ECON 3048 Study Guide - Midterm Guide: Externality

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Published on 4 Mar 2014
Lecture 9 Can Cooperators Prosper?
Evolutionary game theory: Application of population genetics-inspired models of change
in gene frequency in populations to game theory. EGT focuses more on the dynamics of
strategy change via differential success of the carriers of certain strategies. The
‘evolution’ treated by evolutionary game theory need not be biological evolution but
evolution of beliefs and norms over time. Explicitly dynamic
Classical game theory: Focuses on properties of the equilibria of rationally chosen
Social cooperation is materially beneficial: traits promoting social cooperation are
biological, culture copying, and imposition
Meme: A cultural element or behavioral trait whose transmission and consequent
persistence in a population, although occurring by non-genetic means, is considered as
analogous to the inheritance of a gene.
Present-Aim Concept: Whatever your preferences are you pursue the most effective
means of satisfying them. Any observed behavior can be covered by saying the person
has a taste for it. The problem is that any loony behavior can be labeled as rational
Self-Interest Concept: Rational behavior promotes our material self interest, this allows
us to label some behaviors irrational or loony. Self-interest concepts leave the problem of
explaining nonegoistic behavior.
Find an explanation for preferences that keep people from always taking advantage of
opportunities for immediate material gain but support opportunities to advance material
Do traits like loyalty have survival value? It depends, how many people can you trust?
How do you identify them? Can predators mimic identifying signals?
For a cooperator expected payoff is Vc=cPcc + (1-c)Pcd
And for defector it is Vd=cPdc + (1-c)Pdd
Population Evolution: The type with the higher expected payoff will increase its
population proportion. At equal expected payoffs the population proportions are in
equilibrium; but extinction of one type may be an equilibrium
Rewrite the expected payoffs as VC = PCD + c (PCC - PCD )
and for a defector it is VD = PDD + c (PDC - PDD )
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Defectors do better on average than cooperators, based on assumption it is impossible to
identify cooperators and defectors, cooperators are driven to extinction
But if cooperators can identify each other, they will drive defectors to extinction by only
working with one another. Unless defectors develop the capacity to mimic some of the
signs of cooperators so there is a new detection cost, d. Vc^w= Pcc-d it depends on C if it
is worth paying the cost. Without detection, Vc^0= Pcd + c(Pcc-Pcd)
It is worth it if Vc^w> Vc^0
Ct is where Vc^w = Vc^0, if ct>c incur the cost
Individuals are not exclusively Cs or Ds, but have propensities to act as either type. Also
have the ability to develop emotional attachments, which enables ability to read signals
Negative passions can also support social cooperation (rip heart out of defector)
Ct= 1-[d/(Pcc-Pcd)]
Lecture 10 Can Cooperators Prosper Part 2 and Applying Normative Ethics
Tastes for cooperation differ if: Pdc>Pcc and Pcc-d>Pdd
Sympathetic passions and emotions can support cooperation. Individuals have
propensities to act either way. They aren’t solely one or the other
Normative Ethics: Supposed to provide a guide for action, but how do you apply it to
concrete cases?
Deductivism: Use the first principles of a normative theory as premises along with factual
matters of the case to deduce correct decision. Justification is from top down!
Dialectial models: Interplay between first principles and particular moral judgments in a
practical setting. If principle seems at odds with deeply held moral judgments in the
situation, principles can be modified
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Principalism: Do not rely on deep principles of theories, but mid level ones that are likely
to be endorsed by more than one ethical theory and will be acceptable to a wider group of
people: Autonomy, beneficence, nonmaleficence, and justice
Casuistry: Concerned with individual cases, focuses on paradigm cases of morally good
or bad actions and then assess the similarities and differences in a particular case.
Situation ethics: focus on details of the situation and do the loving thing
Practical guidelines:
1. Get the facts straight
2. Insist on definitional clarity, does everyone mean the same thing?
3. Example/counterexample
4. Analyze arguments and positions: show weakness and unacceptable consequences
of a position
Rights theory: Start from the assertion that individuals have rights. Negative obligations:
neither individuals nor states can violate rights. Positive obligations: must assist people to
realize their rights (Robert Nozick’s entitlement theory is an example)
Liberty upsets patterned outcomes, focuses only on process actions and not consequences
Justice in acquisition: A person is entitled to withdraw property from the commons by
working it (mixing labor). Cannot take it by force from others
Lockean Proviso: Must leave as much and as good for others. Mistakes and help
Lecture  11 Applying Ethics to Environmental Ethics
Externality: Cost or benefit that arises from production and falls on someone other than
the producer, or a cost or benefit that arises from consumption and falls on someone other
than the consumer
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