Slide 1

TEACHING THE ETHICAL FOUNDATIONS OF ECONOMICS WHAT ARE THE MORAL LIMITS OF MARKETS? Slide 2 THE DILEMMA POSED BY SCARCITY SCARCITY is an unavoidable fact of life. While peoples desire for goods and services is unlimited, the resources to produce them are limited. Slide 3 INDIVIDUALS AND SOCIETIES MUST DEVISE WAYS TO DEAL WITH THIS PROBLEM HOW CAN WE EFFECTIVELY ALLOCATE SCARCE ITEMS? Rationing Lottery Achievement based Need based Brute force Market First come, First served Slide 4 MARKETS TYPICALLY ALLOCATE RESOURCES BASED ON PRICE AND THE ABILITY TO PAY Slide 5 SOME EXCEPTIONS INCLUDE: CLOSE PERSONAL RELATIONSHIPS: LOVE AND FRIENDSHIP ARE SHARED OR ALLOCATED BY NEED. SOCIAL GROUPS: MEMBERSHIP ACCORDS EQUALITY AND RESOURCES ARE ALLOCATED THROUGH RATIONING OR LOTTERY. TIMES OF CRISIS: NEEDS OF THE MANY OUTWEIGH THE NEEDS OF THE FEW, RATIONING. VULNERABILITY: SOCIETY PROHIBITS TRANSACTIONS THAT MAY BE EXPLOITATIVE. VICES: ACTIVITIES THAT DEGRADE IMPORTANT INSTITUTIONS ARE BANNED. EQUALITY: SOCIETY STRIVES FOR EQUAL OPPORTUNITY AND ALLOCATE BASED ON NEED. Slide 6 IS THERE SUCH A THING AS PRICE GOUGING? IN THE AFTERMATH OF HURRICANES, THERE IS ALWAYS THE CONCERN THAT SELLERS WILL EXPLOIT THE CIRCUMSTANCES BY DRAMATICALLY INCREASING THE PRICES THEY CHARGE DEVASTATED CONSUMERS FOR NECESSITIES LIKE GASOLINE, WATER, PLYWOOD, GENERATORS, AND ICE. Slide 7 THE ENTREPRENEURIAL SPIRIT OUT OF TOWNERS OFTEN DESCEND UPON THE CRISIS AREA HAULING TRUCKLOADS OF ITEMS THEYVE PURCHASED AT HOME WITH THE INTENT OF TURNING A PROFIT. THEY FILL A VOID LEFT BY THE ABSENCE OF LOCAL RETAILERS. Slide 8 MARKET MORALITY WOULD THESE PEOPLE TRAVEL GREAT DISTANCES AND INVEST IN THE INVENTORY IF THEY ANTICIPATED LIMITS ON HOW MUCH THEY COULD CHARGE? Slide 9 MARKET MORALITY WOULD THE PEOPLE IN THE DEVASTATED AREAS BE BETTER OFF WITHOUT THE PRESENCE OF THESE BACK OF THE TRUCK RETAILERS? WOULD THE PEOPLE IN THE DEVASTATED AREAS BE BETTER OFF WITHOUT THE PRESENCE OF THESE BACK OF THE TRUCK RETAILERS? Slide 10 MORAL CRITICISMS OF MARKETS IS SELF- INTERESTED BEHAVIOR THE SAME AS SELFISH BEHAVIOR? Slide 11 MORAL CRITICISMS OF MARKETS WOULD COMPETITION END IF THE GOVERNMENT ALLOCATED ALL GOODS AND SERVICES INSTEAD OF RELYING ON MARKETS? WOULD COMPETITION END IF THE GOVERNMENT ALLOCATED ALL GOODS AND SERVICES INSTEAD OF RELYING ON MARKETS? Slide 12 MORAL CRITICISMS OF MARKETS WOULD AN ECONOMY THAT BANNED MONEY BE MORE MORAL THAN AN ECONOMY WITH MONEY? WOULD AN ECONOMY THAT BANNED MONEY BE MORE MORAL THAN AN ECONOMY WITH MONEY? Slide 13 MORAL CRITICISMS OF MARKETS ARE POOR PEOPLE BETTER OFF IN A MARKET SYSTEM OR IN A SYSTEM DOMINATED BY GOVERNMENT? ARE POOR PEOPLE BETTER OFF IN A MARKET SYSTEM OR IN A SYSTEM DOMINATED BY GOVERNMENT? Slide 14 MORAL AND PRACTICAL ADVANTAGES OF MARKETS CONSUMERS PROMOTE FREEDOM OF INDIVIDUAL CHOICE TREAT EQUALLY CUSTOMERS WITH THE SAME ABILITY TO PAY USE PRICES TO ENCOURAGE CONSERVATION PROVIDE FOR A RELIABLE SUPPLY OF PRIVATE GOODS USE PRICES TO ELIMINATE SHORTAGES AND LONG LINES IMPROVE LIVING STANDARDS Slide 15 MORAL AND PRACTICAL ADVANTAGES OF MARKETS PRODUCERS PROMOTE FREEDOM OF INDIVIDUAL ACTION RELY ON VOLUNTARY ACTIONS, NOT COERCION REWARD CREATIVITY IN PROBLEM SOLVING PROMOTE COOPERATIVE BEHAVIOR GLOBALLY ENCOURAGE MORAL VIRTUES SUCH AS HARD WORK, HONESTY AND THRIFT ALIGN SELF-INTEREST WITH EFFICIENCY AT SATISFYING CONSUMER DESIRES