact they violate people’s rights.
Torture and pleasure example
No consideration of intensions
o It only considers the consequences of that actions
Disregards redistributive justice
o Retributive justice refers to the just imposition of punishments upon those who do wrong.
Utilitarianism only considers future consequences; it does not look back to the past.
