Using the Maximization Principle

16. Aristotle argued that virtue was the middle way. For example, too little courage was bad (cowardice) as was too much courage (foolhardiness). Similarly, too little generosity was undesirable, but a person could also err by too much generosity. How would an economist recast Aristotle's theory of virtue in terms of marginal costs and benefits?

17. We can take Aristotle's approach to areas that Aristotle might not have considered. For example, good athletes train. Better athletes usually train more than the good athletes. An economist would say that the best amount of training is where the marginal benefit of training just equals the marginal cost of training. Based on your experience, draw what you think the marginal benefit and marginal cost curves of athletic training look like, and explain why you drew them as you did. (Hint: time should be on the horizontal axis, and cost/benefit on the vertical.) How would these curves differ for a high school athlete and a professional athlete?

18. How would you use this approach to determine the amount of time you should spend studying economics?

19. We can also take Aristotle's approach to areas that probably would have appalled Aristotle. For example, what are the marginal benefits of making the environment cleaner? What are the marginal costs of making the environment cleaner? Explain why it is best for society to stop environmental cleanup before it reaches zero pollution. Could this argument work as well for any other social bad such as crime?

20. Can we also use this approach with terrorism? In the 2004 presidential campaign John Kerry said, "We have to get back to the place we were, where terrorists are not the focus of our lives, but they're a nuisance." The Bush campaign immediately attacked that statement with a commercial suggesting that Kerry was too weak against terrorism. Does Kerry's position seem reasonable in terms of economic analysis? Why or why not? (Explain using marginal cost and marginal benefit to define the optimal amount of terrorism.)

21. Does Aristotle's approach suggest that one can be too rational?

(Aristotle would approve the economic assumption that people are rational. It is very much like his view that everything (not just people) has a goal (or purpose) and strives to attain it. However, he would not like the economic vision of spontaneous order that comes with the invisible-hand concept. For Aristotle order implied an orderer.)

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