Economics and Ethics

most utilitarianists equate utility with happiness
GHP applies to all
Let U_i be the utility of person i, with n persons, max:
W = U₁+U₂+...+U_n   

_{the utility of each individual is equally weighted}

Utilitarianism is different from egoism and altruism
Egoism: i should only be concerned with his/her own well-being, Ui and NOT U-i

Altruism: only well-being of others matters, W=U-i
Utilitarianism combines both: Ui and U-i

Utiltarians disagree on
- how one should "act" to promote happiness
-the meaning of "happiness"

one should act in every instance so as to produce the greatest happiness (or utility)

apply cost-benefit analysis to every action

cost-benefit-analysis:
calculate the net benefit of every achton (total benfits minus total costs)
take action if and only if its net benefit exceed those of the next best alternative

calculate the net benefit in happiness (utiltiy) to every party of every action

happiness is the presence of pleasure and the absence of pain

pleasrure depends on cirsumstances (intensity, duratiion)

all pleasures experienced by everyone are qualitivley the same

for Bentham, GHP is hedonism

The theory that pleasure is the primary feature of a good life

psychological hedonism: descriptive, all people are motivated by a desire to experience pleasure

Ethical hedonism: prescriptive, goodness is a matter of peasure

Bentham: both, nature has placed mankind under hte governance of two sovereign master, pain and pleasure

Misconception: Hedonism necessarily means the pursiut of one own pleasure

two types of hedonism:
Egoistic: The good life involves securing one's ow pleasure
 combines pleasure and doing what I want

Universalistic: one's moral obligation is to max the total net pleasure in society
combines plesure and all people

most normative economics builds on act utlitarianism
welfare economics: normative economics that asumes welfarism
Welfarism: social welfare (goodness) is a function only of information about individual utilities
Social welfare: well-being of society, depends on individual utilites

consider the distribution of some economic resources, X, between two individuals
x1+x2=X

Utility possibilites frontier (UPF): a graph of the set of effiecient utlity levels of agents

Utility of one's own allocations: U₁= u₁(x₁); U₂= u₂(x₂)

let utility increase in x :   ui' (x1) > 0
Then any increase in U1 must decrease U2m and vice versa (there is just one recource (X))

graph: Utility space (Axis: U2/U1); UPF is downward sloping, when u1 rises, u2 goes down

Welfare economics: social welfare depends on individual utility

social welfare function (SWF): a function that ranks different distributions of utility  W(u1, ..., u_n)

A SWF effectivly assigns weights to individual utility to evaluate the the overall goodness

SWF weight utility differently (add, multiply)

Utilitarianism SWF: assigns a weight of one to each persons utility and adds them up (sum-ranking)
W= U1+U2...+Un

Indifference curves: Drawn in commodity space (x1/x2); illustrate combination of goods, that give equal utility.

SIC: drawn in utility space (U1/U2); depict different distinctions of utility that yield constant social welfare.

SWF is definded over individual utlieites: W(u₁, u₂,..., u_n)

suppose individual utility is a function only of one's own allocation ui(xi)

B+S: W (U1(x1), ..., Un(xn))

social welfare is indirectly a function of allocations xi.

{u₁^*, u₂^*}, maximizes the sum of utilites

This distribution of utilities implies a distribution of the economic resources, X

The UPF can take on any form, as long as it is downward sloping
 

allows very unequal distributions of utlity
permits torture
ambigous about whose utility to include (-> future generations to include or animals)
over demanding implications
Ex: Possibly requires massive transfers from rich to poor

One should act according to the set of rules that, if generally adopted, produce the greatest happiness (or utility)

Act vs rule: in every instance (act) vs according to rules (rule)

rules are moral norms:
-habits
-enforced by concience (feel guilty by not following rules)
-realistic standards: acceptable level of compliance

follow even if exceptions would increase total happiness (EX: do not steal)

Seeking to max utility for every action leads to lower well-being than following rules

info is often insufficient to calculate the consequences (candy to diabetic people)

information often costs more than the stakes

mistakes in calculations (can be systematic, manupulating the outcome)

rules should be pluralistic but not overly complex

avareage outcome as good as if make exceptions

moral norms, sanctioned by comscience, help avoid the slippery slope (to allow yourself to break rules)

these reasons explain existung norms

analogy with driving: follow traffic rules vs driving as to max total happiness.

Sometimes seen as a rule utilitarian

unlike Bentham, Mill distinguished not only quantities, but also qualities of happiness (food vs books)

Mill: it is better to be a human being dissatisfied, than a pig satisfied
-> different stages of happiness

Critique: Following even the best rules sometimes decreases happiness, eg: do not lie, even to protect someone

response: create sub-rules, or exceptions, eg: killing in self-defence

Critique: one can create sub-rules for all exceptions, but then rule utilitarianism breaks diwn and becomes act utilitarianism

response: the specifity of rules must be restricted based on standard considerations (not too complicated rules)

Utilitarianism; most notable consequentialist thoery

clear ethical criterion: GHP

Act U: applies GHP to every instance, But; sometimes conflicts with our moral intuition

Rule U: advocates rules that satisfy the GHP; involves ambiguity about specifity of rules

Porblem for any version of utlitarianism: interpersonal  comparison of utility