Table Of ContentETHICAL ISSUES IN ECONOMICS
Ethical Issues
in Economics
From Altruism to Cooperation to Equity
M. Teresa Lunati
Senior Lecturer in Economics
Bolton Institute
Bolton
First published in Great Britain 1997 by
MACMILLAN PRESS LTD
Houndmills, Basingstoke, Hampshire RG21 6XS and London
Companies and representatives throughout the world
A catalogue record for this book is available from the British Library.
ISBN 978-1-349-39915-4 ISBN 978-0-230-37358-7 (eBook)
DOI 10.1057/9780230373587
First published in the United States of America 1997 by
ST. MARTIN'S PRESS, INC.,
Scholarly and Reference Division,
175 Fifth Avenue, New York, N.Y. 10010
ISBN 978-0-312-17496-5
Library of Congress Cataloging-in-Publication Data
Lunati, M. Teresa, 1958-
Ethical issues in economics : from altruism to cooperation to
equity I M. Teresa Lunati.
p. em.
Includes bibliographical references and index.
ISBN 978-0-312-17496-5 (cloth)
I. Economic5--Moral and ethical aspects. I. Title.
HB72.L86 1997
174'.4-dc21 97-7118
CIP
"M. Teresa Lunati 1997
Softcover reprint of the hardcover 1st edition 1997 978-0-333-67366-9
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This book is printed on paper suitable for recycling and made from fully managed and
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10 9 8 7 6 5 4 3 2
06 OS 04 03 02 OJ 99 98
Contents
List of Tables viii
List of Figures ix
Preface x
Acknowledgements xiii
Introduction 1
1. Altruism, Rationality and Morality 9
Introduction 9
1.1 Morality as 'Altruism cum Rationality' 10
1. 2 Altruism and Rationality 12
1. 3 Morality and Rationality 14
1.4 Moral Behaviour and the 'Invisible Hand', and
Individual Freedom 15
1.5 Summary 18
2. Economic, Socio-Economic and Moral-Economic
Approaches to Altruism 20
Introduction 20
2.1 Standard Economic Approaches to Altruism 21
2.2 Alternative Socio-economic and Moral-economic
Approaches to Altruism 25
2.3 Summary 29
3. (Non-Altruistic) Treatment of Altruism in Some Recent
Economic Works 31
Introduction 31
3.1 Recent Articles Selected 32
3.2 The Articles' Modelling of Altruism 33
3.2.1 Altruism as a 'Preference' in the Utility Function 33
3.2.2 Altruism as Cooperative Behaviour 35
3.3 Allocative Inefficiencies, Exploitability and
'Moral Hazard' of Altruism 36
3.4 Altruism as a quid pro quo 41
v
vi Contents
3.5 Altruism as a Genetically or Culturally Inherited Trait 43
Appendix 3.1 A 'Prisoner's Dilemma' with Altruism and/or
Trust or Assurance 47
Supplement: On Altruism, Fitness, Intelligence and Poverty SO
Introduction 50
S3.1 The Economist's and Sociobiologist's Altruism and
Fitness 50
S3.2 From Altruism to 'Pauper Homo Economicus' 52
S3.3 Conclusion 57
Appendix S3.l A Sketch of the Model 57
4. Ethical and Political Non-Neutrality of Neoclassical
Economics 59
Introduction 59
4.1 Some Thoughts on the 'Prisoners' Dilemma' and
'Free-Rider' Problem 62
4.2 On the Ethical Non-Neutrality of the 'Selfishness'
Assumption 63
4.3 Some Implications 64
S. Ethics, Politics and Economics 71
Introduction 71
5.1 Economic Research 73
5.2 Economic Teaching 75
5.3 Economic vs Weather Forecasting 78
5.4 Some Semantic (or not so) Issues in Economics 79
Supplement: Is the 'Dismal Science' a Corrupting
One as Well? 82
Introduction 82
S5.l Possible Explanations for Economists' Observed
'Bad' Behaviour 83
S5.2 Reasons for Concern 87
6. Ethics, Game Theory and Laboratory Experiments 89
Introduction 89
6.1 From Game Playing to Game Theory 89
Contents vii
6.1.1 From Playing Games to Working ... 90
6.1.2 ... to Game Theory 90
6.2 Concern for Others in Games versus Real-life 92
6.3 Laboratory Experiments and 'Mixed' Results 95
6.4 Teleological versus Deontological Ethics 97
7. Competitive vs Cooperative Individuals and Moral
Principles of Cooperation 100
Introduction l 00
7.1 Game Theory, Rationality and Cooperation 101
7.2 Competitive Individuals: Prisoner's Dilemma and
Other Social Dilemmas l 05
7.3 Cooperative Individuals: Natural or Command
Cooperators l 08
7.4 Summary 117
Appendix 7.1 Description of Social Dilemmas 118
Appendix 7.2 Asymmetric Games among
'Competitive' Players 119
8. Efficiency and Equity: A Short-Run, Short-Sighted
Trade-Oft' 120
Introduction 120
8.1 Efficiency, Equity and the 'Paradox of Greed'
(or Inequality) 124
8.2 Digression on Charities 126
8.3 Formal Relationship between Efficiency and
Income Distribution 126
8.4 Causality between Efficiency and Distribution 128
8.5 Economy's Trajectory 129
8.6 Income Distribution in the Four Regions:
a Simple Model 132
8. 7 Conclusions 136
Concluding Notes 139
Notes 144
References 173
Index 185
List of Tables
3.A1 The Prisoner's Dilemma 47
3.A2 An Asymmetric Assurance Game 48
3.A3 Illustrative Examples of an 'Altruist' 's Prisoner's
Dilemma 49
7.1 'Competitive' Individuals: (Two-player, Two-strategy)
Social Dilemmas 107
7.2 'Cooperative' Individuals: The Resolution of Dilemmas:
Cooperation is the Best Individual and Collective
Outcome 114
8.1 Rich-Poor 'Game' over (e, d): Scenario (a) 135
8.2 Rich-Poor 'Game' over (e, d): Scenario (b) 135
8.3 Rich-Poor 'Three-strategy Game' over (e, d):
Scenario (a) 136
VIII
List of Figures
2. 1 A Taxonomy of Altruism 30
7.1 'Competitive' vs. 'Cooperative' Players:
Payoff Rankings and Outcomes I 15
8.1 Efficiency and Distribution 127
8.2 The Economy's Four Regions 130
8.3 Ten Individuals' Income Distribution 132
ix
