B&E - 441
|Instructor:||Professor Roger D. Congleton||.T/Th: 1:00 - 2:15
|Office:||B&E - 405
|.Office Phone|| 3-7866 (e-mail is
the most reliable way to reach me)
|Office Hours:||2:00-3:30 Wednesday and Thursdays, and most other times by appointment||
|Required Texts:||class notes
|Main Texts (Optional):||Source Material for the Course*
|.||Aristotle (350 bc) Nicomachean Ethics
(Available as an E-book from Google, Liberty Fund, Amazon,
Buchanan, J. M. (1997) Ethics and Economic Progress. Norman OK: University of Oklahoma Press.
Mill, J. S. (1863) On Liberty. Boston: Ticnor and Fields. (Available as an E-book from Google and Liberty Fund).
Rand, A.(2005) Atlas Shrugged. New York: Penguin. (Available as an E-book from Google and Amazon).
Smith, A. (1776) An Inquiry Into the Nature and Causes of the Wealth of Nations. (Available as an e-book from Google and Liberty Fund).
Spencer, H. (1896) Principles of Ethics. Appleton and Company, New York. (Available as an e-book at liberty fund and the Von Mises Institute)
Weber, Max (1930) The Protestant Ethic and the Spirit of Capitalism. (Available as an e-book from Google and Amazon.)
|.||Moral Foundations of Capitalism is a
course in normative economic and political economy theory
and history. It analyzes how some types of morals at the
individual level allow markets to become larger and more
effective by reducing principle agent problems,
simplifying contract enforcement, and internalizing
externalities. It also discusses social norms that can be
used to assess market processes, networks, and outcomes.
Two general types of normative theories are examined: (i)
personal ethics and (ii) civil ethics. Both types of
ethics have played roles in arguments for and defenses of
relatively open (free) markets.
Whether then we suppose that the End impresses each man's mind with certain notions not merely by nature, but that there is somewhat also dependent on himself; or that the End is given by nature, and yet Virtue is voluntary because the good man does all the rest voluntarily, Vice must be equally so;
Aristotle (2012-05-17). Ethics (p. 82). . Kindle Edition.
|For not only is a developed sense of
responsibility absolutely indispensable, but in
general also an attitude which, at least during
working hours, is freed from continual
calculations of how the customary wage may be earned
with a maximum of comfort and a minimum of exertion.
Labor must, on the contrary, be performed as if it
were an absolute end in itself, a calling. But
such an attitude is by no means a product of nature.
Weber, Max (2012-10-21). The Protestant Ethic and the Spirit of Capitalism (Kindle Locations 311-314). Vook, Inc.. Kindle Edition.
|The course is divided in
to three parts. (1) The first part reviews theories of
personal ethics from Aristotle through Mill. It shows how
private and social ethics changed in the West during the
same period in which capitalism emerged. It is a
relatively philosophical section and introduces students
to several theories of personal ethics, with particular
emphasis on ones that support commerce. (2) The second
part uses game theory and economic tools to show how a
subset of ethical norms tend to make markets more
extensive: more gains to trade emerge, larger
organizations become possible,longer trading networks
become feasible, and rates of innovation tend to increase.
(3) The third part reviews theories for evaluating public
policy and market outcomes. In what ways can a market be
said to become "more efficient?" A short review of the
history of welfare economics is undertaken. Examples of
social norms include: Pareto efficiency, social welfare
(utilitarian), contractarian (voluntaristic) norms,
human development based norms (Sen), and pragmatic ones
(gnp, longevity, etc).
The two goals of the course are to (1) provide students with an intellectual history and core ethical arguments in support of voluntary exchange, innovation, markets, and market networks; and (2) increase their understanding of why those normative theories had economic and political effects that helped induce the emergence of modern capitalism.
The course is lecture oriented. Grades are determined by two examinations and a final paper.
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow-citizens.
Smith, Adam (2010-03-23). Wealth of Nations,1776 Edition (pp. 7-8). . Kindle Edition.
|.||Tentative Course Outline||.|
and the Good Life
to Moral Foundations of Capitalism
||Norms as personal motivations and self
restraint. Two approaches to norms: positive--the study of
the effects of norms, and normative--the application of
normative theories to assess private behavior, societies,
and market outcomes. Norms that help and hurt economic
growth. Capitalism as a name for contemporary market-based
networks and lifestyles.
Vonnegut: Harrion Bergeron
||2. Aristotle's Ethics and Political
Theory as Private Ethics Ethics as the
pursuit of lifetime happiness, rather than short term
pleasure. Aristotle's principle of moderation in all
things.Wealth as a means to an end. Aristotlian virtues.
Aristotle as the foundation of contemporary secular
Supporting Ethics and the Early Enlightenment.
Three major disruptions of the medieval order. Nature law
and the moral sense. Markets as a dissipating or
supporting system for ethical development. Rising
importance of life on earth. Baxter and Barklay on duties
on earth. Locke and the division between theological and
Grotius, La Court,
Liberalism, Ethics, and the Market.
Montesquieu and the importance of political virtue.
Franklin and the "spirit" of capitalism. Smith: moral
sentiments and the impartial spectator as the source of
ethics and virtue. Kantian duties and the moral
imperative. Bastiat on market support for ethics.
||5. Utilitarian Foundations for Private and Social Ethics. Another secular core principle for the development of ethics. Bentham and the utilitarian revolution, Mill's extensions. Spencer's evolutionary approach. Do ethics improve survival prospects? Emergence of social ethics along with democratic politics. Ideology as social ethics.||
|II. Ethics and the Extent of Commerce|
||6. Civil Ethics and Civil Society: A
Game Theoretic Analysis
(1) Introduction to Game Theory: Strategy Choice and Nash Equilibrium with Applications to Ethics and Civil Society, (2) Escaping the Hobbesian jungle, ethics and law as substitutes. (3) Solving coordination games, (4) Internalizing Externalities
WP-Contemporary Hobbesian Dilemma
WSJ-Importance of Civic Virtue
||7. Commerce and Market Supporting
Ethics: A Game Theoretic Approach
(1) Economics of gains to trade and trading networks, (2) Problems of Team Production, how the work ethic improves team production and promotes specialization. How selecting ethical persons can improve profits and encourage some types of ethical behavior. (3) Transaction and Enforcement costs as a limit on the extent of trading networks and specialization. How ethics reduces contract complexity and enforcement costs and expand markets. Evidence of the importance of Trustworthiness,
|Weber on the Work Ethic
Congleton on the Work Ethic
Buchanan and Yoon on the Work Ethic
Taylor on Scientific Management
Economics with Ethics (A). Bringing ethics
into the Marginal Benefit Marginal Cost Framework,
Marginal Revenue Product as a consequence of team
production and private ethics. [Not on Midterm]
||Franklin on Ethics in the Work Place|
||Review for Midterm Exam
||Review of Midterm Exam||Paper Topics|
Economics with Ethics (B).
Equilibrium investments and distributions of Virtue.
Ethics and Commerce are codetermined.
||Franklin on Ethics in the
|III. Commerce, Ethics, and the Good Society|
|| 9. Ethics for Evaluating the Market Systems.
using private ethics to evaluate policy makers and
policies. Social ethics and the evaluation of policy and
institutions. Welfare Economics. Contractarianism. The
veils of ignorance and uncertainty.
|| Quotes from:
La Court, Hobbes
||10. Neoclassical Welfare Economics
and the Performance of Markets.
Neoclassical assessments of markets using utilitarian
approaches (benefit cost analysis, income, social welfare
functions, the First Theorem of Welfare Economics).
Contractarian alternatives from Buchanan and Rawls.
Externaliteis and the utilitarian case for regulation. (Link to
lectures from intermediate micro economics on marginal
benefit and marginal cost curves)
||11. Government Failure and System Choice. The possibility of government failure. Majority rule and economic regulation, favoritism and rent seeking. Importance of Ethics in Governance. Evaluating the institutions for choosing public policies. Role of ethical theories in both day to day politics and institutional choice. Laissez faire as a second best policy. The relative importance of ethics in markets and politics.||
| Review for Final
Second Midterm Exam
Exams Returned and Reviewed
|Study Guide II|
||12. The Ethics of Progress: Innovation, Uncertainty, and Markets Dynamic models of commercial societies. Is economic development moral? The role of ethics and norms in the evolution and evaluation of spontaneous orders. Ethical defenses of creative destruction.||
Spencer and Hayek on the Evolution of Ethics and Spontaneous Orders
Congleton and Vanberg on Evolution of Ethics
||Last Day of Class, Final Lecture
and Paper Workshop
Due by Midnight (to be e-mailed
you,” he said. “A city is the frozen shape of human
courage—the courage of those men who thought for the
first time of every bolt, rivet and power generator that
went to make it. The courage to say, not ‘It seems
to me,’ but ‘It is’—and to stake one’s life on one’s
judgment. You’re not alone. Those men exist. They
have always existed.
Rand, Ayn (2005-04-21). Atlas Shrugged (pp. 473-474). Penguin Group. Kindle Edition.
|Marginal extra credit for extraordinary class participation (up to 5% bonus)|