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PHILOSOPHICAL PROBLEMS

     IN ECONOMICS
 UTILITARIANISM

 LIBERTY AND EQUALITY

 PREFERENCE, CHOICE AND SELF
  INTEREST

 HAPPINESS
UTILITARIANISM
Utility (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.
- by happiness is intended pleasure and the absence of
  pain, by unhappiness, pain, and the privation of
  pleasure.
Imagine a situation in which a boat is sailing in to the
Deep-Sea. It is carrying ten children. I am the eleventh
person, the sailor, the only one capable of sailing the
boat. Without the sailor the boat will sink. A catastrophe
happens. The boat is overweight. It slowly starts sinking.
All eleven of us will drown within the next three minutes.
There are no rescue facilities available. No help can be
relied upon.
There is only one hope. If the boat is lighter by a couple
of hundred pounds it can stop sinking and stabilize. That
means two people from the boat have to jump out. I can‟t
leave because I am the only one who can manage the boat.
The choice is in this situation to make two children
people leave the boat or to put it bluntly throw two of
them out.
Utilitarian
- A utilitarian would throw two people out of the boat and
  save the other nine as opposed to allowing all eleven to
  die.
Non-utilitarian
- To minimize the pain of letting eleven people die or
forcibly throwing two out, he could ask two to jump out.
Hopefully having the solace that they are saving lives of nine
people in the process, so their pain of embracing death is
minimized by knowing their death is not going to waste, as
opposed to sinking with the boat and dying needlessly
LIBERTY AND EQUALITY
Liberty formal




                 Liberty formal          Ability to choose as one likes, without interfering
                                         with others ability to do so.

                 Libertyprinciple        Ability to do or refrain from doing definite things in
                                         regard to ones basic needs.

                 Equality limited opp.   Situation in which birth, nationality, colour,
                                         religion, and sex do not prevent people from
                                         achieving the positions in life they want and meet
                                         their talents.


                 Equality outcome        Situation in which everyone has the same level of
                                         living and income.
Milton Friedman
- human freedom and economic freedom work
  together. They are part of the same whole.
  The greatest threat to human and economic
  freedom is the concentration of power, in the
  hands of the government or anyone else.
- Equality of opportunity, then like personal
  equality, is an integral part of liberty
- He contrasted this with a different meaning,
  equality of outcome
- All should win the same prize. “Fair shares for
  all, To each according to his needs, from each
  according to his ability”
- This is where liberty and equality are not
  synonymous he feels
Richard Henry "R. H." Tawney
- „equality implies the deliberate acceptance of
social restraints upon individual expansion. It
involves the prevention of sensational extremes
of wealth and power by public action for the
public good‟
- liberty implies that every individual is free to
  fully exercise all his powers without limit, if it
  is the power of the strong on the weak, then liberty
  is incompatible with equality.
- to ensure that freedom of some is not at the expense
  of slavery to others, must limit Liberty.
- „freedom for the pike is death for the minnows‟
PREFERENCE, CHOICE AND
     SELF INTEREST
You choose what you prefer; you prefer what
you choose, as it augments your self
interest.
Preference - the act, fact, or principle of
giving advantages to some over others
priority in the right to demand and receive
satisfaction of an obligation
Choice- the act of choosing
Self interest- defined as desires of man. It
is an evaluation of the facts of reality.
Situation:


 The basket contains multiples of both fruit. There
  are a number of people present. Most have the same
  preference as you. Since the number of mangoes is
  more than one you choose what you prefer, your self-
  interest being directly served as you pick the mango.
Or: There is only one mango and many people, but the
hostess insists that you take the mango: here the
value of the mango has not been tarnished by the
price of rudeness, you gladly pick the mango, you
choose what you prefer, and serve your self-interest
Or: If there are a number of people present
with only one mango and the rest apples and you
don‟t know their preference, you still choose
the mango, as the elements of sympathy and
commitment cannot be introduced, due to lack of
information.
Or: If there is only one apple and one mango

with only two people remaining at the dinner

party and both of you prefer the mango to the

apple, the number of possible actions will be:
You take the mango- you choose what you prefer,
directly serving your self-interest. You choose the
mango but it now has a decreased value. The other
person might regard you as rude, greedy; you risk
your reputation by being seen as the fruit grabber.
Your self-interest is served here, but only partially
as you now pay a price of rudeness by choosing the
mango.
You don‟t choose the mango. You don‟t choose
the mango due to sympathy. You care about the
other person and seeing his pleasure at
attaining the mango makes you happy. Here when
you don‟t choose what you prefer you still
serve your self-interest as the outcome
results in augmenting your self-interest
You participate in a game concerning strategic nobility. You
pass the basket to you dinner partner, and hope that his
decision is based on sympathy, that he will choose the less
preferred fruit and pass on the mango to you. Here though you
may look gracious in passing on the basket without picking
the fruit, in reality you can be seen as serving your self-
interest by hoping that you will have the opportunity of
attaining the guilt free mango.
You forgo the mango and pass it on to your dinner
partner as your reputation is of more consequence
than attaining the mango. Here again you are
serving your self-interest by not choosing what you
prefer, as it is important to you that you are
viewed as a gracious and considerate person by
society
Situation:
A married man who is unhappy with his wife, and is in
love with other women does not indulge in an affair,
even if having the guarantee that the wife will be
unable to find out, is committed to his principles. This
is self-sacrifice on his part where the action chosen is
not one, which he prefers and does not serve his self-
interest.
Is there always a clear link between choice,
preference and self- interest?
You may choose an action, which you don‟t prefer.
Sometimes our choices can be mistaken due to
misinformation or expectations may prove to be
wrong. We also make choices on principles and not
for gain as we may choose due to binding
commitment, which may undermine our self-interest.
HAPPINESS
Jeremy Bentham
- postulated „The greatest happiness for the
greatest number‟ principle as the aim of life.
But Bentham and most subsequent moral
philosophers have reconciled themselves to the
fact that measurement and interpersonal
comparisons of happiness between individuals
is not achievable.
Richard Layard
- declared that happiness can be measured
- ask people how happy they are, and we then ask
  their friends and observers to authenticate the
  answers.
- He claims people tell the truth in these surveys
Jeremy Bentham and William Stanley Jevons
- believed that the human mind was
  inscrutable
- it was perceived hard to imagine how one
  would numerically express units of
  happiness that were not accessible to any
  unit of measurement
THANK YOU FOR
LISTENING 

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Philosophical issues in economics

  • 1. PHILOSOPHICAL PROBLEMS IN ECONOMICS
  • 2.  UTILITARIANISM  LIBERTY AND EQUALITY  PREFERENCE, CHOICE AND SELF INTEREST  HAPPINESS
  • 4. Utility (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. - by happiness is intended pleasure and the absence of pain, by unhappiness, pain, and the privation of pleasure.
  • 5. Imagine a situation in which a boat is sailing in to the Deep-Sea. It is carrying ten children. I am the eleventh person, the sailor, the only one capable of sailing the boat. Without the sailor the boat will sink. A catastrophe happens. The boat is overweight. It slowly starts sinking. All eleven of us will drown within the next three minutes. There are no rescue facilities available. No help can be relied upon.
  • 6. There is only one hope. If the boat is lighter by a couple of hundred pounds it can stop sinking and stabilize. That means two people from the boat have to jump out. I can‟t leave because I am the only one who can manage the boat. The choice is in this situation to make two children people leave the boat or to put it bluntly throw two of them out.
  • 7. Utilitarian - A utilitarian would throw two people out of the boat and save the other nine as opposed to allowing all eleven to die. Non-utilitarian - To minimize the pain of letting eleven people die or forcibly throwing two out, he could ask two to jump out. Hopefully having the solace that they are saving lives of nine people in the process, so their pain of embracing death is minimized by knowing their death is not going to waste, as opposed to sinking with the boat and dying needlessly
  • 9. Liberty formal Liberty formal Ability to choose as one likes, without interfering with others ability to do so. Libertyprinciple Ability to do or refrain from doing definite things in regard to ones basic needs. Equality limited opp. Situation in which birth, nationality, colour, religion, and sex do not prevent people from achieving the positions in life they want and meet their talents. Equality outcome Situation in which everyone has the same level of living and income.
  • 10. Milton Friedman - human freedom and economic freedom work together. They are part of the same whole. The greatest threat to human and economic freedom is the concentration of power, in the hands of the government or anyone else.
  • 11. - Equality of opportunity, then like personal equality, is an integral part of liberty - He contrasted this with a different meaning, equality of outcome - All should win the same prize. “Fair shares for all, To each according to his needs, from each according to his ability” - This is where liberty and equality are not synonymous he feels
  • 12. Richard Henry "R. H." Tawney - „equality implies the deliberate acceptance of social restraints upon individual expansion. It involves the prevention of sensational extremes of wealth and power by public action for the public good‟
  • 13. - liberty implies that every individual is free to fully exercise all his powers without limit, if it is the power of the strong on the weak, then liberty is incompatible with equality. - to ensure that freedom of some is not at the expense of slavery to others, must limit Liberty. - „freedom for the pike is death for the minnows‟
  • 14. PREFERENCE, CHOICE AND SELF INTEREST
  • 15. You choose what you prefer; you prefer what you choose, as it augments your self interest.
  • 16. Preference - the act, fact, or principle of giving advantages to some over others priority in the right to demand and receive satisfaction of an obligation Choice- the act of choosing Self interest- defined as desires of man. It is an evaluation of the facts of reality.
  • 17. Situation:  The basket contains multiples of both fruit. There are a number of people present. Most have the same preference as you. Since the number of mangoes is more than one you choose what you prefer, your self- interest being directly served as you pick the mango.
  • 18. Or: There is only one mango and many people, but the hostess insists that you take the mango: here the value of the mango has not been tarnished by the price of rudeness, you gladly pick the mango, you choose what you prefer, and serve your self-interest
  • 19. Or: If there are a number of people present with only one mango and the rest apples and you don‟t know their preference, you still choose the mango, as the elements of sympathy and commitment cannot be introduced, due to lack of information.
  • 20. Or: If there is only one apple and one mango with only two people remaining at the dinner party and both of you prefer the mango to the apple, the number of possible actions will be:
  • 21. You take the mango- you choose what you prefer, directly serving your self-interest. You choose the mango but it now has a decreased value. The other person might regard you as rude, greedy; you risk your reputation by being seen as the fruit grabber. Your self-interest is served here, but only partially as you now pay a price of rudeness by choosing the mango.
  • 22. You don‟t choose the mango. You don‟t choose the mango due to sympathy. You care about the other person and seeing his pleasure at attaining the mango makes you happy. Here when you don‟t choose what you prefer you still serve your self-interest as the outcome results in augmenting your self-interest
  • 23. You participate in a game concerning strategic nobility. You pass the basket to you dinner partner, and hope that his decision is based on sympathy, that he will choose the less preferred fruit and pass on the mango to you. Here though you may look gracious in passing on the basket without picking the fruit, in reality you can be seen as serving your self- interest by hoping that you will have the opportunity of attaining the guilt free mango.
  • 24. You forgo the mango and pass it on to your dinner partner as your reputation is of more consequence than attaining the mango. Here again you are serving your self-interest by not choosing what you prefer, as it is important to you that you are viewed as a gracious and considerate person by society
  • 25. Situation: A married man who is unhappy with his wife, and is in love with other women does not indulge in an affair, even if having the guarantee that the wife will be unable to find out, is committed to his principles. This is self-sacrifice on his part where the action chosen is not one, which he prefers and does not serve his self- interest.
  • 26. Is there always a clear link between choice, preference and self- interest?
  • 27. You may choose an action, which you don‟t prefer. Sometimes our choices can be mistaken due to misinformation or expectations may prove to be wrong. We also make choices on principles and not for gain as we may choose due to binding commitment, which may undermine our self-interest.
  • 29. Jeremy Bentham - postulated „The greatest happiness for the greatest number‟ principle as the aim of life. But Bentham and most subsequent moral philosophers have reconciled themselves to the fact that measurement and interpersonal comparisons of happiness between individuals is not achievable.
  • 30. Richard Layard - declared that happiness can be measured - ask people how happy they are, and we then ask their friends and observers to authenticate the answers. - He claims people tell the truth in these surveys
  • 31. Jeremy Bentham and William Stanley Jevons - believed that the human mind was inscrutable - it was perceived hard to imagine how one would numerically express units of happiness that were not accessible to any unit of measurement

Editor's Notes

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