Moral Philosophy in the Marketplace

Read this blog post to learn more about:

• Why markets cannot be separated from ethics and human wellbeing

• How different moral philosophies shape business decisions and corporate responsibility

• Why profit-maximising strategies can create ethical dilemmas for businesses and society

• How ethical thinking can lead to more sustainable, trustworthy, and responsible organisations

Economic and technical matters such as pricing strategies‚ downsizing‚ outsourcing‚ and globalization of production and supply chains are often framed as technical‌ issues focusing on efficiency‚ competitiveness‚ and shareholder return․ They are always about‌ human wellbeing‚ human rights‚ and human character(Sen, 1999; Freeman, 1984)․ Moral philosophy in the form of utilitarianism‚ duty-based ethics and virtue ethics can provide a more systematic way of thinking about these and other issues‚ with the additional virtue that they provide normative‌ standards or rules for the conduct of firms in complex‚ real-world markets(Boatright, 2012).

Utilitarianism‚ best associated‌ with philosophers such as Jeremy Bentham and John Stuart Mill‚ is a consequentialist ethical philosophy that states that an action is good if it leads to the maximum possible utility‚ in terms of happiness or welfare(Bentham, 1789; Mill, 1861)․ Utilitarianism is‌ often used in business‚ in pricing‚ and cost-benefit analysis․ For example‚ charging different prices for different customers (often called‌ dynamic pricing) or enacting large cuts to a company's workforce (layoffs) could be justified as promoting the firm's interest in existing for long enough to benefit the largest number of stakeholders (Varian, 1989; Jensen, 2002)․ One major criticism of utilitarianism is its willingness to‌ sacrifice minorities to benefit the majority․ Global supply chains‚ which migrate production to‌ locations with lower labor costs‚ can lower prices for millions of consumers but expose workers to overwork or exploitation․ Utilitarianism can justify these trade-offs where the benefits to the‌ economy dominate the loss of workers' wellbeing(Sen, 1999)․

In contrast‚ deontological ethics or duty based ethics‚ such as those of Immanuel Kant‚ consider the duties or rights of people‚ or categorical imperatives‚ such that it is a duty to treat people as an end and not as a means (Kant, 1785)․ For instance‚ applied to business issues‚ duty ethics will judge misleading prices‚ misleading or abusive contracts‚ or using either lax‚ or using the threat of‚ regulations to gain a competitive advantage over labor(Bowie, 1999)․ In this way‚ even if mass layoffs yield positive results for shareholders‚ duty ethics assesses the process of dismissing the workers in terms of respect‚ transparency and fairness (Werhane, 1999)․ Accordingly‚ it has provided a basis for more recent corporate social responsibility discussions‚ particularly concerning human rights and fair treatment globally(Ruggie, 2011)․

Virtue ethics is particular in that it is an ethical theory that often originates from the work of the Greek philosopher Aristotle․ This type of ethics is less concerned with rules or consequences and more concerned with character and moral judgement‚ asking the questions: not "What action maximises utility?" or "What are my duties?"‚ but rather "What would a good organisation do?"(Aristotle, trans. 2009). In business‚ this translates into whether corporate leadership represents the virtues of honesty‚ fairness‚ prudence‚ and integrity in their corporate culture and whether decisions on pricing‚ executive compensation‚ or suppliers represent good character and build trust over time (Solomon, 1992)․ Consequently‚ such a virtue-based organization with a global supply chain may not only comply with the minimum legal requirements of human rights but invest in and promote the welfare of workers as part of an organization's responsible conduct (Moore, 2012)․

In practice‚ however‚ modern organizations will often not have one single dominant ethical doctrine in place․ Pricing policy might be a utilitarian means of minimizing short- and long-term costs in conjunction with a deontological prohibition against lies‚ for example‚ and decisions on restructuring could involve a mix of cost and fairness and employee support concerns(Boatright, 2012)․ Ethical pluralism is reflected in the increased prevalence of tools like environmental‚ social and governance (ESG) ratings‚ since such problems generally arise where philosophical thought is not present‚ or is entirely subordinated to short-term profit (Freeman et al., 2010)․

In summary‚ moral philosophy is highly relevant to the market․ Utility theory addresses issues of trade-offs and total welfare‚ duty ethics focuses on individual rights and value of individual worth‚ and virtue ethics stresses the moral character of organizations․ A better understanding of these theories can help us to better evaluate the market․ Markets cannot be morally disengaged from the people that participate in them‚ and an ethical view of business is necessary to ensure that economic activity contributes to social trust and human dignity as well as efficiency and growth (Sen, 1999).

Reference list:

Aristotle (2009). Nicomachean Ethics (W. D. Ross, Trans.). Oxford: Oxford University Press.

Bentham, J. (1789). An Introduction to the Principles of Morals and Legislation. London: T. Payne.

Boatright, J. R. (2012). Ethics and the Conduct of Business (7th ed.). Boston: Pearson.

Bowie, N. E. (1999). Business Ethics: A Kantian Perspective. Oxford: Blackwell.

Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach. Boston: Pitman.

Freeman, R. E., Harrison, J. S., Wicks, A. C., Parmar, B. & de Colle, S. (2010). Stakeholder Theory. Cambridge: Cambridge University Press.

Jensen, M. C. (2002). “Value Maximization, Stakeholder Theory, and the Corporate Objective Function.” Business Ethics Quarterly, 12(2), pp. 235–256. (JSTOR)

Kant, I. (1785). Groundwork of the Metaphysics of Morals.

Mill, J. S. (1861). Utilitarianism. London: Parker, Son, and Bourn.

Moore, G. (2012). “Virtue in Business.” Organization Studies, 33(3), pp. 363–387.

Ruggie, J. G. (2011). Just Business: Multinational Corporations and Human Rights. New York: Norton.

Sen, A. (1999). Development as Freedom. Oxford: Oxford University Press.

Solomon, R. C. (1992). Ethics and Excellence: Cooperation and Integrity in Business. Oxford: Oxford University Press.

Varian, H. R. (1989). “Price Discrimination.” In Handbook of Industrial Organization, Vol. 1. Amsterdam: Elsevier.