Abstract:The kind of commitment to moral rules that characterizes effective interaction between persons in among others places, manufacturing and commercial settings is characteristically treated by economists and game theorists as a public good, the securing of which requires the expenditure of scarce resources on surveillance and enforcement mechanisms. Alternatively put, the view is that, characteristically, rational persons cannot voluntarily guide their choices by rules, but can only be goaded into acting in accordance with such rules by the fear of social and formal sanctions. On this way of thinking, rational individuals are condemned to having to settle for the “second-best” results that are thereby implied. This conclusion rests not only on an appeal to a consequentialist perspective, but also a separability principle. Against this, it is argued that consequentialism itself offers a basis for the rejection of the separability principle, and a defense of the thesis that, for a wide range of realistic cases, being disposed to voluntarily guide one’s choice by rules (on the condition that others can be expected to do so as well) is a necessary condition of engaging in rational interaction.Most people do not trust most other people, unmonitored, to honor obligations completely. Because of this they use substantial amounts of resources to specify the details of agreements, and to police them. Use of these resources … could be greatly reduced, if transacting parties would agree to honor the spirit of their agreement and simply shake hands. The resource saving to the two parties combined, from substituting this mode of “enforcing” agreements to those currently used, is clear. Why, then, does not this more efficient mode of transacting drive out the more costly methods through the normal competitive process? … The underlying rationale for this … is that it is privately profitable to engage in some degree of “cheating” on agreements, and to use resources to disguise this fact. — M. W. Reder, “The Place of Ethics in the Theory of Production”
A Note on the Separability Principle in Economies with Single-Peaked Preferences