After studying different aspects of economics, I’ve come to
question the relationship between both economics and ethics. Do they work in a converging way, where they
coincide and work together, or in a contrasting way, where they are simply
completely separate entities? A lot of
economic ideas imply there is a lack of ethics.
For example, one main economic idea that Adam Smith discussed in his Wealth of Nations is that people work
and make decisions based on their self-interest. Another example of a lack of ethics within
economics is that there is so much focus on markets, profits, efficiency,
prices, and equilibriums that there leaves little room for a focus on a moral
code or ethical behavior for a society or an individual. Also, some economists have developed theories
based on the mechanical view of human beings rather than considering the side
of human beings as simply human beings with emotions and sentiments.
From a business perspective, is it good or bad for a
business to act ethically? What is the
opportunity cost for a business that decides to act ethically?
Do you think economics incorporates ethics? Is it even possible for economics to consist
of a moral code foundation?
I believe that everyone should strive to be ethical, but when coming from a business perspective I think it is sometimes easier said than done. When running a business you are most likely trying to beat out any competition. To make this possible, in our market system, one will have to act unethically. I believe our economy has an unethical foundation making it hard for one to act ethically while prospering at the same time.
ReplyDeleteI think economics tries to incorporate ethics, but it is very hard to uphold this moral code. When looking back at the semester one common thought that I think we kept drawing up was the lack of ethics in economics. There are to many loop holes, or ways around situations for a solid moral code to be founded. Self interest will eventually trump all decisions which will lead to unethical choices as well.
I also believe that everybody should pursue to be ethical to the best of their ability. With that being said approaching things from a business perspective I believe people are put in a bind to do what is best for themselves and their business. Seeking out maximum profit by adjusting price to give you business the advantage becomes the top priority, and all the ethics behind the business is non existent. With the way things are in the economy today there are no rules to play by if you want to succeed. The foundation of a moral code is no longer in place for economics because people will do anything these days to get ahead. In my opinion there is little to no advantage for a business to try act ethically. There are to many sharks that don't play by the rules for you to survive that way.
ReplyDeleteYou make an interesting point, Will. Let me add to it. Is the businessperson doing good by competing on price? Is the consumer better off or worse off? Consequently, is that moral/immoral? Thanks for the platform.
DeleteYes I would be lead to believe that business people are doing the public and consumers a service by competing for price. The competition for price levels among different businesses is vital in lowering the actual price of a good or service. With that being said I would not consider competing on price levels to be moral per say because in the end most business people will only adjust price to better their own personal situation or profit.
DeleteThe consensus view is, of course, that individuals and organizations should act in an ethical way. I think the real question is what separates ethical behavior from unethical behavior. While there are extreme cases that society as a whole could deem to be unethical, there are many day-to-day actions that are right at the boundary, pushing the line between being ethical or unethical. In any given situation, many individuals may find a certain behavior to be ethical, while many others find that same behavior to be unethical. Milton Friedman, for example, believed that what was ethical behavior on the part of management was to increase profits and returns to shareholders, not to use company profits to give to charitable organizations, because management’s primary responsibility is to the company. He believed that if an individual wished to support a charitable cause, they should do it with their own money, not that of the organization. At the same time, there are many individuals who would argue that a corporation primary responsibility should be to be socially responsible and contribute to causes that benefit society as a whole, not an individual organization. Most people would agree that everyone should act ethically, but defining what exactly ethical behavior is remains the true issue.
ReplyDeleteThanks for comment. Would you consider what Friedman is saying about corporations and individual investors the same as a principal/agent problem? If I am a stockholder, shouldn't I be in favor of corporate behavior that raises profits and, by extension my dividends, allowing me to do more charitable work?
DeleteI agree with you Lauren in saying that defining ethical behavior is the true problem for society. There are so many different types of people in today's society with different morals and such that defining what is ethical is nearly impossible. I like the point you brought up in regards to Milton Friedman and donating to a charitable organization. Most people would assume that donating to a charity is ethical and morally good. Professor Schilling, to attempt to answer your question, I think Friedman is basically describing a principal/agent problem example. If as a stockholder I am willing to put my money into a business, then it is up to the corporate board to make the best decisions to raise profits for the business. In doing so, the individual stockholder will have more money to do as he pleases, including making donations to charitable organizations if he so desires. I don't believe that either party is being unethical in making those decisions, but that is just my opinion.
DeleteI would argue, in answer to Sam's questions, that economics is not ethical for it is a field driven for the sole aim of self-interest and answering demands from societal consumers. However, this does not mean that there is no place for ethics to effect economics, or play a major role in transactions. In consideration, I think one could say that each society, or culture, holds its own version of basic ethics that they institute into their economic market transactions and business decisions. So, while the science of economics does not possess ethics due to its end goal of seeking self-interest, the transactions within the market and business world contain the ethical influence of the culture within which they take place. Finally, business transactions have ethics because there must be a basic trust, or else the transactions would never take place, and the economy would be severely handicapped. Therefore, it is good business to behave ethically, due to the continuation of transactions that it creates. While, there may be some opportunity cost in the long-run, the opportunity would diminish, as the ethical transactions would encourage more business.
ReplyDeleteUltimately, I would place the science of economics to be without a moral code. However, the ethical expectations and foundations of the culture and society within which the economic transactions take place provide the element of ethics that we observe.
I agree with Sarah's statement on economics not being ethical due to self-interest. It is the business's own self-interest to outperform the other competitors, if it does not do this then it will not succeed. As Will stated, "there are no rules to play by if you want to succeed." There is no real ethical boundary for which businesses need to abide by during their operations. the only ethical standard that is given real consideration is that of business transactions; businesses want to get the most of what they have. People want to maximize their own gains with transactions, but have to take into effect the value of goods and services of the other trader; from this balance between the interest of the two parties there can be seen ethical standards. There is a desire for ethical behavior in economics, but if every business practice was ethical then there would be no real growth in the economy from competition.
ReplyDeleteI think that businesses almost have to be ethical to a certain extent. One example that I can think about is the Toyota "sticky pedal" problem. Toyota cars were unintentionally accelerating causing people to crash, and, in some cases, even die. They had massive recalls in 2009-2011 and claimed that they investigated the issue extensively. Toyota claimed that the cause of the incidents was that the floor mats were getting stuck on the gas pedals, or simply that the drivers were to blame for the crashes. They also repeated said that the problem was fixed and there was no longer an issue, but in March they came out with a statement that admitted to not recalling all of the vehicles that were in danger and admitted that the accelerator was in fact getting stuck while depressed.
ReplyDeleteThis is a serious ethical issue. Toyota lied to millions of people all for the sake of gaining a few extra dollars. There is no doubt in my mind that their future sales will be negatively affected because of their lack of a moral code. They "put sales over safety and profit over principle." Because of their carelessness, people lost their lives and in the end, their business will be negatively affected. Even if businesses have to compete with other businesses in order to stay afloat, there has to be a moral and ethical code by which they can hold themselves to.
http://abcnews.go.com/Blotter/toyota-pay-12b-hiding-deadly-unintended-acceleration/story?id=22972214
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