UNL ECON 422 Assignment 1

UNL ECON 422 Assignment 1 - There are many dangers of...

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1. What are the three main benefits that humanity gains from expanding human interaction by dealing with more “strangers”? Answer: Specifically, by cooperating with others, they can achieve: # Higher Levels of Specialization # Reduction in Risks from Unpredictable Adverse Outcomes # Faster Expansion of Knowledge By cooperating, humans have achieved all three types of benefits. Today’s high standards of living would be impossible without extensive cooperation among strangers. The spread of knowledge is especially important in the long run; the “spread of knowledge” brings about the destruction of unsubstantiated belief systems that tend to restrict the development of a human society.
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Unformatted text preview: There are many dangers, of course. Strangers, who are unlikely to ever see you again have obvious incentives to cheat, lie, deceive, steal, overcharge, under deliver, etc. Reputation means little if two people meet only once, never to see each other again. Dealings with strangers can have even worse outcomes, however. If there is an imbalance on strength and power, contact with strangers can result in exploitation, enslavement, and death. Our improvements in welfare are fundamentally the result of our improved ability to deal with greater numbers of people, that is, our ability to overrule the perverse incentives that people have to cheat, exploit, or otherwise harm strangers....
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