Values and Values Education
in Economics
30-4-2005, CDI
• Concept of value
One-person economy
• Valuing alternative – preference ordering
• Subjective
• Discounting: same discounting criteria
Two-person economy
• Production: Separate effort
• Exchanges
• Terms of exchange: bargaining and information
revelation
• Contracts and enforcement
• Division of benefits
• Production: Joint effort and division of product
•
Total > Sum of individual
•
Individual share > separate effort
(in terms of physical units)
individual valuation same as separate case
•
costs in joint production < resultant gain
n-person economy
Production and distribution
Competitive case
Prices: collapsing information ->
decision parameter
- values
- constraints
- core of competitive equilibrium
• Pareto optimality: welfare implication –
distributive justice
Pareto improvements: gain to someone with
no one worse-off; deviation from it implies
loss to someone
• Rule is equitable;
• Yet: outcome may not be comfortable to
some – e.g. the ultimatum game
Activity ONE
1
2
3
pair up:
Proposer, and
Acceptor
Offering x out of 6 chocolate to A
If A accepts, divide chocolate;
– If A does not accept, both get zero.
Record the offer and result
Group A
Offer
Accept?
Value of Acceptance
-> individual’s concept of fairness
- Distribution of joint product, common property,
innovation, scarce/unique goods, rights
(parliament seats, education opportunities,
land) …
• Analysis of social conflict or distribution of
scarce good
• Concept of equity
- Equitable outcome (c.f. realised welfare functionings [Sen, 85, 96, 2000])
- Equitable rule/process (c.f. potential welfare –
capabilities [Sen])
Notion of distributive justice
1. Macro: just social order e.g. veil of
ignorance
2. Local: not coherent, case by case
because of compartmentalized
approach
Allocation
1. Supply decisions e.g. seats in
legislature
2. Distributive decision: rules
3. Reactive decision: action after tax
• Activity Two
• Groups of six
• Decide on an allocation scheme for
recipient of kidney donation
• Justify you criteria, scoring and
weighting methods
Score the following cases using your scheme:
One kidney from a man 18-years old available
•
A 45 years old police inspector, divorced, two
kids living with him, cracked many difficult
crime, average tissue match, on waiting list for
1 year
•
A 36 years old professor of BioChemistry,
made major break-through in cardio-medicine
research, single, poor tissue match, on waiting
list for 2 years, conditions deteriorates fast
recently due to infection
• 20 years old man on probation for burglary,
been in and out of prison in the last 2
years, good tissue match, unemployed
and has history of drug abuse, been
hospitalized due to drug overdose, kidney
function is very low and tried suicide after
dialysis, living with girl friend who supports
him financially.
• Business tycoon aged 65, good tissue
match, married with three sons, donated
lots of money to TWGHs, on the waiting
list for just two months, has good
connection with central government
• A altruistic young woman 16 years old,
medium tissue match, does not
communicate with others, can play music
extraordinarily well, was invited to perform
in Arts festival concert.
• Point system for kidney allocation in US
• 1984 Act
• “in accordance with established medical criteria, to match
organs and individuals in the recipient list.”
• Policy:
• “organs offered for transplantation are viewed as national
resources, …allocation … must be based on fair and
equitable policies … The point system for kidney allocation
was developed to accomplish major policy intrinsic in a fair
system: to alleviate human suffering; to prolong life; to
provide a non-discriminatory, fair and equitable system for
organ allocation; to develop technology and foster research
necessary for advancement and improvement of the quality
of life of transplant recipients; to maximize organ usage and
to decrease organ wastage; and to be accountable to the
public that is assuming ever-increasing societal and
economic responsibilities for life-long care required by
transplant patients.”
Point system for kidney allocation in US
• 1984 Act
• “in accordance with established medical criteria, to match
organs and individuals in the recipient list.”
• Policy:
• “organs offered for transplantation are viewed as national
resources, …allocation … must be based on fair and
equitable policies … The point system for kidney allocation
was developed to accomplish major policy intrinsic in a fair
system: to alleviate human suffering; to prolong life; to
provide a non-discriminatory, fair and equitable system for
organ allocation; to develop technology and foster research
necessary for advancement and improvement of the quality
of life of transplant recipients; to maximize organ usage and
to decrease organ wastage; and to be accountable to the
public that is assuming ever-increasing societal and
economic responsibilities for life-long care required by
transplant patients.” (from P. Young, equity)
• Committee: medical experts, patient groups
representatives, ethicists, general public
Broad criteria:
• Efficacy: likelihood of success
• Need: lack of alternatives
• Disadvantage: advantage to patient with difficult match
• a kidney/tissue/antigen match -> utilitarian + efficiency
• b medical urgency -> Rawlsian
• c compensation for bad-luck(difficult tissue match) or
long wait -> Rawlsian
• impartiality + consistency + standard of comparison +
priority method
• => note Arrow’s Impossibility Theorem on absence of
completely satisfactory to get social consensus through
aggregating individual opinions.
• Allocation rules
•
Parity: claimants all equally treated
•
Proportionality: differences among
claimants -> allocation weighting
•
Priority
• normative principles (applied, implied,
decided)
• empirical rules (the set usually is a
compromise)
• Normative Theories of justice
• 1 equity principle (Aristotle)
-allocation proportionate to contribution
contribution?
-Indivisible good?
2 maximizing the total welfare (Classical
utilitarism)
‘greatest good for the greatest number’
- cardinal comparisons across individuals?
- Might harm some for benefit of others
3 least well-off be as well-off as possible
(Rawls)
• maximin/difference principle
• well-off in terms of means/instrument
(income, opportunity, power, self-respect)
to the least well-off
• observable instrument, no need for
interpersonal comparisons
• no need to harm others
• expected benefit Vs costs to other
members may be out of proportion
• weighting of primary goods?
4 No Envy
•
- changing places? Bundles for
allocation?
•
- allocate => divide
•
- requires no information advantage of
one party