Lahore University of Management Sciences. ECON 449 Philosophy and Economics

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1 ECON 449 Philosophy and Economics Fall Instructor Room No. Office Hours Telephone Secretary/TA TA Office Hours Course URL (if any) Khalid Mir 252 Fri: Khalid pervez Course Basics Credit Hours Lecture(s) Recitation/Lab (per week) Tutorial (per week) min. Duration Duration Course Distribution Core Elective Open for Student Category Close for Student Category Elective COURSE DESCRIPTION The first part of the course looks at how moral philosophy has been, is and will continue to be relevant to economics. We look at rationality before turning to how moral considerations may play a role in limiting economic transactions or furthering them. It is also important to understand how markets may affect moral behaviour. The second part of the course looks at how we assess actions, outcomes and institutions and focuses on utilitarianism and efficiency in this regard. The third part of the course examines other relevant moral considerations (or moral theories ): equality, fairness and equity, justice, and rights. COURSE PREREQUISITE(S) Intermediate microeconomics COURSE OBJECTIVES The aim of the course is to understand the meaning, relevance, and implications of the and in philosophy and economics. How is, and how ought economics and ethics be related? Is it a relation of limitation, instrumentality or is ethics integral to both positive and normative economics?

2 Examination Detail Lahore University of Management Sciences Midterm Exam No: Combine Separate: Duration: Preferred Date: Exam Specifications: Final Exam Yes Combine Separate: Duration: 100 minutes Exam Specifications: closed book COURSE OVERVIEW Module Overview Topics Recommended Readings Atkinson,A.B.(2009), Economics as a Moral Science, Economica Objectives/ Application An intro to the themes and issues to be discussed in this course. Broome, J. (2000), Why EconomicsNeedsEthical Theory, For the Meeting of the British Association for the Advancement of Science, London. Broome, J. (2008), Weighing Lives,OxfordUniversity Press, chapters 1&2 1 Bruni, L., and R. Sugden, (2007), The Road Not Taken: HowPsychologyWas Removed From Economics, and How It Might Be Brought Back, The Economic Journal, 117. *Caldas, J, and A. Costa, T. Burns., (2006), Rethinking Economics:thePotential Contribution of the Classics, Cambridge Journal of Economics, 31. *Granovetter,M.(1985), Economic Action and Social Structure: The Problem of Embeddedness, The American

3 Journal of Sociology, 91, 4. HM, chapters 1, 2 and 3. Knight, F.H. (1922), Ethics and the Economic Interpretation, TheQuarterlyJournalof Economics, 36. Knight, F.H. (1923), The Ethics of Competition, The Quarterly Journal of Economics, 37. *Marsden, D. (1984), Homo Economicus and the Labour Market in Economics in Disarray, edited by P. Wiles and G. Routh, Blackwell, Oxford. Nussbaum, M., (1997), Flawed Foundations:The Philosophical Critique of (A Particular Type of) Economics, The University of Chicago Law Review, 64, 4 *Skidelsky, R., (2009), Keynes and the Ethics of Capitalism in Keynes: The Return of the Master, Allen Lane. *Solow, R.M., (1980), On Theories of Unemployment, The American Economic Review, 70, 1 Thaler, R.H., (2000), From Homo Economicus to Homo Sapiens, Journal of Economic Perspectives, Rationality and Morality Elster,J.,(1993),Some Unresolved Problems in the Theory of Rational Behavior, The idea is to critically examine the underlying concept of rationality used in

4 Acta Sociologica, 36, 3. HM: chapter 4 and 5 (pp 60-72) *Sen, A (1981), Plural Utility, Proceedings of the Aristotelian Society, 80. economics (rationality as a calculating procedure designed to optimise the means to achieve a given end, some of which are given by self-interest; rationality and consistency). Sen, A., (1982), Choice, Orderings, and Morality in Choice,Welfareand Measurement,Harvard University Press. Sen, A. (2002), Rationality and Freedom, Harvard University Press, pp3-64 Et hics and Markets: The moral limits of markets Fred Hirsch, (1976), The Social Limits to Growth, Harvard University Press, chapter. 6. Sandel, M.J. What Money Can t Buy: The Moral Limit of Markets, The Tanner Lectures on Human Values, Brasenose College,Oxford, h.edu/lectures/documents/san del00.pdf We look at one fundamental issue: are there any moral limits to market activities and ifnotwhatarethe implications for citizenship, voting etc. Are there some things that money cannot or should not buy? 3 Mankiw. G. and Michael Sandel, On Selling Votes, GregMankiw sblog, November21, m/2007/11/on-sellingvotes.html Karlan, P., (1994), Not by Money but by Virtue Won? Vote Trafficking and the Voting Rights System, 80 Virginia Law Review, pp

5 1475. *Ferejohn, J., (1999), It s Not Just Talk, 85 Virginia Law Review, Nov, sec. 1, 3, 5. *Anderson, E., (1993), Value in Ethics and Economics, Harvard Univ. Press, chapter. 7. *Hirschman, A., (1982), Rival InterpretationsofMarket Society:Civilizing, Destructive, or Feeble?, Journal of Economic Literature, 20, 4. Radin, M.J. (1987): Market Inalienability, Harvard Law Review, Markets and Ethics: Preferences, Behaviour and Norms *Becker, G.S. and G.J. Stigler, (1977), De Gustibus Non Est Disputandum, The American Economic Review, 67, 2. Baier, A. (1986), Trust and AntiTrust, Ethics, 96, 2. Bowles, S. (1998), Endogenous Preferences:TheCultural Consequences of Markets and Other Institutions, Journal of Economic Literature, 36, 1. What are the underlying preferences behind market behaviour? Is the market a morally free zone? Can there be any departures from the standard assumptions about preferences? We then look at whether there can be a role for ethical considerations if we relax the other Walrasian assumption of complete contracts Bowles,S(2004), Microeconomics:Behavior, Institutions, and Evolution, RussellSageFoundation, chapters 6 and 7. *Bruni, L. and R. Sugden, (2008), Fraternity: Why the Market Need Not Be a Morally Free Zone, Economics and

6 Philosophy, 24. *Camerer, C., and R.H. Thaler, (1995),Anomalies: Ultimatums, Dictators, and Manners, The Journal of Economic Perspectives, vol. 9, No. 2 Durlauf,S.N.,andM. Fafchamps,(2004),Social Capital, NBER Working Paper, No Elster, J. (1989), Social Norms and Economic Theory, The Journal of Economic Perspectives, 3, 4. Gauthier, D. (1986), Morals By Agreement, Oxford University Press, chapter 4 Greif, A, (1993), Contract Enforceability and Economic Institutions in Early Trade: The Maghribi Traders Coalition, American Economic Review, 83, 3. HM, pp Hausman, D.M., (1989), Are Markets Morally Free Zones?, Philosophy and Public Affairs, 18, 4. *McPherson,M.S.,(1982), Mill s Moral Theory and the Problem of Preference Change, Ethics, 92, 2. 5 Self-interest and motivation Frankfurt,H.G.,(1971), Freedom of Will and the Concept of a Person, Journal of Philosophy, 68. Pluralismandmonism. Continuing with our theme from the previous module we look at the importance of self-

7 Gerschlager,C(2008), FoolishnessandIdentity: Amartya Sen and Adam Smith, Working Paper, No RS, Vienna University of EconomicsandBusiness Administration. interest in economic theory (Adam Smith) and departures from it: commitment. Griswold,C.L.,(1999), Sympathy and Selfishness, Imagination and Self in Adam Smith and the Virtues of Enlightenment, Cambridge University Press. *Hirschman, Albert, (1997), The Passions and the Interests: PoliticalArgumentsfor Capitalism Before Its Triumph, Princeton University Press. *Hirschman, Albert, (1984), Against Parsimony: Three Easy Ways of Complicating Some Categories of Economic Discourse, Bulletin of the American Academy of Arts and Sciences, 37, 8. *Manent, P., (1998), The Economic System in The City of Man, Princeton University Press. *Mansbridge,J.,(2000) Starting With Nothing: On the Impossibility of Grounding Norms Solely in Self-Interest in Economics, Values, and Organization, edited by Avner Ben-Nur and L. Putterman, Cambridge University Press, chapter 5. Schmidtz, D., (1993), Reasons for Altruism in Altruism, ed.

8 Ellen Frankel, University Press. Cambridge Sen, A. (1977), Rational Fools: A Critique of the Behavioural Foundations of Economic Theory, Philosophy and Public Affairs, 6,4. Sen,A.(1985),Goals, Commitment, and Identity, Journal of Law, Economics, and Organization, 1, 2 6 Markets, Motivation and Policy *Besley, T. and M. Ghatak, (2004),Competitionand Incentives with Motivated Agents, CEPRDiscussion Paper No Does the introduction of market mechanisms lead to the crowding out of altruism? We look at the policy implications of markets having an effect on ethical behaviour. *Bowles, S., (2008), Policies Designed for Self-Interested Citizens May Undermine the Moral Sentiments : Evidence from Economic Experiments, Science, vol *Douglas, M., (2002), The Gift, Routeledge. Introduction. *Etzioni, A., (1988), The Moral Dimension, The Free Press, Chapter 4. Frey, B., and R. Jegen., (2001), Motivation Crowding Theory, Journal of Economic Surveys, 15, 5 LeGrand,J.,(2003), Motivation,Agency,and PublicPolicy,Oxford University Press, Chapters: 3 and 4.

9 *Le Grand, J (2001), The Provision of Health Care: Is the Public Sector Ethically Superior to the Private Sector?, LSE Health and Social Care Discussion Paper no. 1. Shleifer, A, (2004), Does Competition Destroy Ethical Behaviour?, American Economic AssociationPapersand Proceedings, 94, 2 Titmuss, R., (1972), The Gift Relationship: From Human Blood to Social Policy, Vintage Books, pp.70-75, , and Wright, K., (2002), Generosity Versus Altruism: Philanthropy and Charity in the U.S. and U.K., Civil Society Working Paper Welfare and Consequences Broome, J., (2005), Should We Value Population?, The Journal of Political Philosophy, 13, 4. *Broome, J. (2008), Right and Good in Weighing Lives, Oxford University Press. *Broome,J.(2003), Incommensurable Values in Ethics Out of Economics, Cambridge University Press. A central concern of welfare economics is how we evaluate actions, institutions, states of affairs. Here, we will turn to the specific question of the ends of our actions? Are there one or many? Are they incommensurable and what ought we to do in case of a conflict of values? Bruni, L. (2009), Back to Aristotle?Happiness, Eudaimonia, and Relational Goods in Capabilities and Happiness, edited by L. Bruni, F. Commi and M. Pugno, Oxford University Press.

10 Elster, J. (1993), Local Justice andinterpersonal Comparisons in Interpersonal Comparisons of Well-Being, ed. J. Elster and J.E. Roemer, Cambridge University Press. Foot, P., (1985), Utilitarianism and the Virtues, Mind, 94, 374. *Hirschman, A. (1982), On Disappointment in Shifting Involvements,Princeton University Press. HM, chapters 6, 7, 8 and 9. Layard, R. (2002), Happiness: Has Social Science a Clue?, LionelRobbinsMemorial Lectures. Nagel,T.,(1991), The Fragmentation of Value in Mortal Questions, Cambridge University Press, chapter 9. Nussbaum,M.,(1985), AeschylusandPractical Conflict, Ethics, 95, 2. Qizilbash, M. (1997), Needs, Incommensurability and Wellbeing, Review of Political Economy, 9, 3. Sen, A. (1979), Utilitarianism and Welfarism, The Journal of Philosophy, 76,9. *Sen, A. (1979)., Personal UtilitiesandPublic Judgments: Or What s Wrong With Welfare Economics?, The Economic Journal, 89. *Williams, B. and A. Sen.,

11 (1999),Utilitarianismand Beyond,Cambridge University Press, Introduction. 8 Equality, Justice, and Fairness Broome,John., Fairness, Proceedings Aristotelian Society (1990), of the *Fehr, E., and K. Schmidt (2006), The Economics of Fairness, Reciprocity, and Altruism-Experimental Evidence and New Theories, Governance and the Efficiency of Economic Systems, Discussion Paper No. 66. Is equality important as a moral ideal and what is the appropriate evaluative space when thinking about equality? What is the relation between equality, priority and justice? We will focus on Rawls important work on justice as fairness, and the interesting developments he proposes on the dichotomy Good/Right, Rational/Reasonable. *Frankfurt, H., (1987), Equality as a Moral Ideal, Ethics, 98 HM, chapter 11 &12 *Hont, I. and M. Ignatieff., (1986) Needs and Justice in the Wealth of Nations, in Wealth and Virtue: The shaping of Political Economy in the Scottish Enlightenment, Cambridge University Presss. Hooker.B, (2005), Fairness, Ethical Theory and Moral Practice, 8 Miller, D., (1997), Equality and Justice, Ratio X Prafit, D. (1997), Equality and Priority, Ratio X Rawls, J., (1985), Justice as Fairness:Politicalnot Metaphysical, Philosophy and Public Affairs, 14, 3. Rawls, J., (1999), Theory of

12 Justice, 1st part, University Press. Harvard Sen, A. (2007), Inequality Reexamined,Harvard University Press, Preface and Introduction, pp Sen, A. (2009), The Idea of Justice, Allen Lane. (To be announced)