Class #19 10/17/11

Rizzo started class off by talking about the golden rule. The golden rules states that one should do to others what they want done to them. This is a very positive rule. It works in certain conditions with small intimate situations with people you know. In commercial societies, it is very big and very impersonable. The is a substitute for rule with people that we don’t know. In commercial societies one needs a trade off echange to get a personal benefit. The golden rule doesn’t work not because people are selfish, but that people are not omniscient. People need to produce for profit, not for people. 45 million people died in China in a 4 year span. This is because the country produced for the people rather than profit. When we try to produce for people, we starve them.

Why is being healthy celebrated, but when people look out for self interests in business, it is looked down upon. Culture elevates some self interest actions but others are seen greedy. If someone gives a kidney as a donor and that donor 10 years later gets her mortgage saved by an anonymous donor, this is a reciprocal altruism. If you shrink the time frame and location of this transaction, it becomes a market transaction. Only firms are seen as greedy. Why not the customers. The definition of self interests are to pursue projects that interest you. Self love and concern for one self is god for the economy. If the bus stops to wait for Rizzo running down the street, it is bad economics. The driver is arrogant if he stops. Lateness is very counterproductive. It causes Ecuador 4% of GDP a year.

A commercial society works with the silver rule- do not do to others what you would consider unfair or unjust if they did it to you. Don’t do this with your family, but with strangers. This is a very important rule. There are no conflicts between profits and social responsibility. It is perfectly okay to be charitable with your own money, not charitable with someone else’s money. No country has ever gotten rich from charity. No such thing as enough profit. The world is uncertain. You never know how well your business will be doing in the future. Businesses are responsible to make profits for the future of the company. Running a profitable business requires valuing soft rules. Businesses excel when workers excel at soft stuff. When ccompanies treat customers badly, they lose money.

If you run a business like a family, you’ll destroy it. If you run a family like a business, you’ll destroy it worse. Rely on strangers over friends because strangers free up more time for your friends. Love and caring is scarce in the world.