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CORPORATIONS, PROFIT MAXIMIZATION AND THE PERSONAL SPHERE

Published online by Cambridge University Press:  28 November 2012

Waheed Hussain
Waheed Hussain*
Affiliation:
University of Pennsylvania, [email protected]
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Abstract

The efficiency argument for profit maximization says that corporations and their managers should maximize profits because this is the course of action that will lead to an ‘economically efficient’ or ‘welfare maximizing’ outcome (see e.g. Jensen 2001, 2002). In this paper, I argue that the fundamental problem with this argument is not that markets in the real world are less than perfect, but rather that the argument does not properly acknowledge the personal sphere. Morality allows each of us a sphere in which we are free to pursue our personal interests, even if these are not optimal from the social point of view. But the efficiency argument does not come to terms with this feature of social life.

Type
Articles
Information
Economics & Philosophy , Volume 28 , Issue 3 , November 2012 , pp. 311 - 331
Copyright
Copyright © Cambridge University Press 2012

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