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Embracing morals in economics: The role of internal moral constraints in a market economy

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  • Stringham, Edward Peter

Abstract

Economists who adhere to the assumptions of homo economicus typically focus on altering external constraints through laws or regulations as the means of eliminating bad behavior. Reaching the optimal solution is simply a matter of having government adjust the price of unwanted behavior through punishments or fines. But Adam Smith highlighted the importance of another type of constraint, the internal moral constraint. In recent years behavioral, experimental, and other economists have documented that people often do not act according the assumptions of the homo economicus model and instead appear to incorporate moral constraints into their decision making process. In light of this growing body of research, this article argues that many economists have placed too much emphasis on external constraints and that more emphasis should be placed on internal moral constraints. After discussing possible sources of internal moral constraints, the paper describes how these constraints can help strengthen cooperation in the short and long run.

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Bibliographic Info

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

Volume (Year): 78 (2011)
Issue (Month): 1 ()
Pages: 98-109

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Handle: RePEc:eee:jeborg:v:78:y:2011:i:1:p:98-109

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

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Keywords: Cooperation; Moral rules; Moral preferences; Side constraints; Self-government; Self-command; Norms;

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Cited by:
  1. Pedro FrancŽs-G—mez & Lorenzo Sacconi & Marco Faillo, 2012. "Behavioral Business Ethics as a Method for Normative Business Ethics," Econometica Working Papers wp42, Econometica.
  2. Skarbek, David, 2012. "Prison gangs, norms, and organizations," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 82(1), pages 96-109.
  3. Conley, John P. & Neilson, William S., 2013. "Endogenous coordination and discoordination games: Multiculturalism and assimilation," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 92(C), pages 176-191.
  4. Didier Roche, 2013. "Ethical Decision-Making in Private Enterprise: A Study of Its Antecedents in the Sales Sector," Journal of Private Enterprise, The Association of Private Enterprise Education, vol. 28(Spring 20), pages 97-109.

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