Hostname: page-component-586b7cd67f-t8hqh Total loading time: 0 Render date: 2024-11-23T05:05:54.101Z Has data issue: false hasContentIssue false
  • English
  • Français

Against Paretianism: A Wealth Creation Approach to Business Ethics

Published online by Cambridge University Press:  04 October 2021

Carson Young Open the ORCID record for Carson Young [Opens in a new window]
Carson Young*
Affiliation:
SUNY Brockport
Get access Rights & Permissions [Opens in a new window]

Abstract

How should we distinguish between ethical and unethical ways of pursuing profit in a market? The market failures approach (MFA) to business ethics purports to provide an answer to this question. I argue that it fails to do so. The source of this failure is the MFA’s reliance on Pareto efficiency as a core ethical principle. Many ethically “preferred” tactics for seeking profit cannot be justified by appeal to Pareto efficiency. One important reason for this is that Pareto efficiency, as understood by the theory of welfare economics upon which the MFA relies, assumes a static conception of efficiency. This is a problem because many ethically “preferred” tactics can only be justified by appeal to dynamic efficiency considerations. I argue that, instead of Pareto efficiency, we should look to the value of wealth creation to understand the ethical constraints on how market actors may pursue profit.

Keywords

market failures approachdynamic efficiencyPareto efficiencywealthJoseph Heathethics and strategic management
Type
Article
Information
Business Ethics Quarterly , Volume 32 , Issue 3 , July 2022 , pp. 475 - 501
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Society for Business Ethics

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

Acemoglu, D., & Robinson, J. A. 2013. Why nations fail: The origins of power, prosperity, and poverty. New York: Crown.Google Scholar
Arneson, R. J. 2000. Welfare should be the currency of justice. Canadian Journal of Philosophy, 30(4): 497–524.CrossRefGoogle Scholar
Arnold, D. G., & Bowie, N. E. 2003. Sweatshops and respect for persons. Business Ethics Quarterly, 13(2): 221–42.CrossRefGoogle Scholar
Arrington, R. L. 1982. Advertising and behavior control. Journal of Business Ethics, 1(1): 3–12.Google Scholar
Arrow, K. J., & Debreu, G. 1954. Existence of an equilibrium for a competitive economy. Econometrica: Journal of the Econometric Society, 22(3): 265–90.Google Scholar
Baumol, W. J. 1996. Entrepreneurship: Productive, unproductive, and destructive. Journal of Business Venturing, 11(1): 3–22.CrossRefGoogle Scholar
Blaug, M. 2001. Is competition such a good thing? Static efficiency versus dynamic efficiency. Review of Industrial Organization, 19(1): 37–48.Google Scholar
Blaug, M. 2007. The fundamental theorems of modern welfare economics, historically contemplated. History of Political Economy, 39(2): 185–207.CrossRefGoogle Scholar
Bowie, N. E. 2017. Business ethics: A Kantian perspective. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Bowman, C., & Ambrosini, V. 2000. Value creation versus value capture: Towards a coherent definition of value in strategy. British Journal of Management, 11(1): 1–15.Google Scholar
Brandenburger, A. M., & Stuart, H. W. Jr. 1996. Value-based business strategy. Journal of Economics and Management Strategy, 5(1): 5–24.Google Scholar
Brenkert, G. G. 1998. Marketing to inner-city blacks: Powermaster and moral responsibility. Business Ethics Quarterly, 8(1): 1–18.CrossRefGoogle Scholar
Brennan, J. F., & Jaworski, P. 2015. Markets without limits: Moral virtues and commercial interests. New York: Routledge.CrossRefGoogle Scholar
Brink, D. O. 1986. Utilitarian morality and the personal point of view. Journal of Philosophy, 83(8): 417–38.CrossRefGoogle Scholar
Buchanan, A. E. 1985. Ethics, efficiency, and the market. Oxford: Oxford University Press.Google Scholar
Carr, A. 1968. Is business bluffing ethical? Harvard Business Review, 143: 155.Google Scholar
Carson, T. 1993. Second thoughts about bluffing. Business Ethics Quarterly, 3(4): 317–42.Google Scholar
Cowen, T. 2018. Stubborn attachments: A vision for a society of free, prosperous, and responsible individuals. San Francisco: Stripe Press.Google Scholar
Crisp, R. 1987. Persuasive advertising, autonomy, and the creation of desire. Journal of Business Ethics, 6(5): 413–18.CrossRefGoogle Scholar
Dick, D. G. 2018. Impure semiotic objections to markets. Public Affairs Quarterly, 32(3): 227–46.Google Scholar
Donaldson, T. 1989. The ethics of international business. New York: Oxford University Press.Google Scholar
Donaldson, T., & Dunfee, T. W. 1994. Toward a unified conception of business ethics: Integrative social contracts theory. Academy of Management Review, 19(2): 252–84.CrossRefGoogle Scholar
Donaldson, T., & Dunfee, T. W. 1999. Ties that bind: A social contracts approach to business ethics. Cambridge, MA: Harvard University Press.Google Scholar
Dworkin, R. M. 1980. Is wealth a value? Journal of Legal Studies, 9(2): 191–226.Google Scholar
Gaus, G., Courtland, S., & Schmidtz, D. 2015. Liberalism. In Zalta, E. N. (Ed.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/liberalism/.Google Scholar
Ghemawat, P., & Ricart Costa, J. E. I. 1993. The organizational tension between static and dynamic efficiency. Strategic Management Journal, 14(S2): 59–73.CrossRefGoogle Scholar
Hausman, D., McPherson, M., & Satz, D. 2016. Economic analysis, moral philosophy, and public policy. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Heath, J. 2004. A market failures approach to business ethics. In Hodgson, B. (Ed.), The invisible hand and the common good: 69–89. Berlin: Springer.CrossRefGoogle Scholar
Heath, J. 2006. Business ethics without stakeholders. Business Ethics Quarterly, 16(4): 533–57.CrossRefGoogle Scholar
Heath, J. 2007. An adversarial ethic for business: Or when Sun-Tzu met the stakeholder. Journal of Business Ethics, 72(4): 359–74.Google Scholar
Heath, J. 2013. Market failure or government failure? A response to Jaworski. Business Ethics Journal Review, 1(8): 50–56.Google Scholar
Heath, J. 2014. Morality, competition, and the firm: The market failures approach to business ethics. Oxford: Oxford University Press.Google Scholar
Heath, J. 2019. Is the “point” of the market Pareto or Kaldor–Hicks efficiency? Business Ethics Journal Review, 7(4): 21–26.Google Scholar
Hsieh, N. 2017. The responsibilities and role of business in relation to society: Back to basics? Business Ethics Quarterly, 27(2): 293–314.Google Scholar
Jones, T. M., Donaldson, T., Freeman, R. E., Harrison, J. S., Leana, C. R., Mahoney, J. T., & Pearce, J. L. 2016. Management theory and social welfare: Contributions and challenges. Academy of Management Review, 41(2): 216–28.Google Scholar
Jones, T. M., & Felps, W. 2013. Shareholder wealth maximization and social welfare: A utilitarian critique. Business Ethics Quarterly, 23(2): 207–38.Google Scholar
Kates, M. 2015. The ethics of sweatshops and the limits of choice. Business Ethics Quarterly, 25(2): 191–212.Google Scholar
Kirzner, I. M. 1997. Entrepreneurial discovery and the competitive market process: An Austrian approach. Journal of Economic Literature, 35(1): 60–85.Google Scholar
Krugman, P. 1994. Does third world growth hurt first world prosperity? Harvard Business Review, 72: 113.Google Scholar
Lepak, D. P., Smith, K. G., & Taylor, M. S. 2007. Value creation and value capture: A multilevel perspective. Academy of Management Review, 32(1): 180–94.CrossRefGoogle Scholar
Lipsey, R. G., & Lancaster, K. 1956. The general theory of second best. Review of Economic Studies, 24(1): 11–32.CrossRefGoogle Scholar
Martin, D. 2013. The unification challenge. Business Ethics Journal Review, 1(5): 28–35.CrossRefGoogle Scholar
McMahon, C. 1981. Morality and the invisible hand. Philosophy and Public Affairs, 247–77.Google Scholar
Moriarty, J. 2019. On the origin, content, and relevance of the market failures approach. Journal of Business Ethics, 165(1): 113–24.CrossRefGoogle Scholar
Norman, W. 2011. Business ethics as self-regulation: Why principles that ground regulations should be used to ground beyond-compliance norms as well. Journal of Business Ethics, 102(1): 43–57.Google Scholar
Nussbaum, M. C. 2001. Symposium on Amartya Sen’s philosophy: 5. Adaptive preferences and women’s options. Economics and Philosophy, 17(1): 67–88.CrossRefGoogle Scholar
Plato. 2004. Republic (Reeve, C. D. C., Trans.). Indianapolis, IN: Hackett.Google Scholar
Porter, M. 1996. What is strategy? Harvard Business Review, 74(6): 61–80.Google Scholar
Porter, M. E. 2008. Competitive strategy: Techniques for analyzing industries and competitors. New York: Simon and Schuster.Google Scholar
Posner, R. 1973. An economic approach to legal procedure and judicial administration. Journal of Legal Studies, 2(2): 399–458.CrossRefGoogle Scholar
Quine, W. V. O., & Ullian, J. S. 1978. The web of belief, vol. 2. New York: Random House.Google Scholar
Railton, P. 1984. Alienation, consequentialism, and the demands of morality. Philosophy and Public Affairs, 134–71.Google Scholar
Rawls, J. 1951. Outline of a decision procedure for ethics. Philosophical Review, 60(2): 177–97.CrossRefGoogle Scholar
Rawls, J. 2001. Justice as fairness: A restatement. Cambridge, MA: Harvard University Press.Google Scholar
Repp, C., & Contat, J. 2019. Does Heath have a good answer to Steinberg? Business Ethics Journal Review, 7(3): 14–20.CrossRefGoogle Scholar
Sagoff, M. 1981. Economic theory and environmental law. Michigan Law Review, 79(7): 1393–419.CrossRefGoogle Scholar
Satz, D. 2010. Why some things should not be for sale: The moral limits of markets. Oxford: Oxford University Press.Google Scholar
Schmidtz, D. 1995. Rational choice and moral agency. Princeton, NJ: Princeton University Press.Google Scholar
Schmidtz, D., & Brennan, J. 2011. A brief history of liberty. Hoboken, NJ: John Wiley.Google Scholar
Schumpeter, J. A. 1947. The creative response in economic history. Journal of Economic History, 7(2): 149–59.Google Scholar
Schumpeter, J. A. 2010. Capitalism, socialism and democracy. New York: Routledge.CrossRefGoogle Scholar
Sen, A. 1991. On ethics and economics. Hoboken, NJ: John Wiley.Google Scholar
Silver, D. 2016. Competition, value creation and the self-understanding of business. Business Ethics Journal Review, 4(10): 59–65.Google Scholar
Singer, A. 2018. Justice failure: Efficiency and equality in business ethics. Journal of Business Ethics, 149(1): 97–115.CrossRefGoogle Scholar
Steinberg, E. 2017. The inapplicability of the market-failures approach in a non-ideal world. Business Ethics Journal Review, 5(5): 28–34.Google Scholar
Strudler, A. 2005. Deception unraveled. Journal of Philosophy, 102(9): 458–73.Google Scholar
Van der Vossen, B., & Brennan, J. 2018. In defense of openness. New York: Oxford University Press.CrossRefGoogle Scholar
Wenar, L. 2017. John Rawls. In E. N. Zalta (Ed.), Stanford Encyclopedia of Philosophy. https://plato.stanford.edu/entries/rawls/.Google Scholar
Zwolinski, M. 2007. Sweatshops, choice, and exploitation. Business Ethics Quarterly, 17(4): 689–727.CrossRefGoogle Scholar