COMM 394 > Midterm > Flashcards

Midterm Flashcards

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1
Q

What is the burning man festival characterized by?

A

No resource scarcity, limited time, attended by like-minded people who do not represent our diverse society.

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2
Q

What are the main functions of government for citizens?

A

Provide law and order, create a stable trading environment, provide universal healthcare & free education.

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3
Q

What is a positive externality?

A

Benefit to someone who is not a buyer or seller, such as cultural solidarity and international policy.

ORRR A GARDEN

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4
Q

What is the economic rational agent?

A

Selfishly maximizing my own anticipated utility.

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5
Q

What is surplus in economics?

A

The difference between the utility of having the good and the utility of the transaction price.

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6
Q

What is social welfare?

A

Maximizing the sum of everyone’s utility.

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7
Q

What is a free market?

A

Transactions are voluntary, increasing social welfare.

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8
Q

What is the problem with a rational agent in a free market?

A

A rational agent may fail to maximize social welfare due to market failures.

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9
Q

What are institutions in economics?

A

Created to govern and redistribute wealth when free markets do not provide desired outcomes.

  • Formal institutions: written, enforceable rules
  • Informal institutions: unwritten norms, like tipping culture
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10
Q

What is cost-benefit analysis?

A

The tradeoff between gaining additional social welfare and the cost of implementing policy.

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11
Q

What is opportunity cost?

A

The utility an agent gets by doing the best alternative with their time.

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12
Q

What is moral hazard?

A

When someone doesn’t bear all the consequences of their actions, leading to behavior changes. ex. insurance

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13
Q

What is the marginalist principle?

A

Most activities are subject to diminishing marginal benefits (each additional unit of something gives you less extra benefit than the previous unit) and rising marginal costs (extra cost of producing one more unit goes up as output increases)

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14
Q

What is the Peltzman effect?

A

Consumers adjust their behavior to a regulation in ways that counteract its intended effect.

  • The safer they make cars, the more risks drivers will take
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15
Q

What is the law of unintended consequences?

A

Policies often fail to help their intended beneficiaries due to perverse incentives.

  • making it harder to evict tenants can lower the number of properties offered
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16
Q

What is the cobra effect?

A

A situation where well-intentioned policies backfire, exemplified by a bounty on cobras in colonial India.

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17
Q

What is Pareto efficiency?

A

A situation where no individual can be made better off without making someone else worse off.

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18
Q

What is the first welfare theorem?

A

Under perfect competition, markets achieve Pareto efficiency.

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19
Q

What is a Pareto improvement?

A

At least one person is better off, without making anyone else worse off

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20
Q

What is deadweight loss (DWL)?

A

Deviation from Pareto efficiency where mutually beneficial transactions are not realized.

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21
Q

What is Nash equilibrium?

A

Both players maximize their equilibrium option without considering the other player.

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22
Q

What is the prisoner’s dilemma?

A

A situation where players follow their incentives rather than the welfare-maximizing solution.

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23
Q

What are public goods?

A

Non-rival and non-excludable goods that are under-provided (a good or service is not being supplied in the quantity that is socially optimal, and is therefore typically supplied by the government) by the market.

  • national defenese
  • streetlights

gov steps in because public goods are non-excludable so firms have no incentive to provide them since they cannot charge users effectively.

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24
Q

What is adverse selection?

A

Occurs when the seller cannot distinguish buyer types, leading to selecting bad types.

  • Arises from asymmetric information
  • Takes place before a contract has been made

one side knows something the other side doesn’t.

ex. heathcare or lemon car

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25
What is the relationship between fairness and inequality?
Fairness is subjective and often runs counter to individual interests; defining fairness is complex.
26
What is distributive fairness?
The final allocation of benefits across individuals is just or morally acceptable.
27
What are policies to address inequality?
Free medical care, unemployment insurance, disaster relief programs, and progressive taxation.
28
What is Joseph Stiglitz's view on inequality?
Inequality is perpetuated by rent seeking by the wealthy, affecting productivity and aggregate demand. rent seeking = an individual or an entity seeks to increase their own wealth without creating any benefits or wealth to the society
29
What is Thomas Piketty's main argument?
High levels of inequality are evident, and wealth is often inherited, perpetuating inequality.
30
What is 'rent seeking'?
It is a practice by the wealthy to wield political power that shapes monopolies, obtain favorable treatment, and ensure low taxes.
31
How does inequality perpetuate itself?
Inequality transfers across generations since wealth is inherited.
32
What are the effects of inequality on productivity?
Inequality is arguably unfair and hurts productivity by suppressing aggregate demand.
33
What are Thomas Piketty's main points in 'Capital in the 21st Century'?
He provides clear evidence of high levels of inequality and discusses policy responses like direct redistribution and fiscal redistribution.
34
What is the preferable policy response according to Piketty?
Fiscal redistribution is preferable since increasing the cost of labor through direct distribution can increase unemployment.
35
What does empirical evidence suggest about capital to labor elasticity?
Empirical findings show that capital to labor elasticity is low, meaning taxing capital does not significantly reduce employment.
36
What will happen to inequality according to Piketty?
Inequality will increase since the return on capital growth will outstrip/outpace growth in the economy.
37
What are the two options for fiscal redistribution?
Tax capital (interest, dividends- inheritance taxes) or labor income (Wages, salaries)
38
What issues arise from taxing capital?
Capital is internationally mobile, and tax competition makes capital highly elastic. - Capital can move across borders easily- Money, factories, and profits can be shifted to where they need - Because countries compete on taxes, capital is “highly elastic.”
39
What is the proposed solution for taxing wealth?
Fiscal federalism, a progressive global tax on wealth.
40
How much inequality is considered inevitable?
Some degree of inequality is inevitable, and even Karl Marx acknowledged this.
41
What are the consequences of large wealth inequalities?
They can lead to public bads like labor shortages, crime, and revolution. - most relevant example is unemployment
42
What is procedural fairness?
It refers to fair processes in situations like races, where equal starting lines and no unfair advantages are essential.
43
What is the Social Contract?
Ideas developed by philosophers about the legitimacy of the state over the individual, where individuals consent to surrender some freedoms for protection.
44
What did Hobbes say about the state of nature?
He described it as 'solitary, poor, nasty, brutish, and short.'
45
What is John Rawls' concept of horizontal equity?
People that are alike in relevant ways should be treated the same.
46
What is vertical equity according to Rawls?
People who differ in relevant ways should be treated differently based on need, deservedness, contribution, or effort.
47
What is the 'veil of ignorance'?
A concept by Rawls where one must design rules without knowing their own position in society.
48
What is the maximin principle?
It is a preference for the welfare of the least advantaged.
49
What is individual sovereignty?
The right to make personal choices.
50
What is paternalism?
Placing limits on a person's liberty for their own good.
51
What are examples of paternalism?
Restrictions on narcotics, activities of minors, and safety requirements like seat belts.
52
What are problems with utility functions?
They may not be rational, as individuals often overlook long-term costs or benefits.
53
Should we maximize social welfare for current or future humanity?
There is a tendency to undervalue humanity's future, leading to potential paternalism for future generations.
54
What is the challenge of cost/benefit analysis for social welfare?
It involves accounting for uncertainty and choosing appropriate discount rates.
55
What does fairness perception imply?
Perceptions of fairness are crucial and can be distorted, impacting distributional and procedural fairness.
56
What is vertical ethics?
It refers to rewarding participation in class, where more participation leads to higher marks.
57
What is Stiglitz's main point?
Money makes money.
58
What does NIMBY stand for?
Not In My Backyard.
59
What is the relationship between trade and social welfare when a negative externality is present?
Trade does not increase social welfare under negative externalities.
60
What is necessary for market prices?
Prices are set by the market; entry by new firms drives profits to zero.
61
What does it mean for resources to be efficiently allocated?
It is impossible to reallocate resources to make one person better off without making someone else worse off.
62
What does it mean for a good to not be a public good?
It is not a public good just because it is provided free to the public or by a publicly owned enterprise.
63
What characterizes non-rival goods?
The benefits obtain by one ‘consumer’ are not subtracted from benefits available to others
64
How do insurance firms and clients differ in terms of risk?
Insurance firms are risk neutral while clients (policy-holders) are risk averse.
65
What are the Four “isms”
1. Relativism 2. Consequentialism 3. Egoism 4. Utilitarianism
66
What is Relativism
There is no absolute right or wrong but we can say acts are morally acceptable so long as they conform to my society’s approved practices.
67
What Is Consequentialism
Acts are good if they have good consequences.
68
What is Egoism
Acts are good if they benefit me.
69
What is Utilitaism?
Acts are good if they can be expected to raise the sum of all human welfare.
70
What are the 4 rules
1. Golden Rule 2. Kant’s 1st Rule, the Categorical Imperative: 3. Kant’s 2nd Rule, the Practical Imperative: 4. Ethics of Care
71
What is the Golden Rule?
Do unto others as you would have others do unto you.
72
What is Kant’s 1st Rule?
The categorical imperative, that says act according to principles that are universalizable.
73
What is Kant’s 2nd Rule?
The practical imperative, which means do not treat people purely as a means.
74
What does the Ethics of Care emphasize?
Act according to duties of care.
75
What is relativism in ethics?
Moral standards often differ across cultures.
76
What is conventionalism?
It is right to do whatever immediate social environment dictates.
77
What is a problem with relativism?
Moral views differ within societies (sub-cultures, individual dissent).
78
What is consequentialism?
The morality of an action depends solely on the consequences it brings about.
79
What are the two main versions of consequentialism?
Utilitarianism and Egoism.
80
What does utilitarianism focus on?
Maximizing everyone's good, defined as utility/happiness/pleasure.
81
What does egoism focus on?
Maximizing the individual's own good.
82
What is ethical egoism?
Moral agents should do what is in their self-interest.
83
What is psychological egoism?
Self-interest is what motivates people in fact.
84
Who is a champion of ethical egoism?
Ayn Rand.
85
What is a key quote from Ayn Rand?
"I swear by my life, and my love of it, that I will never live for the sake of another man, nor ask another man to live for mine."
86
What does Rand argue about altruism?
It requires sacrificing the individual for the good of others, thus destroying the highest value.
87
What is the Sabre-tooth Tiger Dilemma?
A scenario illustrating the risks of cooperation versus self-preservation when faced with danger.
88
What is Direct redistribution
increasing wages
89
What is Fiscal redistribution
tax on capital or labour income
90
Why do we choose fiscal over direct
cause increasing cost of labour through direct distribution increases unemployment
91
What is the problem with fiscal redistribution?
capital is internationally mobile and tax competition makes capital highly elastic
92
What is fiscal federalism
the solution in Thomas Piketty's eyes, a progressive global tax on wealth
93
94
What is the **scientific evidence** regarding the evolutionary success of humans?
It is largely due to **cooperation and altruism** ## Footnote Psychological egoism in its extreme form is inconsistent with the data.
95
What does **bad luck** (health, natural disasters, etc.) significantly affect?
**Well-being** ## Footnote It raises the question of whether we should care about the unfortunate.
96
In **Prisoner’s Dilemma** situations, what does egoism lead to?
**Both parties being worse off** than they might be under cooperation ## Footnote This highlights the importance of cooperation over egoism.
97
Who is the founder of **utilitarianism**?
**Bentham** ## Footnote He stated that the measure of right and wrong is the greatest happiness of the greatest number.
98
What are the **ultimate ends** that we value for themselves according to utilitarianism?
* Happiness * Pleasure * Absence of pain and misery ## Footnote These are the goals that utilitarianism aims to achieve.
99
Whose happiness should count according to utilitarianism?
**Everyone that can feel happiness** ## Footnote This principle emphasizes the equal consideration of all individuals' happiness.
100
What is the principle that the **needs of many** outweigh?
**The need of few or the one** ## Footnote This is a fundamental concept in utilitarian ethics.
101
What is a significant problem for **utilitarianism** regarding involuntary sacrifices?
**The trolley problem** ## Footnote It raises ethical dilemmas about sacrificing one to save many.
102
What ethical issue arises from utilitarianism regarding **torture**?
**Justified torture** ## Footnote This is a controversial aspect of utilitarian ethics.
103
What does utilitarianism struggle with in terms of **equal treatment**?
**Innocent and guilty, family and strangers** ## Footnote It often leads to sacrificing one to save five, regardless of personal connections.
104
What must moral rules satisfy to be accepted into society?
* **Universality** * **Reversibility** ## Footnote These criteria ensure that moral rules are fair and applicable to all.
105
What is the **Golden Rule**?
**Do unto others as you would have others do unto you** ## Footnote This principle emphasizes empathy and reciprocity in moral actions.
106
What is **Kant’s 1st Rule**, the Categorical Imperative?
**Act according to principles that are universalizable** ## Footnote This rule emphasizes the need for moral principles to be applicable to everyone.
107
What is **Kant’s 2nd Rule**, the Practical Imperative?
**Do not treat people purely as a means** ## Footnote This principle highlights the importance of respecting individuals' autonomy.
108
What does the **Ethics of Care** emphasize?
**Interpersonal relationships** ## Footnote This ethical framework was developed by Carol Gilligan and others.
109
What is a key difference between the **Ethics of Care** and Kant's imperative?
The Ethics of Care may justify actions like **stealing food for your baby**, while Kant's imperative would not ## Footnote This illustrates the conflict between different ethical frameworks.
110
What does the **principle of autonomy** relate to in Kant's philosophy?
**Informed consent** ## Footnote This principle is crucial in ensuring that individuals are treated with respect and dignity.
111
What is a potential pareto improvement?
the overall gains of the better people off is greater then the loss of the people worse off
COMM 394
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