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Moral markets

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  • Zak, Paul J.
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    Abstract

    Is market exchange solely dependent on selfishness or does other-regarding behavior play any substantial role? This article reviews the philosophical, psychological and neurological basis for moral values, showing that they are consistent and measurable. I demonstrate that values play a role in social interactions, including market exchange. Indeed, market exchange in moderately regulated economies is predicated on the notion that most people, most of the time, behave morally - albeit in the shadow of enforcement. This idea is of ancient origin, but is most clearly articulated in Adam Smith's Theory of Moral Sentiments. The moral nature of social decisions is used to identify modifications of the standard expected utility model, and implications for a value-based approach to human decisions are elucidated for law, regulation, business organization, economic growth, and happiness. The conditions that lead to moral market failures like the Enron debacle are also described. Not only do morals underpin markets, but intriguing new evidence suggests that markets may strengthen moral values.

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    File URL: http://www.sciencedirect.com/science/article/B6V8F-511K3M6-3/2/fed95b3cec624abc01eda8911747e143
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

    Volume (Year): 77 (2011)
    Issue (Month): 2 (February)
    Pages: 212-233

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    Handle: RePEc:eee:jeborg:v:77:y:2011:i:2:p:212-233

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    Web page: http://www.elsevier.com/locate/jebo

    Related research

    Keywords: Values Adam Smith Markets Neuroeconomics Regulation Happiness;

    References

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    9. Paul J. Zak & Karla Borja & William T. Matzner & Robert Kurzban, 2005. "The Neuroeconomics of Distrust: Sex Differences in Behavior and Physiology," American Economic Review, American Economic Association, vol. 95(2), pages 360-363, May.
    10. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-97, September.
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    12. Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
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    17. Zak, Paul J. & Feng, Yi, 2003. "A dynamic theory of the transition to democracy," Journal of Economic Behavior & Organization, Elsevier, vol. 52(1), pages 1-25, September.
    18. McCabe, Kevin & Houser, Daniel & Ryan, Lee & Smith, Vernon & Trouard, Ted, 2001. "A Functional Imaging Study of Cooperation in Two-Person reciprocal Exchange," MPRA Paper 5172, University Library of Munich, Germany.
    19. Steven D. Levitt & John A. List, 2007. "What Do Laboratory Experiments Measuring Social Preferences Reveal About the Real World?," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 153-174, Spring.
    20. Moana Vercoe & Paul Zak, 2010. "Inductive modeling using causal studies in neuroeconomics: brains on drugs," Journal of Economic Methodology, Taylor & Francis Journals, vol. 17(2), pages 133-146.
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    23. Knack, Stephen & Zak, Paul J., 2001. "Building trust: public policy, interpersonal trust and economic development," MPRA Paper 25055, University Library of Munich, Germany.
    24. Linda Babcock & George Loewenstein, 1997. "Explaining Bargaining Impasse: The Role of Self-Serving Biases," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 109-126, Winter.
    25. Andreoni, James, 1990. "Impure Altruism and Donations to Public Goods: A Theory of Warm-Glow Giving?," Economic Journal, Royal Economic Society, vol. 100(401), pages 464-77, June.
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    Cited by:
    1. Raúl López-Pérez & Eli Spiegelman, 2013. "Why do people tell the truth? Experimental evidence for pure lie aversion," Experimental Economics, Springer, vol. 16(3), pages 233-247, September.

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