Module 5 - Collective Action Problems and Institutions Flashcards
Models
Abstractions (simplifications) that help us to understand and interpret reality. They also help us in predicting future outcomes.
Theory
A system of ideas intended to explain phenomena (real world things) based on a shared body of principles (terms and concepts).
An Ethical Philosophy
An effort to define how society should fxn in terms of what is accepted as right or wrong behaviour.
Utilitarianism
The view that the morally right action is the action that produces the greatest aggregate level of happiness and well being for affected individuals, meaning fi for every activity if we could calculate the total benefits and the total costs that would occur and sum that all up, we should do the thing that results in the greatest amount of benefit for society.
When and why did utilitarianism rise?
- It is a modernist ethical philosophy that arose in the 18th century drawing on ideas from ancient Greek thinkers
- Arose to counter ethical philosophies rooted in religious and culturally pre-determined morals based in doctrine
What is a homo economicus?
- self interest individual
- does a perfect cost-benefit analysis on every decision based upon their own preferences
- is motivated to employ their resources in an efficient manner to achieve their personal desires
What are Collective Action Problems (aka Social Dilemmas)?
Situations in which the rational self-interested behaviour of individual decision makers leads to suboptimal outcomes in terms of total utility (happiness and well being).
What is ‘The Tragedy of the Commons’?
- Published in 1968 by Garrett Hardin
- Noted that open access ‘common’ properties were doomed to tragedy bc individuals had an incentive to over-exploit them
- Tragedy of the Commons = Collective Action Problem
What are social benefits? What are social costs?
social benefits = positive externalities
social costs = negative externalities
*These external costs are NOT considered by the key decision makers (producers and consumers) of a production/consumption process
When does a negative externality occur?
When a decision causes costs to stakeholders (ppl or groups) other than those involved in making the decision.
- neither the producer or the consumer experience the cost
- costs are experienced by the public as a whole or by unknowing or dis-empowered ppl
What are 2 types of negative externalities?
- present day costs borne by 3rd parties
- direct costs: health costs, aesthetic costs, physical harm etc.
- opportunity costs - future costs borne by 3rd parties
- opportunity costs relating to potential future consumption of non-renewables
- lost opportunities to make use of degraded renewable resources
Positive Externalities
When benefits in a production-consumption relationship are experienced by a third party
What do most environmental issues that we face as a society involve?
Some form of collective action problem.
What did our version of the Prisoners Dilemma demonstrate?
That ppl acting in their own self-interest act very differently when they can COMMUNICATE and DEFEND their own interests.
- when they cannot communicate they are heavily incentivized to turn against one another resulting in a sub-optimal outcome = “Tragedy of the Commons”
- When they can communicate they have an incentive to work collaboratively for the best possible outcome
- This mimics real world collective action problems
- In contrast to what Adam Smith argued about the functioning of mkts- the invisible hand).
What do people in the real world do when they can communicate and defend their own interests?
They can INSTITUTE (make) a collective agreement as opposed to a competitive market based (antagonistic) one
- aka they can choose to work together to achieve a more optimal outcome