Egoism 9/13/2011 7:20:00 AM
`Does business ethics make economical sense? – Amartya Sen (He)
Psychological Egoism: The thesis that everyone is always
motivated to act in his or her perceived self interest.
o Empirical claim: what is the case? All human beings always
motivated by self interest
Altruists: people who put others ahead of them self.
Psychological egoists refute altruists.
Ethical Egoism: The thesis that one ought to pursue acts which
promote one‟s self-interests or well-being.
o Normative claim: what ought to be the claim? ***
Not what business‟s are doing but what they SHOULD
Self interest in Adam Smith’s Wealth of Nations
Passage: Pg. 22 – “through over looking everything Adam Smith
o Commentators use Smith as a “straw man” and seem to focus
on one point from his book. (…not from the benevolence of
the butcher, the brewer, or the baker…)
o Exchange- motivation
Limited to care to only gain someone else‟s business.
Passage: Concluding remark
o We are motivated by self-interest to go into the market place.
o What about production and distribution? The organization and
Did Smith think that economic operations and business activities
consist only of exchanges of this kind?
Did Smith think that the results would be just as good if the
businesses involved, driven by self interest, were to defraud consumers, or the consumers in question were to attempt to
swindle the sellers?
Absolutely not: Smith‟s point concerning the motivation of exchange does
not establish anything about the redundancy of business ethics.
Smith was preoccupied with two problems:
o Laws of the market
o Harmony and prosperity of society: welfare of the consumer
Free Market Competition and Social Utility
o Invisible hand -> free market competition
o ones self interest in the market place can only be satisfied
through exchange where intent is required. This intent is
linked back to one‟s own self interest. With this self interest,
we all participates and contributes in social utility as we
better society by providing business. The invisible hand (aka
free market competition) helps lead to social utility.
“the self interests of indivudals are transmuted by competitive
interaction to yield social harmony and social utility – the market,
ideally speaking, is an endlessly self correcting mechanism.
“the laws of the market demonstrate that the outcome of a certain
kind of behavior in a certain social framework will bring about
perfectly definite and foreseeable results… the drive of similarly
motivated self interested individuals will result in competition, and
competition will result in the provision of those goods that society
wants, the quantities that society desires, and at the prices
society is prepared to pay.
Problem of the poor and the consumer
“No society can surely be flourishing and happy of which the far
greater part of the numbers are poor and miserable.”
“Consumptions is the sole end and purpose of production” Division of Labour as a solution: the division of labor, coupled with
technological advances, multiplies people‟s creative energy – thus leading
towards universal opulence.
Smith was preoccupied with two problems:
1. Laws of the market
2. Harmony and prosperity of society: welfare of the consumer
“Every individual is continually exerting himself to find out the most
advantageous employment for whatever capital he can command. IT is his
own advantage, indeed and not that of society, which he has in view. But
the stidu of his own advantage, naturally, or rather necessarily, leads him to
prefer that employment which is most advantageous to society… he
generally neither intends to promote the public interest, nor knows how he is
promoting it… and by directing that industry in such manner as its produce
may be of greatest value, he intends only his own gain, and he is in this, as
in many other cases, led by an invisible hand to promote and end which was
no part his intention.”
Motivation ------Invisible Hand ------------ Social Utility
Self interest Free Market Competition Distribution
Problem of Externalities (taken as negative term):
”A state of affairs x is better than another state of affairs y, if and only if,
nobody is worst off (has less well-being) in x then in y, and at least one
person is better off.” Prisoner’s Dilemma
“Absence of trust imposes on me certain externalities.”
“Market place only works as well as the behaviors of the people who
“Business ethics is based on trust and cooperation.”
Section 4: Organization of Production: Firms and Public Goods
Three possible solutions to failures in resource allocation involving the
production of commodities that are public goods or involving externalities:
1) Publicly owned enterprises
2) Public regulations
3) The need for non-profit values in private decisions: social responsibility.
Social responsibility, leads to trust, and a more enriched market
“A modern business is a public good.” – Sen
Passage on pg 26:
o “What is perhaps more interesting to discuss is the fact that
distributional and production problems very often come mixed
together, so that how the cake is divided influences the size
of the cake itself.”
Kantianism 9/13/2011 7:20:00 AM
Kantian Business Ethics
September 20 , 2011
Kant‟s two formulations of the categorical imperative:
“Act only according to that maxim whereby you can at the same
time will that it should become a universal law.”
o In order whether a particular action your about to take, and
you don‟t know if its right, follow this test: act, maxim,
universal law, will
“… now assuming he does decide to do so, the maxim of his action
would be as follows: when I believe myself to be in need of money,
I will borrow money and promise to repay it although I know that I
shall never do so. Now this principle of self-love or his own benefit
may well be compatible with his own welfare, but the question is
whether it is right. He changes the pretension of self-love into a
universal law and then puts the question: How would it be if my
maxim became a universal law of nature and be consistent with
itself; rather it must necessarily contradict itself.”
September 22, 11
Can‟t universalize self interest and egoism.
o “If ___ Then ___.”
o Not subjective in any manner
o “Thou shalt not ___.” (Lie, False Promise, Steal, commit
o Kant: We don‟t really need God, we need reason.
“Act in such a way that you treat humanity, whether in your own person or
in the person of another, always at the same time as an end and never as a
Test for rightness Means Vs. Ends
o Negative Right.
End: Must respect someone‟s autonomy.
o Kant: “Fundamental difference between humans and things.
Things don‟t reason and don‟t have autonomy.”
o Positive Right
o Utilitarianism September 22, 11
Acts: leas to many consequences
o No one wants pain, people want pleasure – psychological
foundation for this theory of utilitarianism. – this is our
Pleasure > Sentient Beings
Jeremy Bentham: “nature has placed mankind under the governance of
two sovereign masters, pain and pleasure. It is for them alone to point out
what we ought to do. On the one hand, the standard of right and wrong, on
the other the chain of causes and effects, are fastened to their throne. They
govern us all we do…The principle of utility recognizes that subjection and
assumes it for the foundation of that system… By the principle of utility is
meant that principle which approves or disapproves of every action
whatsoever, according to the tendency which it appears to have to augment
or diminish the happiness of the party whose interest is in question”
Bentham‟s hedonistic calculus: the quantitative score for any pleasure or
pain experience is obtained by summing the seven aspects of a pleasurable
or painful experiences: its
John Stuart Mill:
Better be clear what we are going to maximize.
“Anyone who has experienced both types of pleasure (higher vs lower), will
recognize higher pleasures are far more rewarding and better for you.”
Pg.56: Immediate/ foreseeable consequences are the ones in which we are
* All count equally: All human beings are equal. You‟re a good utilitarian agent if you bring more pleasure than pain.
However what if there are 5 people. 1 slave and 4 masters.
If we factor in higher order pain vs. lower order pleasure we may
be able to argue this situation.
Example with the baggers and rich persons money:
It is not right, because it is not your money to give away.
You‟re using someone else‟s money and treating the rich person as
a means to end. Joseph Heath 9/13/2011 7:20:00 AM Thomas Hobbes
Excerpts from Leviathan 9/13/2011 7:20:00 AM
We postulate, what we call a state of nature.
o Entails living a life, that is short, nasty and WAR. - Hobbes
We move from a state of nature to a civil society.
A very good state of society (Canada)
Government, Laws, Legislation.
o Conceptions of what is right and
wrong. Also known as justice. We
have both, a legal and moral sense of
Things that comprise civil society are things that didn‟t exist at one
point, they were things we decided we wanted to exist.
We go from state of war (state of nature) to state of peace by
contracting ourselves to civil society.
Civil society makes contracts possible. Without contracts, you can‟t
Without government, can‟t have contracts.
“Hereby, it is manifest….” – pg.468
Without a common power, we are in the condition of war
Every man against every man
The will to contend by battle is known
No feeling of security
“Whatsoever therefore is consequences…”
No place for industry
Nasty, brutish and short!
We don‟t have to think about an actual state of nature.
We have to think about a state of nature as a way of reflecting
society back to ourselves.
o A view of understanding it in the first place. *All societies can come apart
In fact, some societies have actually come apart. (Libya)
State of nature is society as broken apart.
Inference made from the passions
“It may seem strange…”
“and this when he knows there will be laws and public officers” –pg
o Hobbes takes it as a given, that we are not good.
o Doesn‟t mean that we can‟t be good
o For political purposes, we must assume that we are not.
Therefore, it is the Hobbesian assumption that we are “Self-interested”
“Nature has made men so equal….”
We are all equal
But we are indeed not equal entirely.
o (IQ, Strength, etc.)
Humanity is equal
o Inference from the passions
Technology has given strength to the populace.
Pg 467. “From this equality of ability, arise it …”
Because we all have the ability to equalize ourselves
We become enemies when resources are scare. We are fighting for
Diffidence = mistrust
Equal in terms of hope, but distrust enters picture when finite
resources are presented.
“and form this diffidence of another….”
o There is a mutual distrust among people.
should anticipate competitors next move this later forms his analysis on contracts.
We‟re not that unequal, we are indeed quite equal.
HOBBES THEORY ON HUMAN NATURE
Equality (Brings about fear), Hope (Self preservation), Competition
(Gives rise to idea of diffidence)
o We know there is competition, competition of finite resources
o We know we fear each other because anyone has power to
become equally powerful and mightier
Brings about notion of “mutual distrust” (diffidence)
Which brings notion of covenants and contracts.
o Idea of glory, we are all trying to get ahead. (part of human
People are moved by pride and glory to do things that
they ought not to be doing to increase their own power.
Perpetuates mutual mistrust
Anticipation of each-others moves
Without government… this ALL leads to WAR.
o Now we got a good sense why we want OUT of this so called
„state of na