Models and Role of Ethical Behavior
Paper Session
Sunday, Jan. 3, 2021 12:15 PM - 2:15 PM (EST)
- Chair: Bruno Strulovici, Northwestern University
The Equilibrium Value of Employee Ethics
Abstract
We propose a model in which employees differ in both skills and ethics. Employees receive a private, non-verifiable signal about the quality of their project, and decide whether or not to undertake it. Skilled employees lead more projects to success than unskilled ones. Ethical employees internalize the overall costs and benefits of a project whereas strategic employees make their decision based solely on personal rewards (i.e., future wages). Hence, both skills and ethics are valuable to firms, which is reflected in how employee wages vary with firms' beliefs about an employee's type given his history. The model's main tension comes from the fact that a strategic employee keeps the option of showcasing his skills when he undertakes a project whereas, since ethical employees drop all negative-NPV projects, he improves his ethical capital when he drops a project. We characterize equilibrium employee decisions and wages and derive comparative statics, first in a one-period model with exogenous wages and then in a two-period model that endogenizes the value of skills and ethics. An inefficient equilibrium emerges when ethics are not prominent or skills are highly valuable to firms. In this equilibrium, skilled employees undertake more negative-NPV projects than their unskilled counterparts, as they rely on their skills to recoup the bad information they initially receive. In this way, the presence of ethics among some employees disciplines the behavior of strategic ones to make decisions more aligned with overall value. Because the disciplining effect is stronger on low-skill employees, the need for interventionist governance solutions is reduced.Can Society Function without Ethical Agents? An Informational Perspective
Abstract
Many facts must be learned through intermediaries with special expertise or access to information, such as law enforcers, scientists, journalists, and public officials. This paper considers whether society can learn about such facts when intermediaries are devoid of ethical motives and make sequential public announcements. The answer depends on the degree of "information attrition" affecting the amount of discoverable evidence about each fact. Information attrition is nonexistent in fields based on reproducible scienti c evidence but can affect the evidence in criminal and corruption investigations. Applications to institution enforcement, social cohesion, scienti c progress, and historical revisionism are discussed.Dutiful Behavior: A Model of Moral Sentiments
Abstract
We expand the formal theory of other-regarding preferences to account for dutiful behavior. There are duties of justice and of beneficence. Justice involves rules, while beneficence involves responsibilities. People are heterogeneous along three dimensions, called decency, integrity, and punitivity. Decency determines the conscious pursuit of duties. Punitivity determines conscious engagement with those that violate their duties. Integrity limits unconscious self-deception about own and others’ duties. We argue that the three parameters can account for much of the heterogeneity in observational and experimental data on generosity and reciprocity.What Is Socialism Today? Conceptions of a Cooperative Economy
Abstract
Abstract. Socialism is back on the political agenda in the United States. Politicians and some economists who identify as socialists, however, do not discuss property relations, a topic that was central in the intellectual history of socialism, but rather limit themselves to advocacy of economic reforms, funded through taxation, that would tilt the income distribution in favor of the disadvantaged in society. In the absence of a more precise discussion of property relations, the presumption must be that ownership of firms would remain private or corporate with privately owned shares. This formula is identified with the Nordic and other western European social democracies. In this article, I propose several variants of socialism, which are characterized by different kinds of property relation in the ownership of society’s firms. In addition to varying property relations, I include as part of socialism a conception of what it means for a socialist society to possess a cooperative ethos, in place of the individualistic ethos of capitalist society. Differences in ethea are modeled as differences in the manner in which economic agents optimize. With an individualistic ethos, economic agents optimize in the manner of John Nash, while under a cooperative ethos, they optimize in the manner of Immanuel Kant. It is shown that Kantian optimization can decentralize resource allocation in ways that neatly separate issues of income distribution from those of efficiency. In particular, remuneration of labor and capital contributions to production need no longer be linked to marginal-product pricing of these factors, as is the key to efficiency with capitalist property relations. I present simulations of socialist income distributions, and offer some tentative conclusions concerning how we should conceive of socialism today.JEL Classifications
- D0 - General