Global challenges chapters 2-5

Social dilemma

A situation where what benefits an individual can conflict with what benefits the group. Individually attractive choices can therefore produce a collectively worse outcome.

Sacrifice

Giving up something of value to yourself in a way that benefits someone else.

Why are social dilemmas important?

They help explain problems where individual incentives can work against collective interests, such as pollution, fishing, and group work.

Voluntary measures for dealing with social dilemmas

Attempts to solve the problem through people’s voluntary sacrifices or cooperation rather than forcing them to behave in a certain way.

Coercive measures

Measures that use rules, restrictions, or other forms of pressure to make people behave ways that help adress a social dilemma.

Lost-wallet experiment

An experiment showing that willingness to return lost wallets differs considerably across countries, suggesting that unselfish behavior can vary across societies.

Main lesson from the sacrifice experiment

People differ both in how willing they are to sacrifice for others and in why they are willing to do so.

Preference

A ranking of alternatives according to which outcomes or actions a person prefers.

Preference ordering

The way a person ranks possible actions or consequences from more preferred to less preferred.

Utility

A numerical representation of a person’s preference. More preferred alternatives are assigned higher utility.

Utility function

A function that assigns utility numbers to possible outcomes or actions in a way that represents a peson’s preferences.

What does a higher utility number mean?

That the person prefers that outcome to an outcome assigned lower utility.

Does utility mean money or happiness?

Not necessarily. Utility represents how a person ranks outcomes; it can reflect anything the person cares about.

Utility maximization

Choosing the available action that best satisfies one’s preferences, given what one expects others to do.

Rationality

In the course's framework, rational behavior means having sufficiently consistent preferences, acting to satisfy those preferences as well as possible, and having unbiased expectations.

Does rationality imply selfishness?

No. A person can rationally sacrifice for someone else if the welfare of that other person enters their preferences.