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Ethics In Business: What Managers Practice That Economists Ignore

Published online by Cambridge University Press:  23 January 2015

James W. Kuhn
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Abstract

In The Theory of Moral Sentiments, the book preceding The Wealth of Nations, Adam Smith argued for a kind of virtue that Milton Friedman and many another economist reject as appropriate market behavior:

Type
Articles
Information
Business Ethics Quarterly , Volume 2 , Issue 3 , July 1992 , pp. 305 - 315
Copyright
Copyright © Society for Business Ethics 1992

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References

Notes

1 West, E. G., in Adam, Smith, The Theory of Moral Sentiments, (New Rochelle, New York: Arlington House, 1969), p. 346.Google Scholar

2 Economic Commentaries (London: Staples Press, 1957), pp. 147–55.Google Scholar

3 Of course, even air, increasingly, if it is unpolluted, becomes scarce.

4 Robertson, p. 148.

5 Arjo, Klamer, “A Conversation with Amartya Sen,” Journal of Economic Perspectives, vol. 3 (Winter 1989), p. 142.Google Scholar

6 Answers to questions on the Dreyfus Roundtable, April 30, 1989, CBS, Channel 2, New York.

7 There is good reason to think that Smith did, in fact, presume such moral ties among people in both the market and society. See his The Theory of Moral Sentiments (New Rochelle, New York: Arlington House, 1969), pp. xxxi–xxxii,Google Scholar “Introduction,” E. G. West. While such ties may have limited “profiteering” by the local shoemaker, brewer, miller, or smith who lived in a small community, where customers were neighbors, there is evidence that such merchants could and sometimes did pursue exploitative self-interest. See, for example, Chaucer's “The Reeve's Tale,” about a greedy miller. David Vogel quotes Paul Blumberg who noted that prebusiness classes rested on the dictum: ‘A profit is a profit, however it is acquired.’ Blumberg pointed out that merchants in Italian city-states thought nothing of putting the bodies of diseased animals into the shops of their competitors to make them, their employers, and their customers ill. See David, Vogel, “Business Ethics Past and Present,” The Public Interest, Number 102 (Winter 1991), p. 51.Google Scholar

8 David, Vogel, Lobbying the Corporation, (New York: Basic Books, 1978), p. 225.Google Scholar

9 Walter, A. Weisskopf, “The Moral Predicament of the Market Economy,” Market and Morals, (New York: E. P. Dutton, 1971), pp. 116–39.Google Scholar

10 William, C. Frederick, “Corporate Social Responsibility in the Reagan Era and Beyond,” California Management Review, vol. 25, no.3 (Spring 1983), p. 155.Google Scholar

11 Michael Novak argues that democratic capitalism works in such a way that business managers come to an understanding that greed is self-defeating, producing a cultural system that curbs unscrupulous profit seeking. Michael, Novak, The Spirit of Democratic Capitalism, (New York: American Enterprise Institute, 1982).Google Scholar

12 Robert, H. Frank, Passions Within Reason: The Strategic Role of the Emotions, (New York: WW. Norton, 1988), p. ix.Google Scholar

13 Herbert Simon and his colleague, James March, long ago called attention to the propensity of managerial satisficing. Herbert, A. Simon, Administrative Behavior, Second Edition (New York: Macmillan, 1957)Google Scholar and James, G. March and Herbert, A. Simon, Organizations (New York: Wiley, 1958).Google Scholar In the latter book, the authors note that “humans, in contrast to machines, evaluate their own positions in relations to the value of others and come to accept others’ goals as their own.” p. 65. John Kenneth Galbraith also noted that those who join organizations are motivated by more than pecuniary gain or compulsion. Though he did not expressly mention altruistic interests in motivation, his discussion of motivation allowed it, as well as self-interests. See The New Industrial State (Boston: Houghton Mifflin Company, 1967), pp. 128–58.Google Scholar It is worth noting that however beneficently the producing firms treated many groups, they hardly served consumers well, charging higher prices and offering lower quality than the market otherwise could have provided. In the long term, they seriously weakened their industries, leaving them in an exposed condition to withstand foreign competition.

14 Henry, Clark, “Editorial: The Dilemma of the Business Ethicist,” Quarterly Review, vol. 8, no. 4 (Winter, 1987), pp. 3–14.Google Scholar

15 Alexis, de Tocqueville, Democracy in America, trans. George, Lawrence, ed. Mayer, J. P. (New York: Doubleday, Anchor Books, 1969), p. 287.Google Scholar Robert Bellah and his co-authors used the term as the title of their book. Robert N. Bellah, Richard Madsen, William M. Sullivan, Ann Swidler and Steven M. Tipton, Habits of the Heart: Individual and Commitment in American Life (Berkeley: University of California, 1985).

16 Both Adam Smith and Thomas Malthus qualified the pursuit of self-interest. Smith qualified it in The Wealth of Nations once. On page 651 of the Modem Library edition, he added the phrase to a self-interest reference: “as long as … [one] does not violate the laws of the justice.” Malthus systematically added a reservation to the self-interest rule, that one should also adhere to the rules of justice. See Principles of Political Economy (London: John Murray, 1820), pp. 3 and 518.Google Scholar See Hirschman's discussion of this point Essays in Trespassing: Economics to Politics and Beyond (Cambridge: Cambridge University Press) 1981.Google Scholar

17 Henry, Clark, “Editorial: The Dilemma of the Business Ethicist,” Quarterly Review, vol. 8, no. 4 (Winter, 1987), p. 6.Google ScholarReinhold, Niebuhr, Man s Nature and His Communities: Essays on the Dynamics and Enigmas of Man s Personal and Social Existence (New York: Scribner & Sons, 1965), p. 68.Google Scholar

18 Fred, Hirsch, “The Ideological Underlay of Inflation,” in Fred, Hirsch and John, H. Goldthorpe, eds., The Political Economy of Inflation (Cambridge: Harvard University Press, 1978), p. 274.Google Scholar

19 Albert, O. Hirschman, Essays in Trespassing: Economics to Politics and Beyond (Cambridge University Press, 1981), p. 301.Google Scholar

20 Donald, N. McCloskey, The Rhetoric of Economics (Madison: The University of Wisconsin Press, 1985).Google Scholar See also, Donald, N. McCloskey, “The Rhetoric of Economics,” The Journal of Economic Literatur, vol. xxi (June, 1983), pp. 481–517.Google Scholar

21 Fred, Hirsch, “The Ideological Underlay of Inflation,” in Fred, Hirsch and John, H. Goldthorpe, eds., The Political Economy of Inflation (Cambridge: Harvard University Press, 1978), p. 145.Google Scholar

22 Robert, Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984).Google Scholar

23 Kenneth, J. Arrow, “Values and Collective Decision-Making,” Philosophy, Politics and Society, vol. 3 (eds.) Laslett, P. and Runciman, W. G., eds., (London: Blackwell, 1987), pp. 121–22.Google Scholar

24 Albert, O. Hirschman, “Against Parsimony: Three Easy Ways of Complicating Some Categories of Economic Discourse,” Papers and Proceedings (American Economic Association, 1984), p. 90.Google Scholar

25 See Amitai, Etzioni, The Moral Dimension: Toward A New Economics (New York: The Free Press, 1988).Google Scholar He refers to a number of economists who have pointed out the way in which economic transaction costs may be significantly lowered—and thus efficiency enhanced—by ethical behavior. Kenneth, Arrow, The Limits of Organization (New York: W. W. Norton, 1974),Google Scholar and Albert, O. Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1958).Google Scholar

26 Albert, O. Hirschman. Essays in Trespassing: Economics to Politics and Beyond (Cambridge: Cambridge University Press, 1981), p. 299.Google Scholar