Will the Real Adam Smith Please Stand Up?: Teaching Social Economics in the Principles Course

Part of the difficulty of introducing social economics into the principles course is the perception that social economics is anathema to mainstream economics. As noted by Warren Samuels, however, neoclassical economics is already a form of social economics despite its pretensions of methodological individualism and value-neutrality . Heilbroner also makes the case that the ... the preponderance of great economists were aware of economics as explanation systems of particular socio-economic formations. Like it or not, economists err in omitting from their models what McCloskey calls S variables--variables representing the social embeddedness of values which direct human choices

The Ethics Behind Efficiency

The normative elements underlying efficiency are more complex than generally portrayed, and rely upon ethical frameworks that are generally absent from classroom discussions. most textbooks, for example, ignore the ethical differences between Paretto efficiency (based on voluntary win-win outcomes) and the modern Kaldor-Hicks efficiency used in public policy assessments (in which winners gain more than losers lose). For the latter to be ethically palatable, society must have in place basic institutions of justice, transparency, and accountability. Normative economics thus requires a pluralist approach that includes considerations of virtue and duty, closer to Adam Smith\u27s Enlightenment conceptions. This surprising finding should embolden economics teachers to engage students with critical thinking problems that are controversial and relevant, and which better prepare students for a complex world

The Ethics Behind Efficiency

The normative elements underlying efficiency are more complex than generally portrayed, and rely upon ethical frameworks that are generally absent from classroom discussions. Most textbooks, for example, ignore the ethical differences between Pareto efficiency (based on voluntary win-win outcomes) and the modern Kaldor-Hicks efficiency used in public policy assessments (in which winners gain more than losers lose). For the latter to be ethically palatable, society must have in place basic institutions of justice, transparency, and accountability. Normative economics thus requires a pluralist approach that includes considerations of virtue and duty, closer to Adam Smith’s Enlightenment conceptions. This surprising finding should embolden economics teachers to engage students with critical thinking problems that are controversial and relevant, and which better prepare students for a complex world

Viability of Ethanol Motor Fuel in Brazil: Cost-Benefit Considerations

The study assesses the viability of ethanol fuel considering both private and social costs and benefits. Ethanol costs are calculated for different production scales, locations, and government subsidies. The results show that without government financing subsidies, ethanol fuel would be privately economical (at May 1981 prices) only in Southeast distilleries of appropriate scale. Northeast distilleries are uneconomical even with a shadow wage for labor. Foreign exchange savings from ethanol production are calculated, with the fining that relatively small savings are achieved. However, Brazil gains greater flexibility in sugar export earnings by being able to alter the production mix of ethanol and sugar depending on international prices. Social benefits of ethanol production include greater rural employment, the creation of rural industrial development poles, and national strategic considerations. yet ethanol from sugarcane has also displaced food crops, contributed to greater land concentration, and not reduced regional disparities

Adam Smith and Poverty

Can we end poverty in America? Does economic theory offer a solution? Humility would be a good starting place, because systemic problems like generational poverty rarely stem from single causes. Putting the broken pieces together is difficult when some edges are sharp, some are shattered, and others missing. This essay draws on insights from Adam Smith in order to examine the problem of poverty. It focuses on a case study involving Serena Robins (the real names have been altered)

Adam Smith and Greed

The virtues of greed have been widely promoted by some economists in the 20th century. Allegedly it is Adam Smith who provides this new dignity to greed (Lerner, 1937, ix). Kenneth Arrow and Frank Hahn in the General Equilibrium Analysis (1971), for example, implicitly assume that Adam Smith\u27s self-interest is the greed that promotes economic efficiency (quoted in Evensky, 1993, 203). Walter Williams (1999), a devoted follower of Smith, writes in his column that, Free markets, private property rights, voluntary exchange, and greed produce preferable outcomes most times and under most conditions. These pronouncements have become part of the cultural tableau. The noted investment banker Ivan Boesky gave a commencement address to MBAs declaring, You can be greedy and still feel good about yourself (Andrews, 1966). In a movie loosely based on his story, the character Gordon Gekko in Wall Street (1987) opines that, [G]reed is good.... Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit. In other words, greed is said to promote survival in Smith\u27s competitive environment

Moral Markets: The Critical Role of Values in the Economy by Paul J. Zak (Book Review)

This volume contains the fruits of a two-year seminar on ethics and economics funded by the John Templeton Foundation and administered through the Gruter Institute for Law and Behavioral Research. Participants came from the social sciences, natural sciences, and humanities, and included Nobel Laureate Vernon Smith and other figures such as Frans de Waal, Herbert Gintis, Robert Frank, and Robert Solomon (for whom the book is dedicated in memoriam). The book’s editor, Paul Zak, is a pioneer in the emerging field of neuroeconomics, which uses medical technology to discover the physiological manifestations of cooperative and altruistic behavior. A theme of the book is that human behaviors are moderated by biological realities that have important implications for the operation of society and markets. In particular, recent laboratory findings have uncovered the psychological interconnections between people that create organic interactions that do not fit neatly within the rational choice mode

Antecedents to the Crisis: Mandeville, Smith, and Keynes

The purpose of this paper is to present the methods of teaching about the global financial crisis (GFC) from a social economic perspective. Using primary texts from the history of economic thought, the moral underpinnings for collective social action are examined in times of economic depression. The deregulation of financial markets raises two questions: to what extent is deregulation the result of a misunderstanding about human nature and the behavioral lessons of social economics; and to what extend does deregulation ignore the moral lessons of Adam Smith’s invisible hand

Institutional Divergence in Economic Development

The Anglo-American capitalist model (AACM) encompasses a set of theories and policies that advance the classical objectives of individual autonomy, wealth acquisition, and economic growth. In the twentieth century, the neoclassical goal of short-run Pareto efficiency was added yet remains in possible tension with these other aims. The AACM generally upholds the primacy of markets as the means for achieving its normative ideals through private, decentralized actions, with some exceptions. In the modern political arena this ideology is associated with the Reagan-Thatcher revolution of the 1980s and provides a framework for many who oppose statist solutions to social problems (Steger and Roy 2010). The AACM has come under attack from a variety of perspectives because of its assumptions of perfectly rational traders, competitive markets, incentive compatibilities, low transaction costs, informational symmetries, and no externalities (Stiglitz 2007; Kay 2004). This paper examines a different critique arising from the a-historical and a-institutional manner in which the AACM has been adopted by some neoclassical policy makers. This criticism, incidentally, also applies to statist models adopted in the 1950s that likewise ignored institutional constraints and path dependency issues