Chapter 6 (Book)

Question 1

A belief system in which individual liberty is held to be the supreme human value, and only those institutions and practices that maximize liberty are to be promoted or accepted.

Answer 1

Libertarianism

Question 2

Forming the foundation or base of something

Answer 2

Foundational

Question 3

A major scholarly work, usually one that is densely argued and not fully understandable by people outside the specialty area in which it was written

Answer 3

Treatise

Question 4

Conditions of Capitalism

Answer 4

Property, Risk, Information, Competition, Externalities

Question 5

Given the right conditions, a capitalist economy is said to yield the most efficient uses of society’s resources and to result –through the operation of an “invisible hand,” and without any person’s intent–in the fulfillment of the utilitarian moral objective of achieving the greatest good for the greatest number.

Answer 5

Adam Smith

Question 6

Executives are not free to spend corporate money however they wished, but instead had to fulfill their duties as agents of stockholders–corporate social responsibility

Answer 6

Milton Friedman

Question 7

a social science concept describing a bundle of conditions, relationships, norms, and social institutions that govern human behavior in groups.

Answer 7

Social control

Question 8

draws on values, beliefs, and symbols. It relies on language, argument, persuasion, and symbolic rewards and punishments

Answer 8

Symbolic power

Question 9

uses material incentives, including goods, money, and access to opportunity

Answer 9

Economic power

Question 10

involves the use or threat of force

Answer 10

Coercive power

Question 11

the economy works better and more efficiently if there is trust in the system

Answer 11

Kenneth J. Arrow–The Limits of Organization

Question 12

understandings about how the society’s resources are to be distributed fairly among members. Private charity and government welfare assistance are both examples.

Answer 12

Distributive justice

Question 13

the ability to feel oneself to be in the other one’s place

Answer 13

sympathy

Question 14

loyalty, honesty, and trust–are critical elements of any social and economic system, without them violent chaos is the likely result

Answer 14

core values

Question 15

there are chances for the agent to do something in his/her own interests while “on the clock”

Answer 15

opportunism/moral hazard

Question 16

We only know what we know

Answer 16

Bounded rationality

Question 17

When there is little or no trust between agent and principal, the existence of moral hazard leads to

Answer 17

comprehensive contracting

Question 18

When there is trust, agent and principal are more likely to have

Answer 18

general clause contracting