Final Exam Questions

Question 1

What steps should be taken in analyzing a case using Utilitarianism?

Answer 1

1. State choice of decision maker
2. State moral rule Actions are right in proportion as they tend to increase the overall welfare of all those significantly affected, wrong as they tend to decrease the overall welfare of all those significantly affected
3. Utilitarian table, Columns:
   1- Those affected, 2- numbers, 3 - gain/loss?, 4 - size of gain/loss, 5 - nature of gain or loss
4. Outcome statement where we weight the gains and loses, and take the action where the gains outweighs the losses.
5. Decision recommendation based on the rule.

Question 2

What steps should be taken in analyzing a case using Kantian Analysis?

Answer 2

1. State choice of decision maker
2. State moral rule Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only (the categorical imperative! A command that applies under all conditions)
3. Low level analysis - does the action go against the strict rules (don’t kill, manipulate, coerce, or deceive), does the action follow the broad rules (contribute to charity, develop yourself, help children/underprivileged with basic necessities to cultivate rationality)
4. Mid-level analysis will the action interfere with people’s capacity for rational thought and choice? Action should:
   ◦ 1) Respect the humanity of others by not interfering with the capacity for rational thought and choice
   ◦ 2) Respect the humanity of others by promoting their capacity for rational thought and choice
5. High level analysis The action is immoral if it interfere with rationality because it violates the categorical imperative.
6. Outcome statement of whether action 1) Action is moral, if it helps children and under-privileged with basic necessities or cultivate rationality, 2) Action is amoral (morally neutral) because it neither interferes with or promotes rationality or 3) Immoral if it violates/interfere with rationality
7. Decision recommendation based on the rule.

Question 3

What steps should be taken in analyzing a case using Capitalist Analysis?

Answer 3

1. State choice of decision maker
2. State moral rule Make those exchanges that maximize owner wealth, provided you remain within the rules of the game.
   • The rules of the game: no manipulation of demand, supply, or manipulation of prices.
3. Cost benefit Analysis determine expected costs, benefits and net outcome
4. Remain within in the rules of the game
   ◦ Does the action manipulate demand? (Need complete and accurate information)
   ◦ Does the action manipulate supply?
   ‣ Cannot 1) restrict number of suppliers, 2) restrict amount of supplied (colluding), 3) linking suppliers together, 4) linking goods together
   ◦ Does the action manipulate price? (Directly affecting prices: price fixing - can only control prices if they are: monopolist, near-monopolist, oligopoly)
5. Decision recommendation based on the judgement and passing of both tests.

Question 4

What is ethics? Why study ethics? What is business ethics?

Answer 4

What is ethics?
• 1) The reasoned study of rules of right and wrong
• 2) The study of obligations to others; concerned with obligations beyond yourself and how they arise
Why study ethics?
• Not every decision has an obvious solution. Ex. Trolley car example - common ethical rule - the golden rule “do to others as you would have them do to you”
What is business ethics?
• The reasoned study of rules of right and wrong pertaining to the realm of business, which includes individuals, firms and markets

Question 5

What are two definitions discussed for a moral dilemma?

Answer 5

◦ 1) Arises when you have to chose between actions, and someone’s welfare will be significantly harmed no matter what action you take (go to)
◦ 2) Arises when potential benefits/harms are distributed disproportionately to parties where one party receives most of the harm and one most of the benefit (useful)

Question 6

What is prudence? Is prudence in alignment with ethics?

Answer 6

◦ Making thoughtful, wise choices, implicitly ones that improve personal welfare. (ie prudence focuses on what’s in your self-interest). Sometimes prudence and Ethics are in alignment

Question 7

What is the difference between moral, immoral and amoral?

Answer 7

• Moral
◦ “Right” actions in accordance with the decision rule of some defensible ethical approach
• Immoral
◦ “Wrong” actions that violate ethical view point
• Amoral
◦ Neither right or wrong (fall outside the realm of a given decision rule)

Question 8

What are the eight steps in the decision making model? Which steps do we focus on?

Answer 8

Steps in the generic-decision making model (Our focus is on the first five steps**)
1. Define problem (posing a question) **
2. Determine criteria for solution (how do we recognize a good solution) **
3. Generate potential actions (potential solutions to problem) **
4. Evaluate potential actions (compare actions to criteria) **
5. Choose solution (which action best meets criteria) **
6. Implement solution
7. Monitor solution
8. Reassess problem

Question 9

What is Mills rule? What name do we used associated with the main idea of his rule?

Answer 9

• The creed (code of behaviour/set of beliefs to guide one’s actions) which accepts as the foundations of morals, utility (measure of pleasure) or the greatest happiness principle, holds that actions are right in proportion as they tend to promote happiness, wrong as they tend to produce the reverse of happiness
◦ The greatest happiness principle - “Actions are right in proportion as they tend to promote happiness, wring as they tend to produce the reverse of happiness”

Question 10

What are the definitions of the three vocabulary words in Mill’s rule: Creed, Utility and privation?

Answer 10

◦ Creed - code of behaviour or set of beliefs
◦ Utility - anything that makes you happy/measure of happiness
◦ Privation (not having pleasurable experiences)

Question 11

How does mill describe happiness and pleasure?

Answer 11

• Mills equates happiness with pleasure - leads to two questions: aren’t happiness and pleasure synonyms, lots of animals seek pleasure -> “the swine objection” -> critics were accusing mill of being a hedonist
◦ Hedonist - greek philosopher Epicurus developed idea that humans were created to seek gratification of sensual desires (food, drink, sex, drugs, music)
◦ Happiness is not a coke commercial - it is “made up of few transitionary pains, many and various pleasures”

Question 12

List the three points that address the swine objection.

Answer 12

1. There are two types of pleasure - Physical (five senses, food drink, sex, hedonist/animal appetites), and psycological (mental pleasure, intellectual/imagination, satisfaction and pride, human capacity for mental pleasure outdistances animals)
2. One type is of higher quality than the other - mental pleasures are superior to physical pleasures ex. Wouldn’t trade life with someone of lower IQ, no intelligent human would consent to be a fool
3. Human happiness involves the higher one - because psychological pleasures are superior to physical - human happiness relies heavily on them.

Question 13

Whose happiness or pleasure are we focusing on in Mill’s utilitarian analysis? Why?

Answer 13

Whose happiness or pleasure?
• Actions should promote the happiness of society not the individual taking action “greatest amount of happiness together”

Why everyone?
1) utter selfishness could not possibly be adopted by all rational beings (personal happiness would never get anyone else to accept)
2) Living in society’s is natural for us - utilitarian analysis considers everyone equally in its moral rule
We must think of everyone who may be significantly affected by our action - make sure happiness is going to improve overall

Question 14

Why does Mill describe morality the way he does?

Answer 14

Happiness lies at the core “summum bonum” - happiness is the highest/most valuable good -> really the only valuable thing. Mill’s argument:
1. Shows that happiness is a desirable thing -> people desire it! Hard to imagine someone not desiring happiness
2. Shows that happiness is the only desirable thing -> other than things people desire (money, power, status, security, health) is all secondary/a means to the true thing of worth

Question 15

What words can happiness with equated with?

Answer 15

Happiness (archaic/ancient Greeks)=Utility (technical economists) =Welfare (modern)
• happiness may seem almost childish, the final word was welfare (the new summum bonum) best for modern audience

Question 16

What are some potential holes in Mill’s thinking?

Answer 16

• This is never going to work objection - “too complicated and confusing” - people should be capable of basic rational thought, dilemmas are complex and then so should the analysis

• The “whiny” objection - “so much time” - real people are harmed by your decisions, a systematic approach is useful

• The “it’s so subjective” objection - goal is to simply prompt you to identify all the people who are affected and how in a real situation you would use more facts and less assumptions. Should be used as a tool.

• “But the many can benefits at the expense of a few” - scale tips in favour of gains (small group is screwed for the benefit of the society) - it’s a tragedy but in the grand scheme of things people are better off

• The “it lacks mathematical rigour” objection - it shouldn’t be mathematical - how to quantify intangibles, would be simply misleading.

Question 17

What is anthropocentrism?

Answer 17

• Regarding humankind as the central or most important element of existence, especially as opposed to God or animals.

Question 18

What is the difference between reasoning and rationing? What process does mill use?

Answer 18

• Reasoning is a forward looking process and rationalizing is a backward-looking process. (Utilitarian is reasoning!)

Question 19

What is Kant’s rule?

Answer 19

• “ Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only”
• Simplification: Act so that you treat the (rationality!) humanity… in that of others… always as an end and never as a means only

Question 20

What is a categorical imperative?

Answer 20

• A command that applies under all conditions (without exceptions). Only one category and everything is in it, means crucial “a command”

Question 21

What does using someone as a ends not a means mean?

Answer 21

• To treat someone as a tool for achieving your ends, using people only as a means to our ends. Stripping them of their humanity, stops you from seeing them as individuals with their own life goals and rationality. Using them only to satisfy your desires=immoral.

Question 22

What is humanity equated with? How does Kant describe humanity?

Answer 22

• Inclinations that move us to act (from instincts, hormonal influences arising from sense of pleasure and pain) Instincts, hormones and addictions - which impel us to act, physiological in nature
◦ Kant believes we are dual nature:
‣ Natural dimensions characterized by inclinations and rational dimensions as characterized by reason. “Our reason has the potential to govern our inclinations”
‣ Humanity does not equal people it equals rationality

Question 23

What five concepts does Kant use to define morality the way he does?

Answer 23

• Understanding Kant’s view of human nature as rationality, 5 concepts:
1. Freewill - “will” = functional area of the brain that makes decisions (prefrontal cortex), “Freewill” = free to take actions of your own choosing. Determinism (chemicals/god controls us). Having Freewill separates us from animals.
2. Inclinations - what motivates human behaviour? Kant thinks inclinations are animalistic urges. Inclinations are not necessarily rational. People become slaves to their inclinations (addicts). Character flaws can be impacted by inclinations controlling them.
3. Reason - we have the ability to engage and decide whether to action inclination or not
4. Autonomy - we can determine our own actions. Autonomy, deriving from our rationality that makes us moral creatures. Morality presupposes autonomy. Humanly ~Rationality ~Autonomy
5. Universal worthiness - summum bonum - something that everyone wants. But wants are contingent and based on animal desires. What’s not based on desires? Logic! FREEWILL

Question 24

What are the two types of worth discussed?

Answer 24

• Absolute worth - things that everyone agrees with is worthy (reason)
• Relative/contingent/conditional/subjective - things of this type are such that their worth varies from person to person (wealth, power, status, health)

• Humanity, the rationality that resides within each of us, worthy of our respect simply for what it is. Rationality has instrinsic and absolute value (not relative to how many people desire it)
A neat little package

Question 25

Explain the three levels of rules generated for Kantian analysis.

Answer 25

The high level rule (very abstract)
• Act so that you treat humanity… in that of another as an end and never as a means only
Mid-level rules
• 1) Respect the humanity of others by not interfering with the capacity for rational thought and choice
• 2) Respect the humanity of others by promoting their capacity for rational thought and choice
Low-level rules (very concrete)
• Do not commit suicide or lie (Kant)
• Do not kill, coerce, manipulate or deceive (F)
• Do contribute to charity, develop yourself (Kant)
• Help children and underprivileged w/ basic necessities and cultivate rationality (F)

Question 26

What are some “obvious” holes in Kant’s thinking? How would Kant solve the trolley car dilemma?

Answer 26

• The problem with Santa Claus - a lie - but children are pre-rational (lack humanity), but still Kant would say that lying about Santa is unacceptable, its doing nothing to help them.

• The problem with lying- takes away rationality - each man has the strict duty to be truthful in statement.

• The Kantian solution to the trolley car dilemma is counter intuitive pushing him dehumanizes him, he is rationally equipped to make the decision himself.

it is important to note that Kantian disregard outcomes, and would rather stand on principle. Good principle is the CI - our canadian legal system works the same ways ex. CPR example, you would not go to jail b/c your choice to intervene was motivated by a good principle.

Question 27

What is the capitalist rule?

Answer 27

Make those exchanges that maximize owner wealth, provided you remain within the rules of the game

Question 28

What is the “exchange” and the “game” in the capitalist rule?

Answer 28

• Exchange
◦ Money as a medium of exchange. Quid pro quo “something for something”. It’s used to refer to equivalent exchanges, one party gives up something of value for something else of value. True exchange can never be a one-way street.

• The Game
◦ The “game” of exchange, all exchanges the firm may be involved in
◦ Firms function in many markets simultaneously ex. labour markets, financial markets, finished goods market, communities market

Question 29

What are the rules of “the game”?

Answer 29

◦ The rules of the free market, no interference to demand, supply or price. Forbids:
‣ 1. manipulation of the demand function (deception, incomplete information)
‣ 2. manipulation of the supply function (restricting # of suppliers, restricting the amount supplied, linking suppliers together, linking goods together)
‣ 3. and/or directly manipulating prices
◦ Not the laws of Canada but the laws of the free market

Question 30

What are two harms of capitalism?

Answer 30

◦ 1) people buy things they don’t really want
◦ 2) pay a higher price for something they do want

Question 31

Explain natural price, ordinary price and extraordinary price.

Answer 31

• Natural price: the price such that the costs of brining that good to market are covered and money is left over such that the seller’s own living needs can be met.
• Ordinary profits: occurs when a good sells at its natural price
• Extraordinary profits: occurs when a good sells above its natural price. Caused by: more efficient techniques, luck, government regulation, or breaking the rules.

Question 32

What do we mean when we say “maximize owner’s wealth?”

Answer 32

◦ Firm’s owners are not always shareholders can be owned by employees, suppliers, customers ex. cooperatives
◦ is not to maximize shareholder wealth, but rather maximize owner wealth
◦ Three types of resources that every company needs (Physical, labour, financial)

Question 33

How do supplier cooperatives work?

Answer 33

◦ Owned by those that supply the product, provide product at a loss (gives firm flexibility and biggest expense is minimized) in exchange for a percentage of the residual (money earned - money owned = money leftover).
◦ Each quarter firm divides profits and pays them out. Can be risky if there are no profits!
◦ Other expenses may come first ex. operating supplies, monthly bank payments etc.

◦ The choice is to "supply the milk on contract, and have no claim on the residual" Pro - higher assurance of payment (must be paid first), Con - Returns are limited in terms of the agreement
◦ or "Supply the milk as a "gift", and have a claim on the residual" Pro - profits are unlimited, Con - there is lower assurance of payment accept greater risk for potentially greater returns
◦ Suppliers provide a crucial input for free (or deep discount) in exchange for the residual and control (A vote, pick a good BOD that will run the cooperative effectively and actually generate a residual)

Question 34

How do worker cooperatives work?

Answer 34

◦ When company’s most expensive input is the labour, when labour is contributed for free
◦ They get: 1) the residual (profits split between them), 2) A vote to determine who serves on the BOD

Question 35

How do consumer cooperatives work?

Answer 35

◦ Thousands of different goods, ex. grocery store
◦ Participants must pay a one-time substantial membership, and may also pay ongoing membership fees. The fees are used by the cooperative to finance the start-up and later expansion of the business.
◦ Critical resource (financing) given for free or below market price for the profits. Members rarely receive a quarterly check amounting to their share of profits, rather used to subsidize next year’s prices.

Question 36

How do lender cooperatives work?

Answer 36

◦ Where large fixed assets dominate a firm’s statement of financial position, ex. mining or airlines. (companies where large sums are money are required to start up and expand)
◦ They are shareholders! provide permanent, interest free loans to firms - can think of them as lenders who give money to the firm for an indefinite length of time to receive claim to the residual and have a vote in BOD elections.

Question 37

What is fiduciary duty?

Answer 37

duty of loyalty. “A person who holds a position of trust or confidence with respect to someone else and who is therefore obliged to act solely for that person’s benefit”

Question 38

Are all equilibriums equal?

Answer 38

• The nature of equilibriums
• Not all equilibriums are equal in the eyes of ethicists - their goodness is determined by how that price came about. Ex. False advertising, colluding with competitors not a good way to get to equilibrium.

Question 39

What is the necessary price?

Answer 39

◦ The necessary price - the minimum price a product must sell if suppliers are going to supply it. In other words, the price at which it is necessary for a product to sell at if suppliers are going to be able to cover all the costs of bringing it to market.

Question 40

What is the purpose of a market and a capitalist market?

Answer 40

◦ The purpose of a market: to facilitate the exchange of goods and services between parties, a method of provisioning society.

◦ The purpose of a capitalist market: minimally regulated, atomistic, thousands of buyers and sellers, prices set purely. In the long-term, excess profits are squeezed out, and the price a product sells at is its neccessary price.

Question 41

What are some holes in capitalist thinking?

Answer 41

• Aren’t capitalism and utilitarianism the same thing?
◦ They both consider pros and cons of the action. But the difference is the perspective. Meso- Theory Capitalism takes a narrow view (firm’s owners) and is narrowly concerned with market activity and assuring functioning markets(Just in the commerce domaine), Macro-theory while utilitarianism takes a broad view (entire society) and is concerned with the overall welfare of society (All societal domains).

• Every exchange affects D, S, or P, so morally managers can’t do anything!
◦ The problem is not affecting it’s manipulating: firms are allows to react to market forces but problem arises when they act on market forces.
◦ The signal that manipulation may be occurring is “extraordinary profits” sustained over a long period of time. (Ordinary profits = expenses of brining a good to market are covered and a living stipend for the over is provided (middle-class income))
◦ It is possible for extraordinary profits to be legitimately created by innovation and then suistained by ongoing innovation or simply dumb luck • Proving manipulation - in our examples: honestly informing customers through advertising is “in bounds” as it follow the rules of the game: providing complete and accurate information. When someone withdrew from the market they are not going against the four supply rules - she is doing what the market is signally so that is allowed. Raising prices due to increase costs to manufacture is allowed.

Question 42

What should the government be doing and not doing to maintain a capitalist approach?

Answer 42

◦ What should the government be doing?
‣ 1) Protecting the marketplace from threats arising internally to be market, must maintain the judicial system and punish those who undermine the market by breaking rules of the game
‣ 2) Protecting the marketplace from threats arising externally to the market
‣ 3) Maintaining the money supply
‣ 4) taxing the marketplace participants

◦ What shouldn’t the government be doing? 
	‣ Dividing markets (violation of supply rule)
	‣ fixing prices (price violation)
	‣ Providing tax rebates for buying certain cars/tuition (demand violation)
	‣ Government of a capitalist society should be enforcing the rules of the market not breaking them

Question 43

What are the meanings of the two quotes discussed? (Butcher, Brewer and the baker quote and the invisible hand quote)

Answer 43

• The BBB quote meaning (Butcher, Brewer and the baker)
◦ We are social animals, for a reason and we benefit from the exchanges with others. It’s telling us that other act self-interestedly (trade for personal benefit). We should act in our own interest

• The Invisible Hand quote
◦ Everyone acts to maximally satisfy their personal preferences, we will maximally satisfy collective preferences.

Question 44

How does capitalism approach taking care of those who can’t care for themselves?

Answer 44

◦ Some can’t exchange. In order to exchange you need 1: others who value more what you value less, 2: you have something others want and 3:rationality. What if you start with little? Ex. Financial, social, or natural disadvantages.

	‣ Role of welfare in capitalism - classic capitalism (no provisions of welfare), but this is unfair, it's not their fault. Welfare is a neccesary add on to capitalism. 
	‣ Implementing welfare  - rules around who qualifies for welfare, how much they get, how they receive it, what they are expected to do in return.

Question 45

What is agency theory? Why do principles hire agents?

Answer 45

◦ Agency Theory is how principles and agents interact
• Principle - someone who has authority over the performance of certain tasks
• Agent - someone who the principle hires, and delegates authority

• Why do principles hire agents? (Simply put agents are to be the means to some of the principals’ ends)
◦ 1) they are capable of performing tasks but are too busy/time would be better spent doing something else
◦ 2) they are incapable of performing tasks due to lack of experience/knowledge

Question 46

What is the agency problem?

Answer 46

when a manager steals from shareholders occurs because of:
• misaligned interests = P and A have different goals
• information asymmetry = one person has better/more information available
• opportunism = the chance to take advantage of someone

Question 47

What is agency risk?

Answer 47

• when the agent takes advantage of the principle because:
◦ 1) their interests are misaligned (agents have own ends that differ form principles)
◦ 2) Information asymmetry exists favouring the agents (use this knowledge to their advantage)

Question 48

What is adverse selection?

Answer 48

• Adverse Selection - exists prior to the hiring of an agent. Candidate presents themselves in glowing terms, may be difficult to determine who is truly qualified. Principle may have a hard time completely verifying the agent’s abilities prior to entering a contract with them. The agents know something that the principle doesn’t, so what the principals don’t know might hurt them.

Question 49

What is moral hazard?

Answer 49

• Moral hazard - the potential for moral hazard exists after the hiring of the agent. This occurs when the agent is hired but unwilling to do the assigned tasks, likely to conceal their behaviour. The agent can get away with it either because the principle is unable to observe (when it is difficult to assess whether the agent is faithfully putting forth effort) the agent’s behaviour or because they are unable to judge (this could be due to lack of background making it difficult to assess their behaviour) their behaviour. **A minor example of moral hazard is shrinking

Question 50

What are three solutions to the “agency problem”

Answer 50

• Board of Directors - elected by shareholders and job is to monitor (fire, hire, determine compensation) actions the executives. This reduces moral hazard risk (reduce information asymmetry)
◦ Why BoD may fail - inside directors (executives of a company may serve on its board, too many inside directors undermine the boards mission), outside directors (preferred to insiders by shareholder advocates, interlocking directorships undermine the boards mission)

• External Audits - performed by CPA firms, goals: 1) reporting to investors is standard and accurate, 2) good internal controls are in place, 3) managers and employees aren’t stealing from shareholders. Reduces information asymmetry
◦ Why external audits may fail - time and budget constraints, internal accountants may try to hide fraud, auditors follow fairly standard procedures, conflict of interest

• Performance-based compensation - executives receive stock options and cash bonuses based on profits the firm posts. This gives executives a reason not to steal from the firm - creating aligned interests.
◦ Why this may fail - may cause executives to focus on the short term, but wealth of shareholders is determined by long term prospects.

Question 51

Explain Position #1 EVERYTHING SHOULD BE DISTRIBUTED BY THE MARKET (libertarian view). Explain how this view works in terms of babies.

Answer 51

◦ when market forces (demand and supply) operate without interference a price will be reached so that good will sell immediately and market is “clear”

• The baby market - should this process involve a market where babies are bought and sold?
◦ Highly qualified New Brunswick couples looking to adopt wait a minimum of seven years to adopt. (Many think this is too long). How could economists understand and find a solution for this problem.
‣ It indicates the price of a baby is too low! Supply of babies has decreased due to: contraception, social norms, abortion. Demand (infertility) is growing with the population and environmental factors are also increasing infertility.
‣ 1) What is the value of a baby? to an economist the value of anything is simply the price it sells at
‣ 2) What is the price of a baby? adoption fees
‣ 3) Who determined adoption fees? tightly regulated by provincial governments
‣ 4) How does the government set adoption fees? fees put in place to cover costs of having the child for those putting the baby up for adoption, and agency costs of evaluating parents.
◦ New fact there are 30,000 children waiting to be adopted. But not all babies are equal, they have preferred attributes: abled, Christian, healthy, infant, white.
‣ Desired babies are in greater demand and lower supply (sell at premium)
‣ Undesired babies are in lower demand and greater supply (sell at discount)
• Proposed solution is to price babies differently

• Generalizing - pretty much anything can be allocated via the market, demand and supply will move towards equilibrium. The market will efficiently match those seeking to adopt with those waiting to be adopted.

Question 52

What are some possible objections to selling babies according to: Position #1 EVERYTHING SHOULD BE DISTRIBUTED BY THE MARKET (libertarian view)

Answer 52

‣ 1) Abuse - people who buy babies may do so to subject them to abuse or otherwise exploit them
• Reponse: laws forbidding child neglect and abuse would presumably apply fully to adoptive parents
‣ 2) The Rich would get the best babies
• Response: people with high incomes tend to have high opportunity costs for time, wealthy usually have smaller families than the poor.
‣ 3) Trafficking of human lives
• Response: have been undermined by the recent changes in public policy, is paying paying pregnant women o carry the child to term so offensive an alternative to abortion.

Question 53

Explain Position #2 - NOTHING SHOULD BE DISTRIBUTED BY THE MARKET

Answer 53

• Many things are not allocated via the market ex. Welfare benefits, voting rights, water, body organs, babies, basic healthcare.
• This view presents the idea that the market is an inappropriate mechanism for distributing goods in a society (Marxist view of private property). Simply put they don’t believe private property should exist, and that would make the buying and selling of goods a meaningless concept.

No goods should be distributed through the market because:
◦ 1) The Labour Theory of value - people who provide the labour to make goods should own the goods not the people who provide the money to make the goods.
◦ 2) The internal labour concept - if society were reconstructed so that people did more meaningful work, people would produce to give away and we should need a market.

Question 54

Explain the two concepts that support Position #2 - NOTHING SHOULD BE DISTRIBUTED BY THE MARKET. (Labour theory of value and internal labour)

Answer 54

◦ 1) Labour theory of value
‣ How does a product gain worth or value? Who really owns it? The inputs (raw materials, machinery/tools, building and land, capital, labour)

• Three inputs in every product: capital (PPE), raw materials, labour
◦ Accumulated labour = dead labour and living labour
◦ In short, everything should be reduced to a single metric - the # of hours involved in making it. So the product belongs to those who made it.
• Capitalist accountants would list: COGS, Operating Expenses
• Marxist accountants list: living labour (# of hours expended in the present) and deal labour (the number of hours expended in the past)
• Raw materials and land idea is that “no one owns it, so it’s free to use for all to use and doesn’t need to be accounted for”

◦ 2) Internal labour   ‣ The kind of labour that when performed is personally fulfilling to us, and so the desire to do it arises within us. 
	• ex. external labour (factory worker, fast food restaurant worker) done to earns wages, means to an end, the beneficiary is the capitalist, the labour belongs to the world of things
	• ex. internal labour (craftsperson, small family farmer) done to express/realize our spirits, an end in itself, the beneficiary is the worker, the labour belongs to the world of people
		• The wrong type of labour alienates us, the right type is fulfilling and meaningful to the person doing it. 
		• If society is structured more so that there is almost no mass production you would have people doing craftwork and small family farming, they are generally more fufilled. 
		• Could we have a society that simply produces simply give it away? A society without ownership and therefore without markets.

Question 55

Explain Position #3 - MOST THINGS SHOULD BE DISTRIBUTED VIA THE MARKET, BUT SOME THINGS SHOULD NOT BE - because they cause the market to fail…

Answer 55

• The purpose of the market - society has multiple domains, the purpose of the market is to facilitate the exchange of commodities, move good from those who have them to those who want them. But some things shouldn’t be distributed this way!

• Market success ◦ Theoretically when people are better off, resources are being directed where they’re most needed, market-determined prices. ex. re-directing air fryer making to steam ovens.
◦ Practically, 1) when market-clearing price has been arrived at such that no goods are on backorder or overstock over the LT, 2) Extraordinary profits aren’t being made over the long term

• Market Failure
◦ When the market’s pricing mechanism fails to assign a market-clearing price to good with the results that: 1) goods are backordered over the LT, 2) goods sit idle in invenotory over the LT, or 3) extraordinary profits exist over the LT

◦ Types of failures: 
◦ 1) When imperfect competition exists
◦ 2) when (near or full) perfect competition exists but there are 2a) instabilities
	‣ ex. weather or agriculture - remedy is typically government intervention, nothing to do with our topic
◦ Externalities (when two parties are transaction and there is a benefit/cost by a third party) 
◦ 2b) positive externalities (when a benefit is being externalized)
	‣ Usually associated with public goods "free riding" types of public goods 
		• a) non-excludable: when they are provided to one person, there's no way to provide it others
		• b) non-rivalrous: the consumption of the good by one person doesn't prevent others from consuming it 
		• ex. street lighting - solution NB power - nothing to do with our topic 
◦ 2c) negative externalities (when a cost is being externalized) 
	‣ Ex. pollution solutions: 1) specially tax the manufacturer to pay for environmental clean up, 2) make the manufacturer buy technologies to reduce/eliminate the pollution. 
	‣ ex #2 - heroin - costs of addition paid by consumers and residents (policing due to driving under the influence, acute care, chronic care, treatment for infectious diseases spread, financial assistance, lost productivity). Possible solutions: legalize it and specialty tax or make manufacturers buy technologies? Not likely! 
	**‣ When externalized costs are too great to ever be recouped, sale of the product in the market must be prohibited.** 

• Conclusion - some things should be disallowed from the market because they will cause the market to fail in its purpose. When a good is suitable for market distrbution, the market will arrive at a price such that a

Question 56

Explain Position #4 - MOST THINGS SHOULD BE DISTRIBUTED VIA THE MARKET, BUT SOME THINGS SHOULD NOT BE - because they’re not commodites …

What are the three characteristics of commodities?

Answer 56

• Commodities (goods or services that can be valued in terms of money/price, what economics tries to explain, what markets have been designed to handle).
◦ Key Characteristics:

	‣ 1) **Alienable** (Kant): separate from owner, can be traded away "able to be transferred to new ownership"  • inalienable things can't be distributed, are inseparable to the human essence ex. prostitution, body parts  • Position: some things can't be commodified because they're inalienable  • justification: proprietor (subject) and property (object). A man cannot dispose of himself because he is not a thing.  • Objections: 1) it's not uncommon to sell body for sex, 2) what about hiring labour?

	‣ 2) **Fungible** (Radin): not unique, "able to be replaced with a like item"  • there is an element of non-fungibility in personhood, focus on babbies and prostitution  • Position: some things can't be commodified because they;re non-fungible  • Justification: we shouldn't take actions that dehumanize us, ultimately ends-in-ourselves • Double-bind problem: while it may dehumanize us to reduce ourselves to commodities, it may also dehumanize us to not do so at times. "desparate exchanges" (poverty)  • Partial commodification (ex. labour or sexual services with limits)   ◦ commodification: for sales ex. cars and toothbrushes  ◦ partical commodification: for sale but regulated: ex. surrogacy, general labour, sexual services ◦ no commodification ex. children, child slavery 

	‣ 3) **Commensurable** (Anderson) : can be valued in dollars. "measurable by the same standard"  • goods valued for non-utility (useful) reasons  • value to economists (utility) and to philosopher (utility, emotion, sharing, respect)  
	◦ commodity: something value only for its utility 
	◦ non-commodities: things valued for reasons in addition to or instead of utility 
	‣ ex. babies, park spaces, education shouldn't be traded in an open market 
◦ Why are economists so simplistic in their views? 1) they're stupid, 2) they are purposeful in ignoring things and simplifying

Question 57

Explain the Final Position: MOST things should be distributed via the (free) market, but some things should not be because… they are the result of “abnormal” preferences

Answer 57

• consumer preferences - markets are designed to fufill preferences, however, not all preferences are the same. Some are aberrant (not the common type of preference that markets satisfy). Goods with non-standard preferences associated with them do not belong in the market.

• Indifference curve - you are indifferent about the goods on that curve.

Alternatives to open markets are needed in such situations:
◦ Addictive goods (ban the good or heavily regulate it)
◦ Necessities (allocate via public utility)
◦ Rare goods of public interest (allocate via a system open for all)

Question 58

What are the three properties of consumer preferences we focus on?

Answer 58

◦ Continuity - X and Y are both available in unlimited quantities
‣ 1) there are no gaps on the curves, 2) That between any two integer tick mars on the X and Y axes are infinite numbers of possible fraction. Good should be produced in large quantities in fractional amounts.

◦ **Convexity** - there is a decreasing marginal rate of substitution along each curve 
	‣ Preference curves are convex to (open away from) the origin. As we move from left to right along an indifference curve we give up units of Y in exchange for X. The rate at which this substitution occurs decreases. (curve flattend) 
	‣ (very little x = a lot of Y) 

◦ **Origin Referencing** - there is no non-zero minimum required of good X or Y for subsistence
	‣ The preference curves are oriented relative to the origin (0,0). This means there is no minimum of good X or Y that is necessary for a person to survive. (4,0 would be they always want 4 units, not like that!)

Question 59

What are some Goods with “abnormal” preferences associated with them (violate preferences properties). How do we deal with them?

Answer 59

◦ Pharmaceutical (luminal drug for epilepsy) violates property “convexity”, thus for regulating purchase and sale, and keeping it out of open market. Ban or tightly regulate with controlled distribution.

◦ Water (levissima) essentials! Shifted to the right 4 units because we require 4 litres of water a day! Violates Origin Referencing. Solution: allocate water through a utility, not through an open market. 

◦ Lythronax (no curve! rare skeletons of tyrannosaurus) Only a small number exist. Not a commodity item and the market is unable to price reliable. Solution: place it in a public sapce for everyone to see. Violates continuity. 

• Summary - alternatives to open markets are needed in such situations:
◦ Addictive goods (ban the good or heavily regulate it)
◦ Necessities (allocate via public utility)
◦ Rare goods of public interest (allocate via a system open for all)

Question 60

What gives someone legal standing? What does having legal standing mean?

Answer 60

What gives something legal standing?
• Things: Serve as a means to the ends of natural persons
• Natural persons: humans recognized as having worth and dignity in their own right

What does having legal standing mean?
• 1) Guaranteed review by some public authoritative body (court/admin) of any action and processes of those who threaten it
• 2) Can institute legal actions at its behest
• 3) Injury to it must be take into account when an authoritative body grants it legal relief
• 4) Relief grant must benefit it

Question 61

What is the difference between a natural natural person and the rights of a legal person?

Answer 61

Natural person (human being with rights) vs. non human being with rights

Rights of a legal person
• some rights bestowed by the law: can own property, sign contracts, file taxes, file a lawsuit in its behalf, be sued
• Some rights witheld by the law: can’t vote, can’t hold public office, can’t claim privacy

Question 62

What are the two possible objections to if trees should have legal standing?

Answer 62

1. The environment can’t express itself
   • Corporations can’t speak either, lawyers speak for them. Guardians represent the incompetent in his legal affairs.
2. Does this mean we can’t ever cut a tree down or ever do anything harmful to nature
   • The environment should have, but not neccesarily all the right humans have.

Question 63

What is legal vs moral standing?

Answer 63

• Legal standing (can a forest or stream have recognition as a person before the law? )

• Moral standing - whether the forest or steam should be included in moral analysis

Question 64

Explain enlightened self-interest in the context of moral standing.

Answer 64

◦ Self-interest: acting to the benefit of one-self only
◦ Enlightenment: deeper and more profound understanding of oneself or one’s circumstances
◦ Enlightened self-interest: choosing actions that are personally disadvantageous to you in some narrow, immediate context, because they are personally advantageous to you in some broader context. ex. if you destroy the earth today, where will you live tmr!
‣ Conservation vs. preservation - conservation: don’t use certain natural resources today so you will have them tmr. - preservation: don’t use certain natural resources ever, so you can appreciate them for what they are.
◦ Enlightened self-interest tends to be more about conservation, but maybe should be more about preservation

Question 65

How do utilitarian, Kantian and capitalist analyses approach moral standing of natural things?

Answer 65

• Utilitarianism
◦ actions are right in proportion as they tend to promote the overall happiness of all those affected, wrong as they tend to produce the reverse of overall happiness for all those affected. Anything that can feel pain.

• Kantian Universalism
◦ act so that you treat the humanity… in that of another always as an end and never as a means only. There is little room for non-humans in this analysis!

• Capitalism
◦ Externalities: Recall how pollution is an externality, so capitalists believe most heavily polluting companies, and their customers - have been getting a free pass for too long.
◦ Endangered species: are represented by abnormal indifference curves, and thus an economic argument can be made against hunting them to extinction. Still working on this one