The Ethics of Management
Chapter 2 – Moral Analysis and Economic Outcomes
“Economic Outcomes” is the first evaluative means in a moral analysis. Economic outcomes do not
refer just to the net balance of revenues over costs for the company.
Economic outcomes in economic theory refer to the net balance of benefits over harms for the
full society as a result of a certain decision or action.
Most non-economists, and some economists appear to focus entirely on profit maximization.
Economic theory, addresses ethical and economic percepts.
Economic Theory in its complete form is more a normative theory of society than a descriptive
theory of the firm. Profit maximization is a part of that theory, certainly not the central focus. Economic
equilibrium is the effort by business managers try to create marginal increases in revenues against
marginal increases in costs, resulting in maximum profit.
Concept: Pareto Optimality forms the moral basis of economic theory. Pareto Optimality refers to a
condition in which the scarce resources of society are being used so efficiently by the producing
firms, and the goods and services are being distributed so effectively by the competitive markets, that
it would be impossible to make any single person better off without harming some other person. “It
would be impossible to make any single person better off without making some other person
The ethical substance of economic theory summarized in Pareto Optimality: Produce the maximum
economic benefits for society, recognizing the full personal and social costs of that production,
and rely on fair markets for the equitable distribution of those benefits.
With this concept, the theory becomes a means of achieving the social goal: maximum benefits of
most wanted goods and services produced at minimum costs of least wanted resources.
There is a view:
- Ethical duties are not relevant in business, beyond the normal standards of not to lie, cheat or
- Necessary to maintain price-competitive markets
- Satisfy customers needs
- Profit maximization
- Following legal requirements
- “One only social responsibility of business is to use resources and engage