Economics and Ethics

assosiates morallity with self-interest

people are by nature self-interested

descriptive

people max. utility, or satisfaction, Ui
Ui is a functiononly of one´s own material allocation xi

ex: doing good or avoiding bad: selfish
rescuing a child: selfish

an action is moraly right if and only if it max. one´s self interest or well-being

normative

First welfare theorem of economics: Individuals acting in their own interests in free markets will max. economic welfare
Counterargument: Sometimes my interests are furthered by immoral behavior (neg. externalities)

Egoism is not a moral theory
Cooperation involves a short-term loss for a long.term gain
Feelings:conscience is a ggod thing not a selfish thing (-> econmists exclude feelings)

Poeple often act against their long-term interests
EX: volunteering, giving money, donating a kidney
but still selfish motives: Social apprpval, futuer material benefits

Subjects in one room are paired anonymously with subject in another room

Dictators: receive a sum of money (endowment)

Recipients: receive no endowment

Dictator can share any amount, including nothing, with his/her recipient

Fix or manipulate variables
Single blind anonymity: paired subjects never learn the identity of their counteroart, but experimenter knows, who gives to whom
Double blind anonymity:the experimentor also never learns who made which decisions

Anonymity helps rule out certain explanations of giving

Null Hypothesis
- default conjecture or position
- Ex.: deictator giving is selfless

Finding on feelings is consistent with this interpretation, but it does not prove it

Reason: alternative explanation: mistakes, false beliefs

No numoer of pos aoutcomes can prove the null hypothesis, a single counterexample suffices to disprove a hypothesis

Hypothesis are general statements and must always be true

A theory iois most falsifiable, i g it can never be proven true, but a single counterexample proves a theory false

Falsifiable does not mean the theory is false or can be made false (you prove it wrong)

Trade off between control (for casual inferences) and external validity (for realism)

Control -------------------------------------------------------------------------------------------------------->
Observational studies                   Field experiments                     Laboratory experiments
<----------------------------------------------------------------------------------------------External validity

Coice of methods depends on the purpose