Utilitarianism and the Free Market (Text 23-43)


1.      Evaluate the free (laissez-faire) market from the perspective of two ethical theories: Utilitarianism and Rights Theory

         a.      Does LFFM maximize utility (Ch 2)

         b.      Does LFFM best protect individual rights (Ch 3)


2.      Distinction between ethical norms and other norms

         a.      Norms: Tell you what you should do

         b.      Norms include prudential, political, etiquette, and ethical norms

         c.      Non-ethical norms are hypothetical; they say, if you want something, then you should do this

                   i.       If you don’t care about the if, then the norm does not apply to you

         d.      Ethical norms are categorical (not hypothetical); they say “do this period” not do this “if you want that”

3.      Ethical norms are thus universal (apply to all rational people regardless of wants and desires)

                   i.       Such norms are incompatible with an anything-goes subjective relativism, but compatible with a contextual relativism

4.      Ethical norms are impartial/fair:

                   i.       This rejects “ethical egoism” the view that what is right is whatever maximizes the agents own self-interest; others interests do not count at all

                   ii.      Everyone counts equally; equal standing for the interests of others; persons own interests don’t get special weight

                   iii.     Some argue in favor of partiality:

                            (1)    For friends and family, or national, or the self


5.      Virtue Ethics (in brief)

         a.      One of three major ethical theories (Virtue ethics, utilitarianism, and rights-based ethics)

         b.      Instead of an ethic of rules/principles/duties (e.g., utilitarian and rights-based ethics), virtue ethics is an ethics of character

                   i.       Asks not “what should I do?”

                   ii.      Asks “what type of person should I be?”

                   iii.     Goal of ethics not to defend rules that guide behavior, but to describe and justify characteristics of an ethically good person and a worthwhile human life

         c.      Focus on virtues and vices

                   i.       Virtue: a praiseworthy character trait (disposition, tendency, or habit to act in certain ways) that promotes a meaningful and worth human life

                   ii.      Vices: a blameworthy character trait (disposition, tendency, or habit to act in certain ways) that undermines the ability of a person to lead a good life

                   iii.     Examples of virtues and vices

                            (1)    Virtues: honest, trustworthy, loyal, courageous, moderation, frugality, thrift

                            (2)    Vices: dishonest, greedy, arrogant, envious, self-centered, insatiable

         d.      Virtues as a mean between two extremes

                   i.       Courage is a mean between cowardice and foolhardiness

         e.      Virtue ethics’ response to the conflict self-interest and ethical duty is to try to dissolve the conflict by having people want what is right

                   i.       Instead of restricting self-interest it tries to channel self-interest in ethically beneficial ways

                   ii.      Instead of trying to prevent people from doing what they want, it encourages people to want to do what is ethically right

                   iii.     It marshals self-interest for the sake of morality

                   iv.     Enron example:

                            (1)    Enron executives who are greedy and arrogant will be tempted by the opportunity to commit fraud and get millions of dollars

                            (2)    If the executives had moderate wants/desires and were satisfied with their incomes/lives they would not be tempted by this opportunity

                                      (a)     Good, honest, unpretentious people don’t feel a conflict between what they want and what is ethically right

                                                (i)     Is this true?

                   v.      Honest person is not someone who wants to steal but decides not to; an honest person doesn’t want to steal.

                            (1)    Not in the character of an honest person to steal.

         f.       Importance of having people with virtuous characters:

                   i.       Rules, principles, and codes of ethics are of little use when the people involved are aggressive, arrogant and greedy.

         g.      Virtues and the consumer culture:

                   i.       Does a free market, consumer culture focused on advertising, branding, marketing, impulse buying, endless economic growth and every rising consumption promote vices of greed and insatiable desires over the virtues of moderation, frugality and thrift?

                   ii.      Virtue ethics suggests people will be happier with more modest desires and lifestyles.


6.      Definition of utilitarianism: Right Act/Policy/Institutions those that maximize the overall good; i.e., that bring about the best overall consequences when considering everyone affected (impartially)

         a.      Not how many good consequences (but their overall good); degree of the good matters

         b.      Not the largest # of people benefitted: “The greatest good for the greatest number” is misleading because maximizing the overall total good might hurt (or fail to help) more people, because the fewer are more greatly benefitted

         c.      Must consider all consequences (effects on future people)

         d.      Must consider all alternatives courses of action


7.      Utilitarianism is a consequentialist moral theory

         a.      Right acts/policies/practices determined solely by their consequences

         b.      Consequentialism: Right (acts) defined in terms of (production of) the good


8.      Intrinsic value versus instrumental value

         a.      Intrinsic value: Things good in themselves or valued for their own sake; good as an end or good in itself.

                   i.       E.g., pleasure, happiness, health, people

         b.      Instrumental value: Things good as a means (instrument) to an end or valued for the sake of something else

                   i.       E.g., money, going to the dentist, tables


9.      Utilitarianism sees morality (right action) as a means to an end, as of instrumental value in achieving something of intrinsic value

         a.      A right action is not good for its own sake, but as a means to achieve the good

         b.      Truth telling is not good in-itself, but because it is a means to good results (a society/business could not function if people didn’t tell the truth for the most part)

         c.      No act is good in itself, but only good depending on the consequences

         d.      If lying promote good consequences, it would be right

         e.      Plausible? Can any action be justified if the consequences are good enough?

                   i.       Rights-based moral theory exists in part to prevent certain actions from happening (rights-violating actions) even if the consequences are good.

                   ii.      Supreme Court Justice Antonin Scalia on the permissibility of torture (e.g., waterboarding)


10.    Utilitarians have different conceptions of the nature of the good (intrinsic value) to be maximized

         a.      Pleasure, happiness, satisfaction of desire/preferences, satisfaction of interests, beauty, knowledge (or a combination of these intrinsic values)

         b.      Difference between preferences and interests

                   i.       One can want/prefer what is not in one’s interests

         c.      Preference utilitarianism:

                   i.       People’s preferences (typically as expressed within the marketplace) is taken to be the good to be maximized

                   ii.      A virtue of this is we let people themselves decide (via their market choices) what is good for them, instead of imposing an objective standard on all people

                   iii.     Problems?

                            (1)    People can prefer what is not good for them (cigarettes, alcohol, fatty food)

                            (2)    People might prefer one thing but choose something else in the marketplace; might vote for one thing, and yet consume the opposite (subsidized flood insurance, organic food)


11.    Utilitarianism must aggregate and quantify (measure) the good it seeks

         a.      But some goods are hard to quantify

                   i.       Health and environmental protection

         b.      Some goods are not easily or appropriately comparable or aggregated

                   i.       Value of life quantifiable?


12.    Free Market (editor’s mean laissez-faire): Minimum government involvement in the market, only what is necessary for there to be a free market


13.    Argument for the view that the free market maximizes overall good of society (and thus is justified by utilitarian ethical theory)

         a.      Car buying example (p. 32) shows how free market maximizes preference satisfaction;

                   i.       People freely pursuing their self-interest in a market will be led by an invisible hand (Adam Smith’s) to the greatest overall good.

         b.      Trading in a free market results in people being better off after the trade than before (otherwise why would they trade?)

         c.      Trading in a free market, makes people better off with no one being made worse off (a “Pareto improvement”)

                   i.       This is not the same as maximum utility but is a step in that direction.

14.    Problems to consider

         a.      What if one person needs the car more than others and does not have the $ to outbid someone who needs (or even wants) it less?

         b.      The market will produce yachts and vacation homes for the wealthy before housing/health care for the poor

                   i.       Presumably more overall social good is produced when a homeless person gets a home than when a wealthy person gets a 2nd home

         c.      One thing this criticism ignores is the production side: Why is the wealthy person wealthy and the poor person poor? It might well be because the wealthy person has produced goods/services that other’s find valuable (are willing and able to pay for) while the poor person has not produced such goods (or if he/she has, then she as already spent the money)

                   i.       Having the $ to buy things is a sign that one has done things that others consider useful (better: are willing and able to pay for)

                   ii.      Not having $ is a sign that one doesn’t have skills others find useful or that one refuses to use them or that one foolishly wastes one’s resources.

         d.      This response ignores that much wealth is not earned or deserved but is a matter of luck


15.    Editors’ criticisms of claim utilitarianism justifies free market (=FM)

         a.      (1) The free market is not necessary to maximize the good

         b.      (2) The free market is not sufficient to maximize the good


16.    (1) FM not necessary to achieve the maximum good

                   i.       Editors assume for the sake of argument that the good is a high standard of living/high level of desire satisfaction

         b.      Our country isn’t a FM (and we have a high standard of living), and

         c.      Other countries with far more government involvement in the market also have a very high standard of living

                   i.       Scandanavian countries, Canada, Japan, Germany


         d.      Defenders of FM will argue if less government involvement (if cut government regulations) there would be even higher standard of living

         e.      Critics of FM say quality of life increase only when we began to regulate FM


         f.       Conclusions

                   i.       FM not necessary: Other ways to achieve high standard of living than (a totally) free market;

                   ii.      Mixed economies can also achieve goal of high level of desire satisfaction

                   iii.     Sometimes more regulations needed to maximize social good


         g.      Forbes editorial supporting free market as a means to prosperity and peace


17.    (2) FM not sufficient to maximize utility either; no guarantee FM will achieve maximum good

Market Failures

18.    Prisoner’s dilemmas (tragedy of the commons):

         a.      When each person acting in her own self-interests leads to making society worse off overall (everybody is worse off overall) than if people had cooperated to achieve a common good

         b.      Contradiction to Adam Smith’s invisible hand

         c.      Rubber necking p. 36

         d.      Garret Hardin’s tragedy of the commons grazing example

         e.      Original prisoner’s dilemma case p. 37

         f.       Overfishing, filling wetlands, taking pollution controls off cars, cities bidding for businesses

         g.      What is needed to avoid these results is cooperation and coordination

         h.      These situations permeate our public/economic life, so this is a serious problem


19.    Externalities:

         a.      Costs of doing business that buyers and sellers don’t pay, but are externalize onto others

         b.      Cases where society not best off when buyer and seller freely exchange (and make themselves better off), because those not involved in the market transaction are harmed/hurt


         c.      Pollution

         d.      Effects of non-renewable resource use or possible global warming on future generations (who are external to transactions and suffer costs)

20.    Note: Not everyone’s interests will be represented in a market

         a.      Future generations, the environment (including animals)


21.    FM only represents the interests of those who can pay:

         a.      Poor can’t pay as well and so their happiness is not considered as much;

         b.      Poor are treated unequally and unfairly by the market

         c.      FM maximizes happiness/preference satisfaction?

                   i.       More happiness: vacation for rich or home for a homeless persons? Which market provide?

         d.      Reply: How seriously your wants are taken into account by the market depends on how well you satisfy other’s wants

                   i.       People’s contributions to social resources figure into how much attention market pays to them

                   ii.      Poor are not productive in eyes of others: market gives productive people more clout in the market;


22.    Even if FM did maximize preference satisfaction (goal of utilitarianism), because utilitarianism is an inadequate moral theory, such a utilitarian defense of FM is inadequate

         a.      Utilitarianism allows for unjust treatment of persons

         b.      For violations of their right

                   i.       E.g., toxic waste production example