Economic efficiency and ethics

In neo-classical welfare economics efficiency and equity are strictly separated. The emergence of New Institutional Economics (NIE) broadens the perspective by focusing on the implications of opportunist behavior. In NIE emphasis is put on institutional arrangements that improve efficiency. The intr...

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Bibliographic Details
Published in:De Economist (Netherlands) 1999-06, Vol.147 (2), p.127-149
Main Author: van de Klundert, Theo
Format: Article
Language:English
Subjects:
Competition
Consumers
Cooperation
Economic efficiency
Economic models
Economic theory
Efficiency
Equilibrium
Ethics
Evolution
Game theory
Games
Income distribution
Institutions
Moral hazard
Pareto optimum
Prices
Prisoner's dilemma
Profits
Social norms
Social psychology
Studies
Welfare economics
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Summary:In neo-classical welfare economics efficiency and equity are strictly separated. The emergence of New Institutional Economics (NIE) broadens the perspective by focusing on the implications of opportunist behavior. In NIE emphasis is put on institutional arrangements that improve efficiency. The introduction of opportunist behavior points at the more general problem of cooperation. As can be illustrated by invoking the Prisoners' Dilemma, cooperation may improve efficiency. Therefore, social norms matter and the question arises how they evolve. Evolutionary game theory shows how economic success may change behavioral dispositions to honesty or dishonesty. On a less abstract level one can investigate whether or not the market system fosters nice social traits. Apart from the approach chosen, the main message is that economics and ethics are strongly intertwined.
ISSN:0013-063X
1572-9982
DOI:10.1023/A:1003643932739