Class 19 - The Silver Rule

Today we talked about the Golden Rule and how it fails economically. If we "do unto others as we want them to do unto me"then our motivation for trade would be for the benefit of others. However, this only works in small societies and not in large markets. This fails in big societies like Stalin's Holomodor in Ukrain in the 1930's and Mao's Great Leap Forward because of a knowledge problem.

We operate under the idea that production for profit causes production for the people. But this is frowned upon. We celebrate self-interest in everything but the market (going to the gym/not smoking is good for only me and celebrated). So apparently the person who jogs is good but the person who makes the jogging shoes is evil.

We then looked at reciprocal altruism and the ethics of paying for organs. Say Tony needs a kidney and Tina gives him one. Ten years later, Tina runs a fundraiser and Tony gives her $20,000. These two events are very altruistic, but shrink the time span and the proximity of the people and the actions are horrific.

We looked at the definition of self-interest as people pursuing actions that interest them. Under this definition, Gandhi and Mother Theresa are self-interested, but not selfish.

We then talked about the Bus driver example in terms of the Rule of Law. If Rizzo is late for his buss, what is the effects. There is a knowledge problem for the bus driver to know the cost of being late. In Ecuador, lateness has caused the GDP to drop by 4%. There is a knowledge problem.

We then talked about the Silver rule. This says that "do not do to others what is unfair/unjust if they did it to you." This is better than the Golden Rule in a large population where we have a knowledge problem.