This is the podcast I would like you to listen to instead of having class this Friday. You have many options - you can listen to it from the website, download it and listen to it on the go, or read the audio transcript. This will also be used for the C.E. quiz so feel free to make comments on the blog as well.
Here are some questions to guide your listening - What does signaling mean? How is this podcast related to the concept of utility - consider the "willingness to pay" discussion? Were consumers of solar panels always making the best decision?
Questions for discussion: Do we "signal" with our everyday clothes and lifestyle choices? Are there any other goods you can think of that are designed to be different and gain market share?
Not required: Here is a link to the journal article by the Sextons if you would like to read it.
Utility theory was first developed in the late 18th and early 19th century as a sort of "guide" in developing government policy. The thought behind it was that government policies ought to maximize peoples utility (happiness, contentedness, etc...), even if that meant some were to be discarded. In what is now known as hedonic calculus, officials chose between policies by counting the amount of people who would be affected by a policy positively, and multiplying that amount by how happy that would make them. Then they subtracted those who would be hurt times how much they would be hurt by. Thus, utility as it used to be calculated was given by:
Utility = (People helped x Happy) - (People Hurt x Hurt)
The policy with the greatest (think of them as happy points) utility would then be used. Obviously there are some issues with this sort of "calculation", but what would you say they are? Can you calculate how happy or hurt someone other then yourself is ?
You don't need to read the following links for a current events quiz, they are just links to wikipedia articles about the economists talked about in this article in case you wanted to learn a bit more.
John Stuart Mill
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