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Where MLM Intersects MFA: Morally Suspect Goods and the Grounds for Regulatory Action

Published online by Cambridge University Press:  30 December 2020

Jeff Frooman
Jeff Frooman*
Affiliation:
University of New Brunswick
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Abstract

The market failures approach (MFA) to business ethics argues that economic theory regarding the efficient workings of a market can generate normative prescriptions for managerial behaviour. It argues that actions that inhibit Pareto optimal solutions are immoral. However, the approach fails to identify goods that should be regulated or prohibited from the market, something common to the moral limits to markets (MLM) approach to business ethics. There are, however, numerous assumptions underlying Paretian efficiency, including some about the preferences of market participants. Trade in some goods violates some of these assumptions, and so these goods are morally suspect and can be understood to indicate that the market for these goods is not moral. This creates grounds sufficient for regulating, and possibly prohibiting, these goods. To help determine whether it is then necessary to regulate the goods, I propose a supplementary economic analysis to ascertain why an assumption regarding a particular preference is being violated.

Keywords

market failures approachmoral limits of marketspreferenceutility functionsPareto optimalityperfect competition
Type
2020 Society for Business Ethics Presidential Address
Information
Business Ethics Quarterly , Volume 31 , Issue 1 , January 2021 , pp. 138 - 161
Copyright
© The Author(s) 2020. Published by Cambridge University Press on behalf of the Society for Business Ethics

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