Wednesday, May 12, 2010

Moral Emotions

Forging ahead through Moral Markets I finished the third chapter titled Moral Emotions by economist Robert Frank who is well known for incorporating behavioral realities such as our desire for status into standard economic utility functions. In this article that builds on his famous book "Passion within Reason"  (cited 2,620 times! Not shabby) he discusses the difference between consequentialist and deontological philosophies, talks about why views of morality matter, and details why studying these ideas are important.

First, Frank establishes the difference between consequentialist and deontological philosophies. Consequentialists hold that the morality of any decision must be measured by its outcomes alone. On the other hand, Deontologists believe that a moral choice emerges from underlying moral principles.  The standard example of the differences is the trolley car problem where the trolley car will kill 5 people by default but you have the power to flip the switch. If you flip the switch and the car changes track you will kill 1 person. What do you do? Consequentialists flip the switch without hesitation ( 5 > 1). But, Deontologists do not agree that this is a moral decision. There are several variations on this problem.The tension between these two forms one of the important points in Frank's discourse, namely, that there may be some situations in which our moral intuitions about what is right and wrong should be re-evaluated if a compelling case is made. However, since our moral intuitions guide us to the appropriate moral decisions most of the time we should not discard them. Besides, Frank retorts at the end, we can't provide an account of why every moral intution is misleading.

Probably the most interesting part of this article is Frank's discussion about why accounting for morals is important. A friend of mine asked me when inquiring about becoming an economics major whether it would darken his perspective on the world. I didn't think that it would but acknowledged that it could. Frank captures what I was thinking really well here when talking about how the expectations economists hold for other people (he offers the example from his own research on the prisoner's dilemma) can change immensely with increased economics education, "Even more troubling, the narrow self-interest model, which encourages us to expect the worst in others, may bring out the worst in us as well."

Finally, Frank illuminates the importance of moral sentiments in business transactions by talking about a standard principal-agent problem.

A) My restaurant is successful
B) I would like to open up a new restaurant across the state
C) Since I (the principal) can't be at two places simultaneously I need to hire someone (the agent)
D) Since I cannot monitor this person how can I be sure this person will not cheat on the agreement?

If the agent is honest we both benefit. But, if the agent feels no remorse and is perfectly rational they will cheat on the agreement and pocket more money than they should leaving me with less money (which would make opening the new restaurant not worth the investment). Therefore, I want someone that will not cheat. How do I know they will not cheat?

The question Frank raises which is quite interesting is this. Since people do not have "C" inscribed on their forehead so that we know who all the cooperators or honest candidates are in the world how do we tell except through this costly information gathering? How can we identify these kinds of dispositions in others? 
I may hire someone with whom I have greater familiarity. Frank points out that each one of us has someone that is not blood related that we could trust in important situations. How did we get to that point with the person? Through repeated interactions and the creation of sympathetic bonds.  We hire people we know because we believe they are trustworthy.

In summary, there are three major thoughts here: moral emotions can allow for economic activity to improve, moral theories can shape how we expect others to behave, and moral inuitions more often lead us to correct than incorrect more decisions, but we should be willing to entertain a compelling case for why those intutions are incorrect.

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