10/17/2011 Class 19

Virtues and Morality of market economy
Golden rule: do one to others as you will have done to yourself
Golden rule makes sense in small situations where relationships are intimate and you can actually know exactly what people around you want.
Commercial society is very big, complex and impersonal.
Some substitutes are needed for golden rule when you deal with strangers and the reason is that we don't have enough information to apply the golden rule.

The reason why golden rule fails is not because of selfishness but because of a lack of omniscience.
Example: If farmers worked based totally on altruism, they would have to figure out what people want before the cultivation but in this process many people will die because of starvation.
1) Irony: People think that anything in the market is about greed and self-interest while things outside the market has nothing to do with greed.
People actually like the self-interest not happened in the market.
Selfish behavior that is exclusively self-regarded (exercise, lose weight, quit smoking,etc) is usually praised while selfish behavior that requires people to think about somebody else (marker trade, etc) often faces suspect.

2)The nature reciprocal of altruism
Example :  Tony gets a kidney from Tina   Tony gives Tina 20000 bucks to pay her mortgage.
Taken separately, people will argue that each of those behavior is worthy of praise but when it's a transaction, they are condemned. The truth is that they are the same act.


3)Only firms are viewed as greedy
Irony: When producers sell products, they are accused of setting high prices and impoverish customers but when customers try ways to buy things in a low price, they are praised. The reality is that customers are also self-interested.

Self-interest is not the only motivation that make people do decisions and get what they want.
Other motivations: people's opinions;satisfaction from challenge;avoid of being bored;drugs...
Self-interest: This and only this  pursue the project that interest you

Why is the golden rule hard to apply?
Example: Should a bus driver wait for a late passenger?
The driver faces problems:
1) Other passengers will be delayed.(maybe they cannot catch another bus)
2) Driver doesn't whether the late passenger really have important things to do
3) If every driver is late, the countries will suffer from tardiness.
So what should the driver do? Obey the rule set by bus company.

Silver rule: don't do to others what you'll consider unfair if it did to you
Question: Should business take some portion of their profit to donate to the charity?
Possible responses:
1) It's perfectly OK to be charitable with your own money
But we invest money to company to have more money in the future,not expecting the company to give it to the charity.
2)There's no such thing as enough profit.
If the company gives money to the charity, the company loses capital and may have problem managing the business in the future.
The business companies' social responsibility: Earn enough profit to cover the genuine cost of a business. The workers will maintain the jobs and get a good pension. Continuous production and exchange will boost the economics and improve living standard.
3) Running a profitable business requires using soft values.
Treat customers and employees better.
4)Running a business like family will actually destroy it.