PHL295H1 Study Guide - Final Guide: Transaction Cost, Invisible Hand, Stakeholder Management
Document Summary
Phl295 final exam study notes: gauthier claims that market outcomes are neither right nor wrong . In a market we are on our own and naturally produce the outcome. A market immunizes you from collective action problems and therefore there is no need for morality. Morality is an artificial way of bringing about what occurs naturally in optimal market interactions. The market creates a circumstance where people pursuing their self-interests do not produce any collective action problems. Private property are internalized externalities, gauthier says that the first step to solving collective action problems is a regime a private property. Collective action problems arise from people imposing externalities on you, and property internalizes and gets rid of externalities. Absence of externalities is a condition for perfect competition. Externalities occur when an exchange or consumption affects someone uninvolved who is not willingly a part of it (could be beneficial or harmful).
