Values and Values Education in Economics

1. Values and Values Education in Economics 30-4-2005, CDI

2. Concept of value One-person economy • Valuing alternative – preference ordering • Subjective • Discounting: same discounting criteria

3. 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

4. n-person economyProduction and distributionCompetitive casePrices: collapsing information -> decision parameter- values- constraints- core of competitive equilibrium

5. 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

6. Activity ONE • pair up: Proposer, and Acceptor • Offering x out of 6 chocolate to A 3 If A accepts, divide chocolate; • If A does not accept, both get zero. Record the offer and result

7. Group A Offer Accept? Value of Acceptance

8. -> 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])

9. Notion of distributive justice • Macro: just social order e.g. veil of ignorance • Local: not coherent, case by case because of compartmentalized approach Allocation • Supply decisions e.g. seats in legislature • Distributive decision: rules • Reactive decision: action after tax

10. Activity Two • Groups of six • Decide on an allocation scheme for recipient of kidney donation • Justify you criteria, scoring and weighting methods

11. 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

12. 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.

13. 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.

14. 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.”

15. 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)

16. 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.

17. 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)

18. Normative Theories of justice • 1 equity principle (Aristotle) -allocation proportionate to contribution contribution? -Indivisible good?

19. 2 maximizing the total welfare (Classical utilitarism) ‘greatest good for the greatest number’ - cardinal comparisons across individuals? - Might harm some for benefit of others

20. 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?

21. 4 No Envy • - changing places? Bundles for allocation? • - allocate => divide • - requires no information advantage of one party