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Chapter

4.docx


Department
Management
Course Code
MGMT 1040
Professor
William(bill) Woof

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Markets and The Role of Ethics in Capitalism
Markets, Liberty, and Labor
Freedom in markets is critically important, more so than the “outcomes”
associated with different economic theories
Used examples such as Russia: standards of living worser than under communist
rule, but public not willing to vote it back because of the economic inefficiencies
and denial of freedom
Markets and Efficiency
“Pareto Optimality”, a situation in which the utility of no one can be raised
without reducing the utility of someone else – Arrow-Debreu theorem
Efficiency results do not say anything about equality of outcomes but both must
be considered
Markets and Interest Groups
Role of markets must also consider what they are allowed to do
If groups are too politically powerful and influential it will limit the market
Need for Critical Scrutiny of the Role of Markets
Public discussion of markets is crucial as good public policy cannot be established
through some predetermined formula or attitude
Adam Smith argued that market signals can be misleading, and consequences of a
free market can include wasting capital resulting from private pursuit of
misguided enterprises or waste of social resources
Cannot lump all economic policy into conclusions based on “pro” or “anti”
attitudes as there are limits to every theory
Business Ethics, Trust, and Contracts
Efficiency of capitalism dependent on powerful systems of values and norms
Successful markets rely on solid foundation of institutions that support the rights
ensuing from contracts
Capitalist ethics limited in the issues of economic inequality, environmental
protection, and the need for cooperation of different kinds that operate outside the
market
Variations of Norms and Institutions Within the Market Economy
Behavioral codes vary even among developed capitalist economies
Experiments of different countries have been quite diverse (eg. European vs
Japan) as different cultures have different motivators and standards
Not as simple as “pursuit of self-interest’, variations exist
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