Abstract
This article examines the relationship between economic rationality and the possibility of a moral science of business ethics. The purpose of this inquiry is to consider whether a universal and non-controversial moral science of business ethics can be defined satisfactorily, and linked to economic rationality of managers and other stakeholders of firms operating in market economies. Economic rationality connotes economic efficiency, meaning a strictly instrumental maximization of actor utility from limited resources. This rationality is a universal and value free (or value neutral) axiom: actors should and generally will be rationally efficient. Utilitarianism accepting aggregation across values is the moral framework associated with market exchange. Business ethics is about normative valuation of motives, actions, and consequences. This article argues that the common foundation across relevant ethical frameworks – moral common sense, Kantianism, virtue theory, religion as a belief system, and utilitarianism – is a first or axiomatic principle of no harm without acceptable justification. A moral science of business ethics proceeds from this no harm axiom.
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Hartman (2015) explains arguments as to why psychology is not a science, and how to make psychology a science. Many academic psychologists presumably view themselves as scientists; and there is scientific method in psychological research.
Behavioral economics and behavioral finance, drawing on psychology, investigate the bounds on economic rationality in human behavior in markets (see Chen et al. 2006).
Windsor (2015) argues that as distinct from studying prescriptive philosophy (whether scientific, professional, or moral), managers develop personal operating philosophies focused on career survival and advancement within firms.
J. S. Mill, On Liberty (1859) and the 1789 “Declaration of the Rights of Man and of the Citizen” constrain the natural right to liberty to a condition of no harm or injury to others. This constraint might define ethical egoism, aligned with utilitarianism in competitive markets. Ethical egoism is not a justification for harm to others.
Belgium regulates reduction in force, for example, in ways that can make such reduction costly for a company.
In Pareto efficiency, a change from the status quo benefiting one actor is non-controversial if there is no harm to any other actor. Such a condition is proof of an efficiency improvement. In contrast, Kaldor-Hicks efficiency involves a change from the status quo benefiting some and harming others: the change might be defensible if the gains are greater than the harms, such that the gainers could hypothetically compensate the losers. Justifications are the essence of the Kaldor-Hicks criterion.
One can compare Smith’s definition to W. H. Vanderbilt and J. P. Morgan. W. H. Vanderbilt (1821–85) allegedly expressed to a reporter that “The public be damned!” Quoted in J. R. Daughen and P. Binzen, The Wreck of the Penn Central (Beard Books, 1999), pp. 34–35. Vanderbilt denied making the statement; and more certainly the profanity. J. P. Morgan (1837–1913) allegedly expressed to a reporter that “I owe the public nothing.” Quoted in New York World (11 May 1901) during the Northern Pacific “corner.” S. Gittelman, J. P. Morgan and the Transportation Kings (University Press of America, 1912), at p. 49, citing C. Lewis, The House of Morgan (1930). “Alleged” means that the statements might or might not have been made, depending on one’s view of journalistic standards of the time.
The “Adam Smith Problem” concerns whether The Theory of Moral Sentiments (1759) and The Wealth of Nations (1776) conflict or are compatible in vital aspects (Paganelli 2008). The present article presumes sufficient compatibility.
“Moral imagination refers to the ability to perceive that a web of competing economic relationships is, at the same time, a web of moral relationships. Developing moral imagination means becoming sensitive to ethical issues in business decision making, but it also means searching out places where people are likely to be hurt by decision or behavior of managers. This moral imagination is a necessary first step, but because of prevailing methods of evaluating managers on bottom-line results, it is extremely challenging” (Werhane 1999: 5). “One of the most consistent findings is that good people do bad things. We’re not talking about an issue of character; that oversimplifies matters. Good people do horrendous things in the workplace because they don’t see the situation as an ethical dilemma. They see it as a business problem to be solved.” – Professor Arthur Brief (Director of the Burkenroad Institute for the Study of Ethics and Leadership in Management, Tulane U.), quoted by Teuke (2004: 58).
Banfield (1958) reported for a South Italian village practice interpreted as “amoral familism” which he defined as morality within the family and absence of citizenship toward others. Miller (1974) reported no empirical support for Banfield’s interpretation of the conditions in a South Italian village.
Wilk (1993) points out that the debate over whether human nature is self-interested or altruistic dates back to Hobbes and Locke. He provides the three models of motivation - selfish, social, and moral - referenced here. Wilk argues that the problem of human nature should be recast from philosophical to empirical.
Frankena cites Henry Sidgwick, The Methods of Ethics, 7th ed. (London, Macmillan, 1907).
“When Mill pointed out that economics had no ultimate solution to the problem of distribution, that society might do with the fruits of its toil as it saw fit, he introduced into the mechanical calculus of the market a conflicting calculus of moral judgment. … the assertion of independent conscious decision about the ends we desired from the economic process …” (Heilbroner 1953: 307).
John J. Fernandes, President & CEO, AACSB International (retiring), “Looking Back on a Legacy,” BizEd (February 26, 2015), describes the 2013 AACSB revised accreditation standards (adopted April 8, 2013 and revised January 31, 2015) for business programs (Standard 9 – curriculum content) as follows: “Now, we want schools not only to help their students develop a strong sense of ethics, but also to make sure students understand social responsibility and sustainability—of the planet, of the organization, and of society. Someone could be highly ethical without being socially responsible or committed to having a positive effect on society.”
“Today’s employees think their number one objective is to be thought of as decent people doing quality work. We all have a much greater consciousness of ethical issues. With the [Martin Marietta ethics] program, you are less likely to get into trouble, and you feel better about yourself. The [ethics] program has also helped us compete. We have been afforded opportunities because we were trusted.” – Norman R. Augustine (CEO of Martin Marietta, later CEO of Lockheed Martin), quoted in Paine, Choy, & Santoro, “Martin Marietta: Managing Corporate Ethics (A),” HBS Case 9-393-016 (1992, revised 081704), p. 1.
July 4, 1938 letter to Roy Harrod, #787, http://economia.unipv.it/~dbesomi/edition/editionstuff/rfh.346.htm
July 10, 1938 letter to Roy Harrod, #791 http://economia.unipv.it/harrod/edition/editionstuff/rfh.34a.htm#36302
J. R. Weinstein authored Adam Smith’s Pluralism: Rationality, Education and the Moral Sentiments. New Haven: Yale University Press, 2013. See review by Smith (2014).
Gert (2011): “My definition of what I take to be the universal normative sense of “morality,” requires a normative sense of “rationality,” such that no moral agent would ever advise anyone for whom he is concerned, including himself, to act irrationally. The concept of rationality described earlier satisfies this condition because no moral agent would ever advise anyone for whom he cares, including himself, to act in any way that harms himself with no compensating benefit to anyone.”
Spinoza (1677) developed a systematic approach to ethics by geometrical demonstration, drawing on Euclid and Descartes. The present study is narrowly focused on business ethics.
Strine is Chief Justice of the Delaware Supreme Court (2014–2026) and previously Chancellor of the Delaware Court of Chancery,
George W. Merck, CEO, Merck & Co. (during 1929–57): “We try never to forget that medicine is for the people. It is not for the profits. The profits follow, and if we have remembered that, they have never failed to appear. The better we have remembered it, the larger they have been.” Address to the Medical College of Virginia, Richmond (December 1, 1950); quoted in J. Collins and J. I. Porras, Built to Lastn Successful Habits of Visionary Companies (New York: HarperBusiness, 1994), p. 48. Steve Jobs, CEO, Apple: “My passion has been to build an enduring company where people were motivated to make great products. Everything else was secondary. Sure, it was great to make a profit, because that was what allowed you to make great products. But the products, not the profits, were the motivation. It’s a subtle difference, but it ends up meaning everything. The people you hire, who gets promoted, what you discuss in meetings.” Told to biographer Walter Isaacson, quoted in R. Foroohar, “What Would Steve Do? Jobs was a jerk, but his leadership lesson is more about product than personality,” Time (27 February 2012), p. 18.
“I mean not, however, by anything which I have here said, to throw any odious imputation upon the general character of the servants of the East India Company, and much less upon that of any particular persons. It is the system of government, the situation in which they are placed, that I mean to censure, not the character of those who have acted in it. They acted as their situation naturally directed, and they who have clamoured the loudest against them would probably not have acted better themselves.” Adam Smith, The Wealth of Nations (1776), Book Four, Ch. 7, Part 3.
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Windsor, D. Economic Rationality and a Moral Science of Business Ethics. Philosophy of Management 15, 135–149 (2016). https://doi.org/10.1007/s40926-015-0021-7
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DOI: https://doi.org/10.1007/s40926-015-0021-7