Summary Economics and Ethics (2021/2022)

Economics and Ethics

General introduction
 Why is this course important?
- Economics is part of humanities  Search for well-being, stability, value in life, etc.
- Society expects graduates to possess a broad intellectual and cultural background
- Ethics develops your own self

 Negative liberty
- Freedom from all external constraints and influences
- E.g., Professors should be value neutral  No moral positioning or judging (while teaching)
- E.g., When going to a bar you do not receive a menu list

 Positive liberty
- Freedom to choose your own path from many possibilities ( Given multiple options)
- Creating the right conditions to allow individuals to make informed decisions
- E.g., When going to bar you receive the menu ( You can make an informed choice)

 Overview of this course
- Part 1: The Ethics of Economists
- Part 2: The Limits to the Market
- Part 3: Unconditional Basic Income
- Part 4: Introduction to Business Ethics

,Part 1: The Ethics of Economists

1.1 Introduction
- We need to be aware of our own ethical principles
- Self-interest model  Making decision based on self-interest
- We are economists  More exposed to the self-interest model
- Does this influence our ethical judgements?




1.2 Are economist different, and if so, why? ( Carter & Irons, 1991)
- Of course, economists are different from other scientists
- Are economists measurably different at fundamental levels?
- Fundamental levels  Ethical principles of an individual
- Measurable  Are the differences measurable?

 Marwell & Ames (1981): More free-riders due to selection or learning
- 2 explanations for self-interested behavior of economists
- Selection  Economists are more concerned with economic/financial incentives
- This interest often translates into self-selection into an economic education
- Learning  Economic students intentionally adapt behavior to the theories they study
- Economists learn about profit maximization, etc.  Behavior becomes more self-interested
- Difference between learning and indoctrination  Unconsciously changing behavior

 Objectives of Carter & Irons (1991)
- Checking the results of Marwell & Ames (1981)
- Testing the assumptions of the rational/self-interest model (of economists)
- Determining the impact of selection and/or learning

 Bargaining experiment with 4 different groups of respondents ( Carter & Irons, 1991)




 Comparation of different groups of respondents
- Comparation 1 & 2  Are economists different at beginning of education? ( Selection)
- Comparation 1 & 3  Do people become self-interest after time? ( Maturation effect)
- Comparation 2 & 4  Do economists become more selfish due to education? ( Learning)

,  Simple ultimatum bargaining experiment ( Carter & Irons, 1991)
- All participants receive $2 + can earn the money decided upon in experiment
- Bargaining experiment between 2 individuals  Proposer + responder
- Proposer offers division of 10$
- Responder accepts offer  Both receive the proposed amount
- Responder rejects offer  No-one gets anything

 Assumptions of economic theory
- Rational or self-interest model ( How does an economist think?)
- Homo economicus  Humans are rational and self-interested actors
- Homo economicus will maximize utility as consumer and maximize profit as producer

 Predictions of economic theory
- Responder will prefer any amount above 0$
- Proposer knows  Proposer keeps $9.50 and offers only $0.50
- Responder will accept

 Results of this experiment ( For proposers)
- Economists keep more ( In line with economic theory)
- Seniors keep less ( Maturation results in lower level of self-interest)




 Results of this experiment ( For responders)
- What is the minimum acceptable amount for a responder?
- Economists accepts less ( In line with economic theory)
- Seniors accept less ( Maturation results in lower level of self-interest)




 Conclusion
- Economists accept less and keep more
- Economic behavior on average is closer to predictions of economic theory
- Economists are significantly different ( Confirmed by regression analysis)
- Regression analysis confirms selection ( Freshman economists keep more & accept less)
- Economists are born, not made ( No real evidence for learning effect)
- Economists are already different at the start of their education
- There seems to be more than self-interest that guides economists
- Results are not completely in line with economic theory ( Evidence of ethics?)