Ethics Part 2

ethics and errors- Mitchell on Bentham

Bentham believed ethics was more scientific than social sciences. Because of the original point of errors. It is about the actual consequences or happiness of actions. People see the world in errors. to a be a good social scientist you have to be good at seeing the errors people make and there is an eternity of errors and complexity. In ethics you only have to find out what the truth of the matter is in reality. Errors are millions of things ...but it still isn't easy and may not be the case that people make that many errors. traditional economics had been like Bentham errors. Focus on the right answer and not the errors because there are too many.

Some Lessons Learned from the leading Theories (nature of profits)

- The theories point unerringly to the disequilibrium character of profit, one must acknowledge that to the extent such a steady service and such a settled market price could be identified for an entrepreneur's role then you are no longer dealing with the purely entrepreneurial role and with pure profit. - the cause is the real world state disequilibrium. Profit comes from the leadership he propels the economy away from equilibrium for Schumpter, for knight profits are caused by the inevitable failure of market participants, in the disequilibrium world of uncertainty. - HOWEVER no theory has given a ethical justification for profit. The Profit is neither a property income nor an income paid as compensation for a productive service. Pure Profit falls under an ethical cloud. but they say that it should go to the owner cuz of property rights. and there is no direct violation of other ethical issues. Its just the distribution . however the entitlement theory is not satisfying for many.

The Economic and Ethical Problems of Pure Profit (nature of profits)

- 1st observation, we regard the justly earned receipts to be attributed to the efforts of the recipient. To the extent that a person's sweat is solely responsible for a particular output. It is unjust if it appropriated by anyone else. (wage) - 2nd observation, the fruit of a tree justly to belong to the legitimate owner of that tree. It is acceptable if a owned asset spontaneously yields a return without the effort of any human being, that return is to be accrued to the owner of the asset (owner of the capital) - The economic problem raised by pure profit is that it seems to be uncaused and cannot be traced to anyone's effort. - After the element of the wages and the fruitfulness of the owners assets is filtered out then you have a pure profit. It is an economic puzzle, not created by human effort or fruit. The ethical question occurs, who is to lay claim on the basis of neither the 1st or 2nd observation. - The pure profit is either by pure chance or the exploitation of buyer's ignorance [issue of fraud]. In fraud even the beneficiary of good fortune does not enjoy intuitive ethical approval.

what is Business "Profit" (nature of profits)

- In considering the ethical acceptability of business profits o - Necessary to an economist to disentangle the various elements that `] comprises business profits, usually the elements are identical to non-profit elements. o -wages [match that working at another firm], ownership/investment [getting the equivalent of market interest income] o -profits pose a challenge for an ethical appraisal of capitalist distribution o -"pure economic profit," residual category of profit that cannot be imputed into any factor owner, (such as investment or wage hours etc)

J.A Schumpeter's theory (nature of profits)

- Profits are created by entrepreneurial innovations. He see it the function as consisting in the "carrying out of new combination." Which change the methods of productions and/or the products produced. - Not so much originality and ingenuity but leadership energy, getting things done. - The profit won are not windfall profits they have been deliberately created with the innovation of the new technique or new product, which leads to profit surplus of revenues over cost. The imitators compete away that difference. In Schumpeter risk and uncertainty have nothing to do with profit (does not deny that it is inseparable from exposure to uncertainty). The risk associated is borne by the Capitalist not the entrepreneur.

Division of Labor Hayek - Adam Smith

- Smith made the recognition that men that were governed in their efforts, not by the known concrete needs and capacity of their intimate fellows, but by the abstract signals of the prices at which goods were demanded offered by the market they are able to serve the enormous field of the "greater society" that no human wisdom and knowledge could ever be sufficient to survey - men could use their own efforts to serve the wants of the markets even though is it towards the signals of the markets which is not visible. The individual is able to create more good and to serve much greater needs than if he let himself be guided by the capacity and needs of his neighbor. this is why commercial centers become rich

J.A. Schumpter and the aspect of Profit/agreement with other theorys(nature of profits)

- The profit of innovation is not a reward but a gain paid by the market created by jolting the economy out of its routine pattern. - Agrees with Clark. Profit emerges from dynamic change - Schumpeter emphasize the deliberate character of profit creation, the temporary nature of profit caused by "economic friction" - the lure of profit stimulates the entrepreneur to innovate with the impression that the market is already clearly offering these possible fleeing profit opportunities in exchange for innovation. - For Schumpeter profits are caused by the entrepreneurial innovation; they tend to be ground down to zero by the competition of imitators.

Pure Profit and the Entrepreneurial Role (nature of profits)

- problematic nature of pure profit is mirrored - entrepreneur assembles productive services to produce product and assumes the cost represent by market value of all services and receive market value for output. Retain any surplus or loss. [note however everything he makes or got can be hired in the market place to do it. ]You need to identify the peculiarly entrepreneurial character of his role. - Pure profit residual accrues to the pure entrepreneurial role played by the entrepreneur, the question is what the role played, does or contribution to the product if it can be done by someone else. Immediately it seems the entrepreneurial function disintegrates into nothingness. Yet prices paid are high enough to leave a residual profit and why does he retain the residual. {the services or labor should be able to command higher price if the product does too]

Diff between compensation vs income. Inequality!!!!!

...comp has gone up but income/wages hasn't consumption- actual income, happiness kind of goods available between high and low income people buy. today the difference is no longer as pronounced, the good available and the price makes many goods in reach of many today makes up for the income inequality unlike the early 20th century. the significance of income differential has narrowed as time as progressed. ex : its hard to think of the poorest not having access to a source of music. Basket of commodities low income goods-->are intensive in non-durable consumer good (lower income ppl spend a greater portion of income on food than rich. high income goods--> are intensive in services prices of foods have gone down and services are up. purchasing power of the low has increase while those of the high have decreased Trade with China has cause a fall in the prices of the goods poor people consume

college Inequality!!!!!

2005 College 70% more income. than HS 1980 Graduate 50% more income than HS 2005 Graduate 100% more income than HS College education breeds more inequality today then in 1980, today thou more people are going to college but also it costs more to attend than 80's human capital- to get stream of returns. stream of returns over time from college has increased to a higher level. inequality, how to view it 1- outcome oriented 2- process oriented (if process is just then out is too) 1 hr mark Top 1% 1974- 8% of Income in US 2007- 18% of Income in US Financial sector corporate profits. 1973-83 - max 16% 1990's - 21-30% 2000s - high 41%

Hayek - Adam Smith

Adam smith did not appreciate the work that had come before him however his influence was immense and in addition he made the penetration and clear recognition of the central problems of the science

Marginal utility of income (Mitchell on Bentham )

At lower level of income the things that you can buy with the extra dollar you view as more important the thing you don't have when you have twice or more income. The rich persons marginal utility is greater overall the priorities of both the rich and the poor could be the same.....but they have no relation to each other but you don't really know....preferences are different and the gains are not the same.

Frank H. Knight the key difference that creates profit (nature of profits)

Clark right in associating profit with dynamic change [not enough to generate profit] and Hawley was right in associating the entrepreneurial function with the residual bearing of uncertainty. o Knight locates the source of profit not in the dynamic change itself but in the open-ended uncertainty of the future for which such change is responsible (hence the delay in change in wages). o Difference between what has been anticipated and what actually occurs. This is responsible for entrepreneurial profit and loss. o Qualities required for the entrepreneurial function are responsibility and control of an enterprise in an uncertain world. Judgment is required to carry out routine of managerial tasks in an uncertain world. Pure luck also is inevitably intertwined n the generation of residual profit. o Consumers don't purposely pay higher prices than is necessary to cover all costs it is because the course of events happened such as to force the current output price up higher than anticipated.

JB Clark and Friction (nature of profits)

Clark states that were It not for the ____________BLANK which permits a temporary profit to entrepreneurs, the latter "would have no incentive in self-interest to make any improvements and it is clear that additions which are difficult and costly would be in danger of not being made. Profit is the lure that insures improvement to secure progress, this lure must be sufficient to make men overcome obstruction and take risks" [not clear how it is ethically acceptable to clark] o Ethically with Clark it remains unsolved but a solution is provided to why there is profit at all. Profits are not uncaused, caused by economic friction, prevents immediate disappearance of profits created by dynamic change.

Virtue is in our interest.

Having explained the moral approbation attending merit or virtue, there remains nothing but briefly to consider our interested obligation to it. To inquire whether everyman who has any regard to his own happiness and welfare will not best find his account in the practice of every moral duty. The virtues, which are immediately useful or agreeable to the person possessed of them, are desirable in a view to self-interest; it would surely be superfluous to prove It seems equally superfluous to proice that the companionable virtues of good manner and wit, decency and genteelness are more desirable than the contrary all men show a jealousy of our success in the pursuit of avarice and ambition, yet we almost sure of their good will and good wishes so long as we persevere in the paths of virtue and employ ourselves in the execution of generous plans and purposes. also honesty is the best policy may be a good general rule, but is libable to many exceptions.

The Role of Prices in a Market Economy (price gouging)

In a market economy, free markets determine these allocations using prices as signals of where scarce resources should be used • market may not alway be perfect which is when regulation steps in • price gouging laws that place limits on how much prices can increase in response to large, unanticipated changes in supply or demand, are unlikely to improve resource allocation

Why insider trading when legal would not like to corp limiting it completely (insider trading)

Insider information would not be made completely off limit because corps. must compete for capital. If no insider info is allowed then there is less inform about that corp available making it risker and less attractive investment as executive malfeasance could occur as well. Corps that allow info would have a lower cost of capital. • competition would punish firms that are either overly inclusive or under-inclusive in the sorts of information they shield from insider trading. • it is decentralized competitive model, not perfect but better than now. • less heavy handed, less bureaucratic, less politicized, more decentralized, no political agencies is needed.

Egotism - Hayek - Adam Smith

It is in error that Adam Smith preached in egotism his central thesis said nothing about how the individual should use this increased product his sympathies were with the benevolent use of the increased income and how to use it to make their contribution to social product as large as possible. in addition their is an inherited instinct demand that a man should aim to do a visible good to a known fellows...aka social justice

Heinrich von Langenstein

Langenstein states that if the public authorities fail to fix a price, the producer may set it himself, but he should not charge more for his labor and expenses than would enable him to maintain his status - if not follow he is committing a sin. he is considered a giant figure and support of the just price and guilds by really does he have any credit? and he was a rather minor figure in econ

Politicians reactions and response (Mitchell on bentham )

Once they are in jail or caught you try to change the way they think or calculate. the politician worries about the behavior only on the cost to a subset of people. criminals only worry about themselves how to incentivize politicians to care about the people overall. Bentham thought extending suffrage and democratization would solve the problem and make the government more responsive and account to the vast of people. He thought this naively He did not foresee special interest groups.

Is paternalism Inevitable? (Libertarian paternalism)

Planners are forced to make a design choice, a simple and important example is the selection of a "default option" to determine what happens if an agent fails to choose for himself • ideally a design should have little impact because agents would simply choose the best option for them regardless of the default • HOWEVER there is a strong status-quo bias, existing arrangements tends to stick EX is the 401K plan automatic enroll or not enroll ( there was a jump in Madrian and Shea by 86%) • would automatic enrollment be paternalistic? officious meddling with with employee preference? yes and no respectively • In the end they are attempt to steer the employe choices in direction that will promote employee welfare, no one is forced to do anything its should be considered unobjectionable to libertarians. neither default should be considered objectionable meddling cuz both led to altered choices. • not making a choice for them and making them to forceable make a choice before hand still ends in them opting in just in less numbers and by requiring them to make a choice to opt in or out has a paternalistic element. • default has such a large effect because of inertia, for an employee changing from status quo involves time and effort which they want to avoid esp if they are prone to procrastination, default rules are sticky • paternalism in the form of effect on individual choices are unavoidable often.. • ^ when it is absent it is becuz there is a such a strong natural choice that shapes preference that is seems invisible.. • the anti paternalistic position is incoherent

Ethics and Economics Intertwined how? (nature of profits)

Recognizing the ethical implication of economic insight. -Suggesting the application of ethical principles to the evaluation of pure profit demands and appreciation -the examination of nature of pure profit result in us rejecting the ethics and the defenses for it.

David Hume Self Interest

Self-interest must be used to regulate itself • The avidity alone of acquiring goods and possessions for ourselves and our nearest friends, is insatiable, perpetual, universal, and directly destructive of society. • there is no part of the human mind that "has both a sufficient force, and a proper direction to counter-balance the love of gain....by making them abstain from the possession of others. • benevolence to strangers is too weak. • No passion is capable of controlling the interested affection (self-interest), but the very affection itself, by an alternation of its direction • Passion is better satisfy'd by its restraint, than by its liberty, and that by preserving society, we make greater advances in the acquiring possessions, than by running into solitary and forlorn condition • passion of self-interest is either vicious or virtuous....since it can restrain itself • need a rule for the stability of possession, that this passion restrains itself.

Mitchell on Bentham

Takes about Bentham's view of human nature the term human nature - conjectures up religious or philosophical view not psychological view

They Clapped: Can Price-Gouging Laws Prohibit Scarcity? Michael Munger*

This is an example of price gouging in modern times, the scarcity of ice.

Benevolence is not a species of self-interest

This principle is that all benevolence is mere hypocrisy, friendship a cheat, public spirit a farce, fidelity a snare to procure trust and confidence; that while all of us, at the bottom, pursue only our private interest, we wear these fair disguises in order to put others off their guard and expose them the more to our wiles and machinations. Also whatever affection one may feel or imagine he feels for others, no passion is or can be, disinterested; that the most generous friendship, however sincere, is a modification of self-love; and that eve unknown to ourselves, we seek only our gown gratification while we appear the most deeply engaged in schemes for the liberty and happiness of mankind. Objection to selfish hypothesis - is that as it is contrary to common feeling and our most unprejudiced notions there is required the highest stretch of philosophy to establish so extraordinary a paradox. How can we suppose that passionate tenderness arises from some metaphysical regards to a self-interst, which has no foundation or reality? Animals are also susceptible to kindness . General benevolence in human nature where no real interest binds us to the object. IT IS IRRATIONALLY

Frank H. Knight how profits come about (nature of profits)

o Profit occurs because a world of uncertainty is necessarily one which "conditions of perfect equilibrium is no longer possible." A world subject to unanticipated shocks and readjustments. Even the best judgment can't come up with the best plan for events. o Knight's theory of profit from uncertainty-bred conditions of market disequilibrium explain how profit arise but not in a way which sees profit as the market value offered in exchange for the fulfillment by the entrepreneur whose role is inseparable form profit and loss. Most important role in the capitalist process of production.

Schumpeterian Profits(Some Lessons Learned from the leading Theories)(nature of profits)

o Profits are deliberately created by determined entrepreneurs. o seems ethically defendable as outcome is achieved by effort. o However "imitators" will absorb and duplicate the innovations pioneered by the entrepreneur returning to equilibrium again, not ethical. Either because anyone could have come up with the idea as they are capable so why does the entre. get. OR because he is entitled a share of the output revenue since the new idea may have never come to pass at all but then why is he not entitled to the entire revenue stream (since it allows for ppl to copy undeservedly ) ? It

Pure Profit and the Ethics of Discovery: An Overview (nature of profits)

o Profits are the result of the circumstance in which the entrepreneur '"anticipates future conditions more correctly than other entrepreneurs." Since are some can see better a gap is generated b/w present market value of resources and the market value of output. o What the entrepreneur see is a prospective increment of value which other have failed to see, and the others are in no way handicapped. o Profits are grasped by the entrepreneur , they are unowned and first discovered by an alert pioneer. this first person becomes the legitimate private owner on the basis of "FINDERS-KEEPERS" ethic. So we are adding a third criterion for ethics that is widely accepted.

Guilds (just price)

are presented as welfare agencies which prevented unfair competition, protected consumers against deceit and exploitation, created equal opportunities for their members, and secured for them a modest but decent living in keeping with traditional standards - Max Weber huge supporter

Commerce conducive to morality (commercial relations)

because it lets more people live, but it is conducive to morality because it allows more people to live freely, through a set of institutions which foster liberty • non commercial societies - characterized by personal relationships which implies dependence and therefore servitude turning tyrannical. African king worse off than a european peasant but master of life and liberties of many. • Commercial societies - characterized by impersonal relationships which implies independence and therefore freedom. Euro Peasant free living under the protection of the rule of law. • Commerce brings institutional liberty, its most important effect. It generates 'regular administration of justice,' institutionalizing rules of cooperation, fostering commercial prosperity and liberty • feudal societies can spend their products of their land only on "rustick hospitality at home", they only support their men. Since they are fed by his bound and have nothing equivalent to give in return they must obey him, lack of commerce implies servility. • In commercial societies the "masters" can use their produce to get something else and also they trade away their power and authority, freeing their dependents from servitude. Commerce requires monetized transaction and those transaction are impersonal breaking personal ties b/w master(customer) and servant(tradesmen) . They are still interdepend but not completely as there now serve thousands of "master' and not absolutely dependent upon any one of them.

"Sin tax" (The Avuncular State )

claimed to be unfair to poor as it take up a bigger portion of their income than the rich. but since the poor are more sensitive to prices than the rich and higher taxes are of greater help to get them to quite, most are progressive taxes • Sin license high cost but entitled to a certain amount. would help most those that plan not to smoke but find themselves not following it completely. • Liberal should not object, this is helping people make forward making decisions that they cannot easily renege on later, they enlarge their own freedom making them possible to do things they could otherwise not do. • GOVERNMENT bias • why should govt always favor the long sighted self over its near-sighted alter ego. The immediate pleasures of gambling and drinking etc are real , so to are the costs of suppressing them

characteristics of Guilds (just price)

has monopolistic practices • essence of the guild system • which were associations of small independent masters. They often entered into secret compacts to fix prices at the expense of the consumer. • second type resembled more closely the modern labor union, not independent master more small producers who worked for wages and combined to protect themselves against exploitation by their employers and to obtain better pay. • Both were different guild but scholastics of the to time...were not favorably disposed toward any alliances, whether of masters or of workers. Molina, for example, condemns them both indiscriminately as detrimental to the commonwealth • guilds of small practices too supposedly to earn a livable wage and may did so but that was an abuse of power

the challenge Making it legal and Proprietary info (insider trading)

lies in distinguishing information that should be treated as proprietary from information that does not warrant such treatment. In theory protect information whose revelation to the public through insider trading would likely reduce overall economic efficiency • Fortunately defining what information is proprietary and not can be left to the corporations themselves not govt is need. • each corp. should be free to specify in its by-laws what type of information is to be protected and if the laws are violated the firm person can be subject to suit by that firm. people trading on insider information not protected by corporate by-laws would be acting perfectly legal.

the advantage of having corp have their own by laws

giving a company that ability permits corps to customize their insider-trading proscriptions as they all have a different mix of investments. those that depend on financial investment strategies will more likely have a stronger and boarder prohibition on insider trading than will companies that depend on development of new consumer products. • this is ^ his "best guess" not reliable but neither are those of politicians and bureaucrats and there are better proscriptions • you rely in competition and self-interest if shareholders and creditors to discover which types of information are proprietary, removes politics and best guess of political officials with more reliable determination of competition.

social justice - Hayek - Adam Smith

governs all socialist demands easily engages the sympathies of all good men but which are irreconcilable to open society to which those of the west owe their wealth to. Recognition that a man's efforts will benefit more people and on the whole satisfy greater needs, when he lets himself be guided by the abstract signals of prices reather than by perceived needs,

Framing of options (The Avuncular State )

how should things be framed. How information is framed Matters. There are markedly different effects on behavior. People weigh losses more heavily than gains/ they will bet only if their potential winnings are twice as big as the amount they stand to lose in a coin toss. • IF the state is to provide any information at all, it will also steer people, whether it wants to or not. "it is far too simple, and behaviorally naive, to draw a sharp line between acceptable 'provision of information' and unacceptable 'mind control' • the acute sensitivity to losses is not the only bias behavioralist have discovered. People also have great difficult understanding risks. it depends on how easily it can be envisaged. images turn a statistical risk into a visceral image to make the point. The effectiveness however may be too much as there is evidence that people now overestimate the risks of smoking • there are negative side effects of this ^. this is like s psychic tax reducing demand by using fear, shame, and guilt. unlike a real tax which shift money form taxpayers to the treasure, psychic tax impose a emotional cost without raising revenue. This also paves the way for hard paternalism.

The Meaning of Discovery (nature of profits)

o Economic gains is either deliberately achieved goals of human effort or as windfalls attributable to sheer luck. o We a add a third possible source for gain. o ^deliberate human discovery, not attributed to unaided luck (at least in par) to the alert attitude on the part of the discover. The alertness of the human enables them to notice and profit by finding it. o One decides to search for an object or item of information, deliberate productive activity. The decision is determined by the value of the prospective find to the searcher in conjunction with the relevant cost to search. Determination is in the economics of search o deliberate search is not the same as spontaneous alert discovery o

Just Price

instead of being set by the allegedly blind and unconscionable forces of the market, was determined by criteria of fairness without regard to the elements of supply and demand or at least with the purpose of eliminating the evils of unrestrained competition. this was done by catholics and who knew nothing of business or public authorities linked to the medieval concept of a social hierarchy and corresponded to a reasonable charge which would enable the producer to live and to support his family on a scale suitable to his station in life.

commercial relations , 2 nd step of the development of impartiality and morality

is from whom we are interacting. the close the other is the less effective our development of while others too far away to care also leaves us indulging in our passions. The strength of our passions is not proper, given circumstances. • strangers whom we meet face to face are far enough to be unbiased in our judgement and close enough for us to care. • We have to adjust the pitch of our passions to appeal to others and make ourselves morally stronger. • The adjustment of the pitch of our passions is our learning the size of our fortunes and misfortunes and our best teachers are strangers. • if we see ourselves as a stranger see us, we see how bias our judgment is. The more we encounter and practice the more easily we adjust our pitch to eventually become so accustomed to see ourselves with the eyes of another that we do not need the physical other any longer to do it. With imagination and practice we split into two becoming the actor and the spectators of our actions at the same time. once this occurs we are able to be impartial in our judgements regarding our passions. When this happens we act morally. • Commercial societies are societies of strangers, the most effective locus to develop impartiality. Morality therefore is a result of commerce which is why Smith promotes commerce on moral grounds.

Govt fixing price (just price

just price was either fixed by law or determined by common estimation communess aestimation) There has been some discussion about the meaning of this phrase, but it appears to be identical with aestimatio jori, or market valuation, since the two expressions were used interchangeably by the scholastic Whenever the free market failed to function properly, the public authorities, according to the scholastic doctrine, had not only the right but the duty to step in by means of price regulation. When there was a legal price, it superseded the market price and was binding, unless the regulations were manifestly out of date or openly disobeyed, with the authorities making no attempt at enforcement." In other words, the moralists realized perfectly well that it was useless to fix prices by decree if nothing was done to make them effective. Legal prices were usually ceiling prices. But they could be minima, below which a buyer could not go, if the rate was set in favor of the seller. Navarrus, who opposed all price regulation because it was unnecessary in times of plenty and ineffective or harmful in times of dearth

The reason for irrationality or bad decision making for welfare (The Avuncular State )

lack of self control is one such regularity. Impatience: people don't like to defer gratification, they demand compensation an interest rate for doing so. • Behaviorist show however that people are inconsistent about their impatience. clean now or week later but one more hour versus one less earlier • ^ sets up a "intimate contest for self-command". People act as if two different selves take turns to run the show. One self who decides an action is not the self who must act on that. • also externality must be considered, an uncompensated, unpriced harm for ex a smoker inflicts on others. • The self can inflict harm to an external person but the self also takes too little account of the damage done on his future self.

The Problem with Frank Knight's solution to Pure profit (nature of profits)

o Knight solved purely economic problem of pure profit without being concerned with and without offering any clue to the solution of the ethical problem identified earlier. Knight restored legitimacy to Hawley's irksomeness of uncertainty. o In fact if you think about it, the argument can be made that the entrepreneur has no inherent right to the lucky profits that came his way. (Knight used the fact of bad luck existing as well to justify it)

THE Arbitrage Theory of Pure Profit (nature of profits)

o Ludwig Von Mises, arbitrage theory of Profits o Focuses on profit being the price discrepancy between two markets , today's and tomorrow's market. Arbitrage opportunities arise when today's market prices are out of line with the true higher values of tomorrow's market o profit emerges when the entrepreneur who judges the future prices of the products more correctly than others and buys factors of production at which at view from the future are too low. thus there is a lag of the PC behind the prices which the entrepreneur receives for the product. This difference is Entrepreneurial profits. o this is basically the ability of a superior entrepreneur to identify, more correctly that others are able to do where today's market undervalues future output. Superior perception to where resources are undervalued. o Entrepreneurial profit and loss are derived from the uncertainty of the future constellation of demand and supply.

J.B Clark (nature of profits)

o -Under static conditions there is no profit. All incomes are marginal productivity incomes. - Two incomes that are permanent and independent of dynamic changes are the products, respectively of labor (wages) and of capital (owners and value). o -profit only result of DYNAMIC change[new invention improve production, labor takes a while to claim a wage that reflects new leve of production leaving a profit margin b/w output value and prod. Cost grasped by entrepreneur. Interval b/w actual wages and static standard is the result of friction. That fiction lasting is the pure profit given to the entrepreneur o -dynamic theory, static law determines what wages will be when friction is completely overcome. o Clark is stasfied with the justice of such entrepreneurially grasped profit despite that it does not fit into his own marginal productivity ethic.

F.B. Hawley (nature of profits)

o The "distinguishing function of the entrepreneur" is the "assumption of risk." o If no one were to assume the industrial risk then it would not be possible for production to occur. The profit provides a reward for this entrepreneurially provided service. The assumption of risk is not a service available to purchase on the market. o Not to confuse this reward and inducement with the amount an unwilling risk bearer pays. The average losses are already included in cost of production. o Entrepreneur can be induced to assume risk through prospect of a surplus over and above all costs, including insurance. o Profit is cause by the need for the assumption of risk. Consumers forced to pay price high enough to permit profits o Knight point out a difference between uncertainty and risk. Uncertainty is a term reserved for that which is as a consequence of the utter unpredictability of future events, inherently indeterminate and immeasurable. Hawley provides no room for uncertainty.

The meaning of discovery the creative aspect (nature of profits)

o VALUE ADDED the creative aspect of alert discovery deserves to be emphasized. Had he not discovered it for all human intent and purposes, it would be non-existent and it is the property of the producer because it is those resources used to find it. he does not own the input because it was not created from inputs. the thing discovered has been brought from existence from non-existence. simply be being discovered and its discoverer in a ethically relevant sense, its creator. the arbitrage creates economic value or value added to something that did not exist

The Discovery Character of Pure Profit (nature of profits)

o economic and ethic problem of profit dissolve once one recognizes the discovered character of pure profit. Profit cannot arise in equilibrium conditions; this is because equilibrium is by construction a state in which nothing remains to be discovered. The profit aries from disequilibrium because disequilibrium condition are directly implied consequences of as yet ungrasped opportunities, this is the arbitrage opportunity between two market. It is the manifestation of the failure selling in the low-priced market to be aware of buyers in the other market who are prepared to pay more.

Knightian Theory of profit (Some Lessons Learned from the leading Theories)(nature of profits)

o emphasize on the consequences of sheer luck in profit, this is bothersome because of the undeserved nature of profits. Its entire arbitrary to declare one person to the just owner with what came by chance and not attributable to his efforts

The meaning of discovery the ethical aspect (nature of profits)

o ethical relevance arises from the circumstance that it can be classified either as a deliberate activity nor as a occurrence strictly attributable to blind chance. o he who alertly grasps an opportunity for gain - an opportunity in principle available to others but which has remained ungrasped because it is yet not notice occupies a distinct ethical box. neither that labeled "producer of output with legitimately owned resources." nor " lucky beneficiary of windfall gain o the ethical box is occupied by the alert discoverer of an available opportunity "finders-keepers" o NOTE the a lucky winner in purely chance situation has done nothing to generate this outcome which is unrelated to his efforts his actions, his thoughts and his purposes. While the opportunity noticed is the direction creation of the discoverer's alertness, vision, and self-confidence.

Wealth of Nations states (commercial relations)

that commercial societies favor morality because they allow poverty-stuck people to improve their material conditions, poverty is the cradle of heinous crimes. The weak or helpless is killed often. (china ex) • In the Theory of Moral Sentiments Smiths claims that poverty induces immoral and actually unnatural behavior such as infanticide. Poverty kills • Commerce allows people to be more humane and less brutal because it generates wealth to support life. The wealthier one and society is the cheaper it is in relative terms to be moral. Also think about the quantity of life of a African King, a European Prince and European Peasant (Greek were an exception they kept barbaric customs in their refined society. Commerce provides the resources to maintain children and sick. In this sense commerce creates morality.

San Bernardino (Just Price)

price is a social phenomenon and is set not by the arbitrary decision of individuals by the community. There are two possibilities: The price of a commodity can be fixed either by the public authorities for the common good, or by the estimation currently arrived at in the market. The first is the legal price; the second is called later the natural price. for the same commodity there can be only one price in the same market since people are aware of prices so they will not pay more than the lowest price basically, multiple prices does not work for those using just price. there is a market to be aware of.

Why pure profit fails to be ethical (nature of profits)

pure profit emerges only the result of a fluke, aberration, or fraud. No economic justification fails to meet the two criteria for deservedness, does not meet the factors of income. . it is the left over after wage and owner income.

the practice and Regulation of just price

scholastic authors were full of illusions about the omniscience, honesty, and efficiency of public authorities. In addition without a well-organized system regulation breaks down • . Price fixing usually made matters worse instead of better and inevitably led to the emergence of a black market and widespread concealment of available stock • however even thou regulation wasn't prefect the worse is avoided under free competition in which the poor are completely left out • . As the experience of two world wars has shown, the institution of controls is an unavoidable measure when demand greatly exceeds the available supply at reasonable prices. The scholastic writers, in their weighty treat

The Canon Placuit (scholastic Doctrine, france just price)

states that parish priests should admonish their flocks not to charge wayfarers more than the price obtainable in the local market If there is a complaint, the priest, who is then required to set a price with "humanity." This text, it seems to me, clearly equates just price with market price and does not lend itself to a different interpretation

Libertarian paternalism just creates

the possibility and influence people to make choices that would make them better off but this does not eliminate the possibility that some will make inferior choices and they will do it in some cases. • the inferior choice can occur because of lack of complete information, unlimited cognitive abilities, lack of will power . • organization decision are inevitable, this form or paternalism is unavoidable when the alternative to paternalism are unattractive

collusion (just price)

the public authorities retained the right to interfere and to impose a fair price monopoly as a deleterious practice, inimical to the commonweal. Monopoly was defined broadly so as to include any pacts or rings formed to keep up or to depress prices above or below the competitive level. This is collusion which is criminal

Mitchell - the role of when you take it into actually and ought to do pain and pleasure are the guides.

the role of punishment ought to reflect the cost to society and the individual of the individual's behavior. o the easiest way to think about it is in money terms. Think about it as an externality, bare a tax on that action in relation to the cost on to society o the threat of punishment should compensate for the miscalculation and the make up for the cost added of the externalities.

Consumer (nature of profits)

there is not earthly reason why when a consumer buys an item, he should pay a price for it which is more than sufficiently high to cover all costs of resource services. A portion of purchase price, which accrues as pure profit is paid for nothing at all. It cannot be rationalized as being paid in return for the provision by the seller of the necessary information because that this is the reason why the payment is being made.

Discriminatory price (just price)

there was not disagreement surrounding this • Thomas Aquinas and John Duns Scotus formulated the rule that a seller was not allowed to sell dearer because his wares were greatly wanted by a prospective buyer.38 An even better statement is found in San Bernardino of Siena who, citing the canon Placuit mentioned above, underscores the point that price should be the same to all and that no one is allowed to charge strangers more than local customers or to take advantage of a buyer's ignorance, rusticity, or special need.

Commerce fosters moral development

through facilitating the development of impartiality. Moral development is an enhanced capacity to exercise impartiality in our judgements, it is an acquired skill. Not born with but have the capacity. • According to Smith, 'as to the eye of the body, objects appear great or small, not so much according to their real dimensions, as according to the nearness or distance of their situation; so do they likewise to what may be called the natural eye of the mind'(TMS III.3.2: 134-135. Small personal troubles close to us appear more tragic than a large catastrophe far away. • ^this natural propensity is a problem for moral judgement and consequently for moral behavior. Everything that occurs to you is of great importance due to self love. (ex losing your finger to china population facing death) • for Smith the presence of others allows us to understand that our judgment toward ourselves is biased because we are too close to ourselves. The presence of others, given our ability to put ourselves in the place of others and see how we would react if we were them looking at ourselves, helps us overcome our biases and try to develop a more socially acceptable behavior. Thanks to the presence of others we learn the appropriate behavior in a specific situation. This is develop. of Impartiality and Morality

Making it legal and Proprietary info why a company would have in interest in limiting it (insider trading

• There are situations in the interest of both a company and the public for that company to delay the release and protect it as company property • ex merger with smaller firm is planned to create greater efficiency, if that info is release people will buy share in the small firm raising price to the point it is no longer profitable for the big company to acquire controlling share and the greater efficiency won't occur. • therefore a legitimate interest in preventing insiders from trading on that knowledge.

Smith and approbation (commercial relations) what is the issue?

we are willing to trade approbation from moral behavior for approbation from parading wealth. We are willing to give up approbation from moral behavior if we think we can gain a lot of approbation from material possessions.

The main problem in gaining approbation (commercial relations)

when the possibilities to gain approbation from wealth are large enough, they may incentivize more morally questionable actions and generate possibly disastrous consequence. Merchants and manufactures are willing to give up moral behavior to increase their fortune/status at the expense of society. • We have markets with immoral behaviors and consequence potentially devastating for society. A commercial society is reshaped into a a mercantile system. • Only commerce within its moral framework, not poverty nor the immoral mercantile system, brings about life. • The system of just that commerce generates becomes a system of brute injustice when morality is ignored. • ^This occurs when great merchants or manufactures have large profit opportunities generated by government granted monopolies. They become a threat to the system of justice through their ability to extort ferocious laws in favor of their own interests. • Mercantilism, a generated form of commerce where the framework succumbs to avarice and venality, generates the death of both individuals and society. Commerce requires morality mercantilism subverts.

factor incomes (nature of profits)

worker commands wage for labor o -owner of fruit tree commands a price for the scarce fruit o -consumers are in competition with one another.

Roover seeks to state that the "just price" is

wrong, the just price did not correspond to cost of production. by the producer's social status, but was simply the current market price, with this important reservation: in cases of collusion or emergency public authority was allowed to take control and set the price

Ignorance is not an option (The Avuncular State )

• public health campaigns use more tradition weapons on things such as smoking, ex they decorate packs with repellent images. images that "protect body and mind from dangerous or stressful circumstances. • Even liberals are happy for govt to provide information or force others to do so. ex doctor must tell patient about the risk of the surgery , to leave the patient in the dark would be criminally negligent.

misconceptions of Paternalism

• 1 - there are viable alternatives to paternalism • in many situations an org. or agent must make a choice that will affect the choices that will affect the choices of other people. Applies to both private and public. • ex, someone must order the food in cafeteria, 1- makes people better off, 2- random, 3- obese as possible, 1 seems the best but also paternalistic (who would go for the other choices) • 2- paternalism always involves coercion • the choice of which food to order does not coerce (force) anyone to do anything, yet one might prefer some order to others on paternalistic grounds • actions that don't force anyone to do anything but present in such a way should be called liberation paternalism

Mitchell when you take it into actually and ought to do pain and pleasure are the guides.

• 1- error - people base their actions on calculations of pleasure and pains but they are mistaken in their calculations. This is what tells us what and how human actually do • 2- ought - it is the true calculation of pleasure and pain, what the end result actually is. • 3- level education - this is how we know what we ought to do, education in the sense that you are able to know what the consequences are knowing how the world works, yourself, know history, how the world works. Education in the broadest sense gives people a better calculation of pleasure and pain. • 4- a 2nd reason why people don't act they way they ought to....they don't care about the other people as much as themselves - even if you are a good or perfect calculated the consequences but you don't cause there still results a distinctions of what you actually do and ought to do.

Human nature from Bentham's view (Mitchell on Bentham)

• 1- hedonistic (pleasure and pain) Happiness [determines what people actually do instead of what they ought to do], • 2- Calculating - • 3 - passive - people react to actions, people don't act out of the box of pleasure and pain.

3 possible method to see if method is welfare promoting (libertarian Paternalist)

• 1- select approach that the majority would choose if explicit choices were required and revealed. (market-mimicking). the problem is that majority's choices would be insufficiently informed to promote the majority's welfare. they would not necessarily make the best choice and its just you best guess) • problem that the majority's choices might be a function of the starting point or the default rule. circularity issues • 2- approach that would force people to make their choices explicit [actually force them to make explicit choice. ] (might be chosen if market mimicking fails, t or because planner does not know what majority would do ) risk is that choices that are actually elicited will be inadequately informed or will not promote welfare • 3- approach that minimizes the number of opt-outs • this an ex post inquiry into people's preference, but again you are using your best guess in which choice will make that happen and you are relying on inerita, (note that the inertia would be on BOTH sides)

Commercial Relations is explained by

• Caveats on the use of the terms free markets, commerce, morality, and the result. • Markets generate: wealth which supports life for an increasing number of people, institutions which support liberty, the social conditions which facilitate moral impartiality. • Markets are a result of morality, if economic actors are not moral agents then markets are impaired and may collapse or have negative consequences, • negative consequences of markets for morality. (wars, interest groups etc) • a testable hypotheses. • The above is used to and shows that Smith is right to promote free markets on the bases of Efficiency AND morality, (morality alone is not sufficient)

Markets as a result of morality (commercial relations)

• Commerce also requires morality to develop and to grow. Found in two places. • the role of justice • consequences of the absence of morality in commerce. (when agents do not behave morally a commercial society is transformed into a deleterious and impoverishing mercantile system. • Human society is characterized by the presence of justice, without it society collapses.

Morality as a result of Markers

• Commerce is a source of morality in at least three ways •1 commerce facilitates moral behaviors by offering the means to behave morally •2- by offering the institutional and social environment in which we can behave morally •3- by offering the social environment in which to behave morally

Libertarian Paternalism

• Economists are libertarians, fear paternalism but the view must be changed it is not so bad and necessary task • There is a false assumption that people always make choices that are in their best interest • Libertarian paternalism just creates the possibility and influence people to make choices that would make them better off but this does not eliminate the possibility that some will make inferior choices and they will do it in some cases. • the inferior choice can occur because of lack of complete information, unlimited cognitive abilities, lack of will power . • organization decision are inevitable, this form or paternalism is unavoidable when the alternative to paternalism are unattractive

doctrine of the just price in middle ages

• Everywhere measures were taken against engrossers (accapareurs), forestallers (recoupeurs), and regrat- ers (regrattiers) who tried to accumulate stocks, to prevent supplies from reaching the market, or to form corners in order to drive prices up • Those who escaped conviction in the secular courts were still punishable in foro conscientiae; according to canon law, monopoly profits were turpe lucrum, which, like usury, was subject to restitution.55 In dealing with the Middle Ages it would be a grievous error to ignore the confessional as a means of enforcement

how to Choose: The Toolbox of the libertarian Paternalist

• How should a planner choose among the possible systems given that a choice is necessary? there are two approaches • Direct inquiry to welfare, set rule using cost-benefit analysis to measure the full ramifications of any design choice • direct inquiry is usually not possible because of too little information or the cost of the analysis are not warranted • anti-paternalist would say that ppl should chose as they see fit but this is unhelp as it often depends on the starting point so the starting point cannot be selected by asking what people would choose.

price gouging

• refers to a rapid increase in prices after some type of demand or supply shock. Public outcries over the unfairness of these rapid price increases have led some states to pass laws against price gouging • legal definitions in the laws or bills refer to "unconscionable prices" or prices that increase more than a certain amount unless justified by costs, possibly only after an official declaration of emergency • In order for the law to work you need the it to be a price cap but markets will not be able to allocate resources

lord give me thrift, but not yet, inertia and self control issues (The Avuncular State )

• Inertia explains why people fail to change choices, improvidence example the rest. ex is low saving save more for tomorrow org and they people they are being paternalistic but they have not infringed on freedom of choice, they do not think it a crime. • critics say economics without rationality is like tennis without a net. if it appeal to irrationality then everything goes. • people depart from rationality by they do so in way that are predicted and exploited. Unlike free verse their behavior has some rhythm and regularity

Issues with insider trading prohibitions are

• Insider trading prohibitions slow economic growth promote corporate mismanagement and discourage investment diversification. • the prohibition prevents all insider trading with non -public information from profiting from use of the information before it is public. • It does not equally target traders who have information that prompts them actively buy or sell asset and those traders that have the information, prompting them not to make asset purchases or sales that they would not have made otherwise. • ex trader abandons plans to sell share upon learning information that the FDA approves a new blockbuster drug for a company. This is the same information that would prompt a insider to also buy shares • This leads to insider "non-trading" and is undetectable. Only the latter would be punished. • this might be occurring as the same frequency as insider trading and is occurring anyway. Not much harm results, it undetectable, so why would insider trading be anymore harmful than insider non-trading.

Selfishness and scarce resources create the need for justice - David Hume Self Interest

• Justice takes rise from human conventions and to remedy it's inconveniences. The inconveniences rise from the human qualities of selfishness and limited generosity with the situation of external objects. • If we had regard for each other or supplied abundantly all our wants and desires. that jealously of interest, which justice supposes, could no longer have place; nor would there by any occasion for those distinctions and limits of property and possession • the selfish of men is animated by the few possessions we have in proportion to our wants • If we had same affection for everyone as we do for ourselves then justice and injustice would be unknown. • Justice derives its origin from the selfishness and confined generosity of men, along with the scanty provision nature has made for his wants.

What is Price Lie? (insider trading)

• Prohibitions on insider trading prevent the market from adjusting as quickly as possible to changes in the demand for and supply of, corporate assets. The result is prices that lie • when prices lie, market participants are misled into behaving in ways that harm not only themselves but also the economy writ large. • ex Company succeed in hiding its bad condition, and prices of shares are brought and also without this knowledge concealing the doom, they are still getting creditors to extend financing and will not be compensated for the risk they are taking.

Negative consequences of markets on morality (commercial relations)

• Smith is not a one handed economist, see potential negative effects of commerce as well as positive ones. • example: may bring individuals to debauchery, decreases the martial spirit of soldiers. numb the mind of some specialized workers. there exist moral corruption of commerce. • Doux commece - that commerce increase humanity Smith does not believe commerce brings peace. the length of unjust wars increase as wealth increases. merchants and manufactures want to open new markets and willing/able to bring a nation to war for the enhancement of price. The citizens live remotely from the scene of action, they enjoyable read about it in news about the exploits of their fleets. In addition commerce creates the ability to debt financing which leads to disregard for the high expense of war. • Wealth of commerce brings about a sovereign's morally irresponsible spending. which Smith said "in the long run will probably ruin all the great nations of Europe. • The possibilities created by commerce include the irresponsible and immoral frivolous spending of the sovereign and the possible ruin of society.

From Adam Smith to field Experiments (Commercial Relations)

• Smith promotes free Markets for two reasons: Efficiency and Morality • Promotes on moral grounds and argues that morality is a result of markets and vice versa. • Current debates focus on the idea of • 1 - moral constraints in market transactions tend to reduce transaction costs (morality cheaper to enforce contracts rather than formal) • 2- Analyzing both costs and benefits of markets may help us debunk useless yet common stereotypes • 3- We may increase our appreciation for the depth and breath of 18th century scholarship, smiths place in it, as well as for its relevance in today's discourse.

The Callow nephew, why there is no choice in paternalism, it must happen (The Avuncular State )

• Thaler and Sunstein argue gov't often cannot remain neutral even if they want to. there must sometimes a default options or something on top of the information if anything is to be provided at all. • soft paternalist want the govt to use these tools knowingly in favor of the outcome citizens themselves would prefer if only they had the necessary discipline and discernment. • reasoning, judgement, discrimination and self control, all these soft paternalist see as the burdens the state can and should lighten. Mill see them as opportunities for citizens to exercise their humanity. Soft p. may improve people choice's rescuing them from their own worst tendencies the nephews of the avuncular state have no reason to grow up. .

Are Choices Rational? (Libertarian paternalism)

• There is a presumption that individual choices should be free from interference, this is based on the assumption that people do a good job of making choices, better than 3rd parties. There is little empirical support for this • People do not exhibit rational expectations, not consistent with bayes' rule. • ppl make systemic blunders, exhibit preference reversals, make diff choices depending on the wording of the problem. • in intertemporal choice ppl exhibit dynamic inconsistency valuing present consumption much more than future consumption, there are self-control problems. • there is a belief that in the real world ppl do better with high stakes..not true...obese problem in the USA even thou its horrible for health • ex ppl picking their investment portfolios, they did not make the right choice and when the details where focused on the return only 20% picked the one they had......

Human Beings naturally show concern for others' interests - David Hume Self Interest

• We take into consideration of the happiness and misery of others in weighing the several motives of action and incline to the former where no private regards draw us to seek our own promotion or advantage by the injury of our fellow creatures

Potential Unintended Consequences (price gouging)

• Without higher prices, potential suppliers do not have an extra incentive to increase supplies to an affected area, or to stockpile additional supplies in case they are needed. • distant retailers (or entrepreneurs) may load up generators on trucks and deliver them to the area with the blackout • The price cap also provides incentives for illegal markets to develop, individuals are more willing to take risk and it hard to find • if merchants do not know the maximum price that they can charge (what exactly is an "unconscionable price"?), or if the enforcement of the laws are inconsistent. Dont want to take loss or price gouge so they simply don't resupply making matters worse.

John Stuart Mill (The Avuncular State )

• against paternalism, in his essay "On Liberty," State should repress a man's act only if they harm others. Harm to himself alone is not a good enough reason for state to limit freedom • missouri lets self-confessed gambling addicts to add their name to a voluntary blacklist that they can never come off of. People enlist the state's help for internal battle to give the force of law to the angels of their better nature.

Humans have an innate desire to receive approbation which stems from two difference sources (commercial relations)

• appropriate moral conduct and the social status associated with the possession and parade of wealth. Approbation generated from moral conducted and wealth incentivizes us to behave morally while accumulating wealth. • however wealth is visible and easily recognizable sign of distinction while moral behavior is not. we tend to rely more on wealth to give and receive approbation to/from others. Easily attracts more attention thus approbation, we run a moral risk kinda of.

The downfalls of limiting insider trading

• as a result of a price life Capital that that would would otherwise have been invested in firms more productive than that of the failing firm never gets to those firms because of the price lie. The firm that is better won't be able to expand since it did not get the capital and then consumers lose out as well as they don't get the increase output. In addition less jobs are created, investors and creditors lose • It is in the public interest, therefor, that prices adjust as quickly and completely as possible to underlying economic realities. • ex Eron Scandal would happen less frequently. If there was insider trading there would be many people would would use the information to get rich by trading on the information and the stock market would have reflected the correct prices based on al the problems they had.

Behavioral Economics (The Avuncular State )

• claim to understand people as they are not as economist hitherto assume them to be. Because of ignorance or intemperance, lack of willpower or brainpower, people choose badly and Predictably so. People fail to exercise their choices in their own best interest. • Behaviouralist now want to save them. They are becoming distinctive kind of paternalist • Sunstein and Thaler - "libertarian paternalism", Edward Glaeser calls it "soft paternalism" • Regardless the approach is cannier and stealthier than the heavy handed paternalism liberals reject. • they offer a "avuncular state" world-wise, offering a nudge in the right direction, perhaps pulling strings on your behalf without you ever noticing • ex is the 401k default enrollment or not. it in the best interest of the worker to have it set to default enrolled with the freedom to opt out. • the little brainwork and paper work required defeats a surprising number of ppl you have have to opt-in to be enrolled from the beginning. • Soft paternalist, default rule alters behavior while preserving the freedom of choice

Why libertarian paternalism?

• defend libertarian paternalism, preserves freedom of choice but steer people in the direction that will promote welfare

Non-Price Rationing of Resources (price gouging)

• in not allow price to fix s&d shock, non-price rationing must be implemented instead using coupons or queuing (most likely queuing). • Changes in demand can induce shortages a well, (flashlight/battery ex) Without price increases, there was no mechanism to allocate the available goods to their highest-valued uses. It becomes a first come first serve and goods go to those with the lowest OC, so the one who values it the most does not get it.

Adam Smith basically McKinzie

• know for the idea of invisible hand • invisible hand of morality • Impartial spectator - • often times Smithin "man of system" - accepts the idea of tribal society accepts someone who has the knowledge to plan to benefit people but he tries to apply it to the great society is not useful • 1- invisible hand of market public choice • 2- laws (justice nessary ) • 3- impartial spectatir • (4?) religion to reinforce impartial spectator

unexpected change in supply or demand (price gouging)

• natural disaster or a failure of supply infrastructure, consumers often accuse sellers of "price gouging", but not in infrastructure cases, both prices increase. • it is illegal to price gouge and business don't do it in fear of backlash but If prices do not increase but, consumers do not receive a signal to cut their consumption and suppliers do not have the proper incentives to increase supply adequately

Beyond the Inevitable meaning (but Still libertarian [paternalism])

• the inevitability of paternalism is clear when planner must choose defaults. ....the question is should you go beyond the inevitable and take mild intervention or more intrusive steps (such as moving dessert to a whole other location) The proposal is unattractive. you cannot make one group worse off and no one better off however you also cant make a choice too easy either . • making a choice to not hard to take (such has having dessert in a location not too hard to find meets libertarian muster) • save more for tom....increases savings plans as they get raises few ppl who join drop out, successful libertarian paternalism in action.... increase in savings from 3.5 to 11.6 % in two years

Caveats on commercial relations

• today the terms we use are: free markets, market economy, economic transactions, exchange, trade, and commerce. NOTE that Smith and others in the 18th century used Commerce as a broader term that meant exchange and free markets, it is a specific institutional framework . • nomadic, pastoral, agricultural societies involves exchange and even markets/free markets. • Commercial societies - people live predominantly on commerce. key difference being that in commercial societies commerce is the main feature that shapes society and institutions. • Morality - ill-defined relies on intuition, preference, altruism, trust, benevolence etc. She uses it in a vague sense that is present today. • Result - meaning that there is an indication of of causal relationship strong and weak about morality being a result of markets and vice versa.

Magnus and Thomas Aquinas had a labor theory of value

•Writers prove their point these writers used chiefly the comments of the two theologians on Aristotle's Nicomachean Ethics, where it is stated that commutative or contractual justice requires strict equivalence between what is received and what is given and that any exchange violating this rule is unfair. This lead to may contradictions In Magnus and Aquinas • the market price could not fall permanently below cost, and go in accordance to the oscillating cost thus price cannot be decided on with precision (this is not in accordance with Marxism. • Aquinas upheld market valuation instead of cost, however, there was no change, but a continuous tradition involving, it is true, elaboration and refinement as economic development raised new problems and as discussion revealed flaws