Lecture 12 Morality of markets

Question 1

Micheal Sandel

Answer 1

wrote book on what happens when we implement markets where we shouldn’t.
gave arguments for as well as against free markets.

Question 2

libertarian argument

Answer 2

people are free to buy and sell, as long as they do not violate anyone’s rights

Question 3

utalitarian

Answer 3

market exchange benefits buyers & sellers alike, thereby improving our collective well-being, or social utility

Question 4

inequality

Answer 4

the more things money can buy the sharper the sting of inequality

Question 5

value corruption

Answer 5

in some cases free markets change the character and meaning of the good itself

markets can corrupt the value of goods and in turn shape morality

Question 6

Gneezy & Rustichini (2000)

Answer 6

study with fine for picking up kids late at daycare

Question 7

social norms

Answer 7

you bring flowers to dinner with your in-laws, not money. flowers are a signal of appreciation, money makes it a transaction

Question 8

commonality

Answer 8

markets decrease the sense that we are all in this together

Question 9

democracy

Answer 9

democracy requires us to be in touch not necessarily equal and we can only do that if we live in roughly the same world. so markets are bad for democracy

Question 10

Falk & Szech (2013) on the moral value of life

Answer 10

gave participants the choice between saving a mouse or 10 dollars in 3 conditions
- individual decisions
- bilateral market (if agreed mouse lives, no agreement mouse dies
- multilateral market with more sellers

in the market conditions people were more likely to kill the mouse than in the individul condition

Question 11

why did the market erode the moral value of the mice’s live

Answer 11

• diffusion of responsibility
• social norm formation: in a market, norms form
• materialistic framing: in a market a good deal is desired

Question 12

ethical blind spot

Answer 12

we have a blind spot that prevents us from seeing some things that are unrealistic
example was Madoff’s feeder fund. people don’t realise that type of stock fund is not realistic

Question 13

information assymetry and moral hazards

Answer 13

people are charged more when they say they have insurance compared to when they don’t mention it.
also charged for more hours.

study

Question 14

solution to moral hazards

Answer 14

• more information (reviews)
• better incentives