Economic Analysis, Moral. Philosophy, and Public Policy. Third Edition. Edited by. DANIEL HAUSMAN Universitär of Wisconsin-Madison
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1 Economic Analysis, Moral Philosophy, and Public Policy Third Edition Edited by DANIEL HAUSMAN Universitär of Wisconsin-Madison MICHAEL McPHERSON Spencer Foundation, Chicago DEBRA SATZ Stanford Universitär CAMBRIDGE UNIVERSITY PRESS
2 List offigures ListofTables Preface to the Third Edition Preface to the Second Edition Acknowledgments page xiii xiv xv xvii xix 1 Ethics and Economics? Economics and Morality in Contemporary Controversies What Are Moral Questions and How Can They Be Answered? How Is Moral Philosophy Relevant to Economics? Organization of the Book 14 Suggestions for Further Reading 16 Questions for Study and Discussion 16 2 Ethics in Weifare Economics A Shocking Memorandum Eight Distinctive Features of Weifare Economics Ihe Economic Benefits of Exporting Pollution to LDCs The Argument of the World Bank Memorandum Should the World Bank Encourage Migration of Dirty Industries to LDCs? School Vouchers Conclusions 36 Suggestions for Further Reading 36 Questions for Study and Discussion 37 vii
3 viii 3 Ethics in Positive Economic«: Two Examples Is Unemployment Involuntary? Overlapping Generation« Conclusions 51 Suggestion«for Further Reading 51 Questions for Study and Discussion 51 PART I RATIONALITY, MORALITY, AND MARKETS 53 4 Rationality and Utility Theory Certainty and Ordinal Utility Theory Expected Utility Theory Questions about Utility Theory 64 Suggestions for Further Reading 68 Questions for Study and Discussion 69 5 Rationality and Morality in Positive Economic« Rationality and Positive Economic« Self-Interest, Rationality, and Morality The Moral Danger of Ignoring Morality The Influence of Moral Norms on Economic Behavior How Do Norms Motivate Human Actions and What Sustains Them? Conclusions: Rationality, Morality, and Positive Economics 88 Suggestions for Further Reading 89 Questions for Study and Discussion 90 6 The Ethical Limits to Market« Are There Any Limits to the Reach of the Market? Market Virtues Market Limits Morals and Market« Policy Implications: How Should Policy Respond to Morally Problematic Markets? Market Alternatives Conclusions 104 Suggestions for Further Reading 104 Questions for Study and Discussion 104
4 ix PART II WELFARE AND CONSEQUENCES ütilitarianism, Consequentialism, and Justice Clarifying Ütilitarianism Interpersonal Comparisons of Well-Being Justifying Ütilitarianism Contemporary Consequentialism Is Ütilitarianism Plausible? Consequentialism and Deontology Conclusion: Should Economists Embrace Ütilitarianism? 123 Suggestions for Further Reading 123 Questions for Study and Discussion Weifare Iheories of Well-Being Weifare in Economics Against the Constitutum View: Well-Being Is Not Preference Satisfaction Conflicting Preferences and Well-Being Assessing Preferences The New Hedonist Weifare Economics Other Theories of Well-Being Condusions 143 Suggestions for Further Reading 143 Questions for Study and Discussion Weifare Economics Preference Satisfaction, Pareto Efficiency, and Competitive Equilibrium Pareto Efficiency, Pareto Improvements, and Benevolence How Weifare Economics Narrows Normative Questions Cost-Benefit Analysis Objections to Cost-Benefit Analysis Cost-Benefit Analysis and Social Weifare Functions Putting Cost-Benefit Analysis to Use Weifare Economics 169 Suggestions for Further Reading 170 Questions for Study and Discussion 171
5 X PART III LIBERTY, RIGHTS, EQUALITY, AND JUSTICE Liberty, Rights, and Libertarianism Freedom What Are Rights? The Importance of Rights The Justification of Rights and Freedoms Weighing Rights, Liberties, and Weifare Libertarianism Libertarian Paternalism 189 Suggestions for Further Reading 190 Questions for Study and Discussion Equality and Egalitarianism What Is Wrong with Contemporary Income and Wealth Inequalities? Consequences and Causes What Is Wrong with Inequality Itself? "Basic" Egalitarianism and Prioritarianism Egalitarian Objectives The "Currency" of Egalitarian and Prioritarian Justice Relational Equality and Equality of Moral Status The Measurement and Importance of Inequality 217 Suggestions for Further Reading 220 Questions for Study and Discussion Justice and Contractualism The Social Contract Idea Justice as Reciprocity: Rawls's Theory of Justice How Can Rawls's Principles Guide Policy? Other Contract Theories Challenges to Contractualism Conclusion: Social Contract Reasoning and Economics 240 Suggestions for Further Reading 241 Questions for Study and Discussion 242 PART IV MORAL MATHEMATICS Social Choice Theory The Social Weifare Function and Arrows Theorem The Interpretation of Arrows Theorem 251
6 xi 13.3 Social Choice Theory and Moral Philosophy Social Weifare Functions with Interpersonal Comparisons Rights, Freedom, and Fairness in Social Choice Theory Other Developments of Social Choice Theory Conclusions 265 Suggestions for Further Reading 266 Questions for Study and Discussion Game Theory WhatlsaGame? Moral Philosophy and Some Simple Games Cooperation and Justice Paradoxes and Difficulties Bargaining Theory and the Social Contract 286 Suggestions for Further Reading 289 Questions for Study and Discussion 290 PART V CONCLUSIONS Putting Economics and Ethics to Work Involuntary Unemployment and Moral Basehnes Overlapping Generations Do Pollution Transfers and Vouchers Promote Weifare? The Bearing of Capabilities and Primary Goods on Pollution Trades and Voucher Proposais A Utilitarian Perspective on Pollution Transfers and Educational Vouchers Other Ways of Evaluating Vouchers and Pollution Transfers Conclusions 312 Questions for Study and Discussion Economics and Ethics, Hand in Hand Health Care Uber and the "Gig" Economy Environmental Protection and Global Warming Conclusions 334 Suggestions for Further Reading 335 Questions for Study and Discussion 336
7 xii APPENDIX: HOW COULD ETHICS MATTER TO ECONOMIC?!? 337 A.l Objection 1: Economists as Engineers 338 A.2 Objection 2: Positive Economics Is Value Free: The Standard View 340 A.3 Objection 3: Normative Questions Are Not Subject to Rational Evaluation 342 A.4 Answering the Standard View: How Knowing Ethics Contributes to Positive Economics 343 A.5 Conclusions: Ethics into Economics 349 Questions for Study and Discussion 350 Glossary 353 References 361 Index 385
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