Moral Marginalistism

Very short summary: This essay examines the extension of marginalism to morality and politics. The marginalist reasoning principle holds that past decisions are irrelevant when assessing the rationality of current and future choices. Applied to moral and political matters, this would imply that history is irrelevant for determining what is just. However, marginalism cannot be easily exported outside economics because history provides normative reasons that underlie moral and political disagreement.

Among the first principles that economic students learn is the marginalist reasoning principle. This principle states that rational decisions should only consider the marginal costs and benefits that a decision will generate. A key implication is that rational choice-makers should ignore sunk costs—costs that have already been paid or will be paid regardless of the decision made. Consider two classic textbook examples:

- You bought a concert ticket six months ago. The concert is tomorrow, but you're no longer keen on attending—you don't like the band's new album, or you partied the night before and feel tired (though that would have never happened in your young days!).

- You're the CEO of an aeronautics company. For the past decade, you've invested significant resources in developing space tourism. However, you now realize that demand may be too limited to justify further investment.

Marginalist reasoning dictates that attending the concert simply because you've already paid for the ticket would be irrational. Similarly, continuing to invest in space tourism based on past expenditures, rather than future profitability, would be equally misguided. The millions already spent are irrelevant to the decision. In both examples, basing decisions on past expenditures would be to commit the sunk cost fallacy. Rationality is forward-looking: rational choices are independent of past decisions and their consequences.

A close cousin of the marginalist reasoning principle is the concept of sequential rationality. Sequential rationality applies to strategic interactions where individuals make multiple choices in a sequential game. Technically, the “path” through which a specific node in a game has been reached (i.e., the successive decisions that have led this specific player to have to choose between these specific options) is irrelevant to assess the value of the different alternatives available, and hence to determine the rational choice. When a player makes a decision, sequential rationality requires evaluating it based on what rational choices the player would make at future decision points. Players cannot justify current irrational choices by committing to ...