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Business Ethics MGT610 VU


LESSON 01
INTRODUCTION
Lets begins with a case study of Merck and Co!any" discussing how they dea#t with the
!rob#e of de$e#o!ing a drug that was !otentia##y #ife%sa$ing but which !resented the with
#itt#e" if any" chance of earning a return on their in$estent&
The drug was '$erectin" one of their best%se##ing ania# drugs& The !otentia# arket for the
drug was those suffering fro ri$er b#indness an agoni(ing disease aff#icting about 1) i##ion
i!o$erished indi$idua#s in *frica and Latin *erica& The disease is !articu#ar#y horrendous+
wors as #ong as two feet cur# u! in nodu#es under an infected !erson,s skin" s#ow#y sending
out offs!ring that cause intense itching" #esions" b#indness" and u#tiate#y death -though any
sufferers actua##y coit suicide before the fina# stage of the disease.&
The need for the drug was c#ear& /owe$er" the $ictis of ri$er b#indness are a#ost e0c#usi$e#y
!oor& 't seeed un#ike#y that Merck wou#d e$er recou! the estiated 1100 i##ion it wou#d cost
to de$e#o! the huan $ersion of the drug& Moreo$er" if there !ro$ed to be ad$erse huan side
effects" this ight affect sa#es of the $ery !rofitab#e ania# $ersion that were 1200 i##ion of
Mercks 13 bi##ion annua# sa#es& 4ina##y" Congress was getting ready to !ass the 5rug
6egu#ation *ct" which wou#d intensify co!etition in the drug industry by a##owing
co!etitors to ore 7uick#y co!y and arket drugs origina##y de$e#o!ed by other co!anies&
8uestions+ 9as Merck ora##y ob#igated to de$e#o! this drug:
Their anagers fe#t" u#tiate#y" that they were& They e$en went so far as to gi$e the drug away
for free& This story sees to run counter to the assu!tion that" gi$en the choice between
!rofits and ethics" co!anies wi## a#ways choose the forer& The choice" howe$er" ay not be
as c#ear%cut as this dichotoy suggests& ;oe ha$e suggested that" in the #ong run" Merck wi##
benefit fro this act of kindness <ust as they are current#y benefiting fro a sii#ar situation in
=a!an&
E$en so" ost co!anies wou#d !robab#y not in$est in an 6 > 5 !ro<ect that !roises no
!rofit& *nd soe co!anies often engage in outright unethica# beha$ior& ;ti##" habitua##y
engaging in such beha$ior is not a good #ong%ter business strategy" and it is the $iew of this
book that" though unethica# beha$ior soeties !ays off" ethica# beha$ior is better in the #ong
run&
* ore basic !rob#e is the fact that the ethica# choice is not a#ways c#ear& Merck" as a for%
!rofit cor!oration" has res!onsibi#ities to its shareho#ders to ake a !rofit& Co!anies that
s!end a## their funds on un!rofitab#e $entures wi## find these#$es out of business&
This book takes the $iew that ethica# beha$ior is the best #ong%ter business strategy for a
co!any?a $iew that has becoe increasing#y acce!ted during the #ast few years&

This does
not ean that occasions ne$er arise when doing what is ethica# wi## !ro$e cost#y to a co!any&
;uch occasions are coon in the #ife of a co!any" and we wi## see any e0a!#es in this
book& @or does it ean that ethica# beha$ior is a#ways rewarded or that unethica# beha$ior is
a#ways !unished& An the contrary" unethica# beha$ior soeties !ays off" and the good guy
soeties #oses& To say that ethica# beha$ior is the best #ong%range business strategy eans
ere#y that" o$er the #ong run and for the ost !art" ethica# beha$ior can gi$e a co!any
significant co!etiti$e ad$antages o$er co!anies that are not ethica#& The e0a!#e of Merck
and Co!any suggests this $iew" and a bit of ref#ection o$er how we" as consuers and
e!#oyees" res!ond to co!anies that beha$e unethica##y su!!orts it& Later we see what ore
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can be said for or against the $iew that ethica# beha$ior is the best #ong%ter business strategy
for a co!any&
This te0t ais to c#arify the ethica# issues that anagers of odern business organi(ations ust
face& This does not ean that it is designed to gi$e ora# ad$ice to !eo!#e in business nor that
it is aied at !ersuading !eo!#e to act in certain ora# ways& The ain !ur!ose of the te0t is to
!ro$ide a dee!er know#edge of the nature of ethica# !rinci!#es and conce!ts and an
understanding of how these a!!#y to the ethica# !rob#es encountered in business& This ty!e of
know#edge and understanding shou#d he#! anagers ore c#ear#y see their way through the
ethica# uncertainties that confront the in their business #i$es?uncertainties such as those
faced by the anagers of Merck&
Business Issues
*ccording to the dictionary" the ter ethics has a $ariety of different eanings& Ane of its
eanings is+ Bthe !rinci!#es of conduct go$erning an indi$idua# or a grou!C& 9e soeties use
the ter personal ethics, for e0a!#e" when referring to the ru#es by which an indi$idua# #i$es
his or her !ersona# #ife& 9e use the ter accounting ethics when referring to the code that
guides the !rofessiona# conduct of accountants&
* second?and ore i!ortant?eaning of ethics, according to the dictionary" is+ Ethics is
Bthe study of ora#ity&B Ethicists use the ter ethics to refer !riari#y to the study of ora#ity"
<ust as cheists use the ter chemistry to refer to a study of the !ro!erties of cheica#
substances& *#though ethics dea#s with ora#ity" it is not 7uite the sae as ora#ity& Ethics is a
kind of in$estigation?and inc#udes both the acti$ity of in$estigating as we## as the resu#ts of
that in$estigation?whereas ora#ity is the sub<ect atter that ethics in$estigates&
Morality
;o what" then" is ora#ity: 9e can define morality as the standards that an indi$idua# or a
grou! has about what is right and wrong" or good and e$i#& To c#arify what this eans" #et us
consider a concrete case&
;e$era# years ago" B&4& Goodrich" a anufacturer of $ehic#e !arts" won a i#itary contract to
design" test" and anufacture aircraft brakes for the *D5" a new air!#ane the *ir 4orce was
designing& Eerit Fandi$ier was !resented with a ora# 7uandary+ he knew that Goodrich was
!roducing brakes for the G&;& go$ernent that were #ike#y to fai#" but was re7uired by his
su!eriors to re!ort that the brake !assed the necessary tests& /is choice was to write the fa#se
re!ort and go against his ethica# !rinci!#es" or be fired and suffer the econoic conse7uences&
/e chose the forer" e$en though his ora# standards were in conf#ict with his actions& ;uch
standards inc#ude the nors we ha$e about the kinds of actions we be#ie$e are right and wrong"
such as Ba#ways te## the truth&B *s Fandi$ier shows" we do not a#ways #i$e u! to our standards&
'n this B&4 Goodrich case" Fandi$iers be#iefs that it is right to te## the truth and wrong to
endanger the #i$es of others" and his be#iefs that integrity is good and dishonesty is bad" are
e0a!#es of ora# standards that he he#d& Mora# standards inc#ude the nors we ha$e about the
kinds of actions we be#ie$e are ora##y right and wrong as we## as the $a#ues we !#ace on the
kinds of ob<ects we be#ie$e are ora##y good and ora##y band& Mora# nors can usua##y be
e0!ressed as genera# ru#es or stateents" such as H*#ways te## the truth"C H't is wrong to ki##
innocent !eo!#e"C or H*ctions are right to the e0tent that they !roduce ha!!iness&C Mora# $a#ues
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can usua##y be e0!ressed as stateents describing ob<ects or features of ob<ects that ha$e wroth"
such as" H/onesty is goodC and H'n<ustice is bad&C
9here do these standards coe fro: Ty!ica##y a !ersons ora# standards are first absorbed
as chi#d fro fai#y" friends" and $arious societa# inf#uences such as church" schoo#" te#e$ision"
aga(ines" usic" and associations& Later" as the !erson grows u!" e0!erience" #earning" and
inte##ectua# de$e#o!ent ay #ead the aturing !erson to re$ise these standards& ;oe are
discarded" and new ones ay be ado!ted to re!#ace the& /o!efu##y" through this aturing
!rocess" the !erson wi## de$e#o! standards that are ore inte##ectua##y ade7uate and so ore
suited for dea#ing with the ora# di#eas of adu#t #ife& *s Fandi$iers own stateents ake
c#ear" howe$er" we do not a#ways #i$e u! to the ora# standards we ho#dI that is" we do not
a#ways do what we be#ie$e is ora##y right nor do we a#ways !ursue what we be#ie$e is
ora##y good&
Mora# standards can be contrasted with standards we ho#d about things that are not ora#&
E0a!#es of non%ora# standards inc#ude the standards of eti7uette by which we <udge #ega#
right and wrong" the standards we ca## the law by which we <udge #ega# right and wrong" the
standards of #anguage by which graatica##y right and wrong" and the standards of aesthetics
by which we <udge good and bad art" and the ath#etic standards by which we <udge how we## a
gae of footba## or basketba## is being !#ayed& 'n fact" whene$er we ake <udgents about the
right or wrong way to do things" or <udgents about what things are good or bad" our
<udgents are based on standards of soe kind& 'n Fandi$iers case" we can surise that he
!robab#y be#ie$ed that re!orts shou#d be written with good graar" that getting fired for a
we##%!aid" !#easant" and cha##enging <ob" and the #aws of go$ernent are a#so standards" but
these standards are not ora# standards& *s the case of Fandi$ier a#so deonstrates" we
soeties choose non%ora# standards o$er our ora# standards&
There are other ty!es of standards as we##" such as standards of eti7uette" #aw" and #anguage&
Mora# standards can be distinguished fro non%ora# standards using fi$e characteristics+
1& Mora# standards dea# with atters that can serious#y in<ure or benefit huans& 4or
e0a!#e" ost !eo!#e in *erican society ho#d ora# standards against theft" ra!e"
ens#a$eent" urder" chi#d abuse" assau#t" s#ander" fraud" #awbreaking" and so on&
3& Mora# standards are not estab#ished or changed by authoritati$e bodies& The $a#idity of
ora# standards rests on the ade7uacy of the reasons that are taken to su!!ort and
<ustify theI so #ong as these reasons are ade7uate" the standards reain $a#id&
2& Mora# standards" we fee#" shou#d be !referred to other $a#ues" inc#uding se#f%interest&
This does not ean" of course" that it is a#ways wrong to act on se#f%interestI it on#y
eans that it is wrong to choose se#f%interest o$er ora#ity
J& Mora# standards are based on i!artia# considerations& The fact that you wi## benefit
fro a #ie and that ' wi## be hared is irre#e$ant to whether #ying is ora##y wrong&
K& Mora# standards are associated with s!ecia# eotions and a s!ecia# $ocabu#ary -gui#t"
shae" reorse" etc&.& The fact that you wi## benefit fro a #ie and that ' wi## be hared
is irre#e$ant to whether #ying is ora##y wrong&
Ethics is the disci!#ine that e0aines one,s ora# standards or the ora# standards of a society&
't asks how these standards a!!#y to our #i$es and whether these standards are reasonab#e or
unreasonab#e?that is" whether they are su!!orted by good reasons or !oor ones& Therefore" a
!erson starts to do ethics when he or she takes the ora# standards absorbed fro fai#y"
church" and friends and asks+ 9hat do these standards i!#y for the situations in which ' find
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yse#f: 5o these standards rea##y ake sense: 9hat are the reasons for or against these
standards: 9hy shou#d ' continue to be#ie$e in the: 9hat can be said in their fa$or and what
can be said against the: *re they rea##y reasonab#e for e to ho#d: *re their i!#ications in
this or that !articu#ar situation reasonab#e:
Ethics is the study of ora# standards?the !rocess of e0aining the ora# standards of a !erson
or society to deterine whether these standards are reasonab#e or unreasonab#e in order to a!!#y
the to concrete situations and issues& The u#tiate ai of ethics is to de$e#o! a body of ora#
standards that we fee# are reasonab#e to ho#d?standards that we ha$e thought about carefu##y and
ha$e decided are <ustified standards for us to acce!t and a!!#y to the choices that fi## our #i$es&
Ethics is not the on#y way to study ora#ity& The socia# sciences?such as anthro!o#ogy"
socio#ogy" and !sycho#ogy?a#so study ora#ity" but do so in a way that is 7uite different fro
the a!!roach to ora#ity that is characteristic of ethics& *#though ethics is a normative study of
ethics" the socia# sciences engage in a descriptive study of ethics&
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Business Ethics MGT610 VU
LESSON 02
INTRODUCTION (CONTD.)
*#though ethics is a normative study of ethics" the socia# sciences engage in a descriptive study
of ethics other fie#ds" such as the socia# sciences" a#so study ethicsI but they do so descri!ti$e#y"
not norati$e#y& That is" they e0!#ain the wor#d but without reaching conc#usions about
whether it ought to be the way it is& Ethics itse#f" on the other hand" being norati$e" atte!ts
to deterine whether or not standards are correct&
* normative stuy is an in$estigation that atte!ts to reach norati$e conc#usions?that is"
conc#usions about what things are good or bad or about what actions are right or wrong& 'n
short" a norati$e study ais to disco$er what shou#d be&
* escri!tive stuy is one that does not try to reach any conc#usions about what things are
tru#y good or bad or right or wrong& 'nstead" a descri!ti$e study atte!ts to describe or e0!#ain
the wor#d without reaching any conc#usions about whether the wor#d is as it shou#d be&
Business Ethics
Business ethics is a s!ecia#i(ed study of right and wrong& 't concentrates on ora# standards as
they a!!#y to business !o#icies" institutions" and beha$iors& * brief descri!tion of the nature of
business institutions shou#d c#arify this&
* society consists of !eo!#e who ha$e coon ends and whose acti$ities are organi(ed by a
syste of institutions designed to achie$e these ends& That en" woen" and chi#dren ha$e
coon ends is ob$ious& There is the coon end of estab#ishing" nurturing" and !rotecting
fai#y #ifeI !roducing and distributing the ateria#s on which huan #ife de!endsI restraining
and regu#ari(ing the use of forceI organi(ing the eans for aking co##ecti$e decisionsI and
creating and !reser$ing cu#tura# $a#ues such as art" know#edge" techno#ogy" and re#igion& The
ebers of a society achie$e these ends by estab#ishing the re#ati$e#y fi0ed !atterns of acti$ity
that we ca## institutions: fai#ia#" econoic" #ega#" !o#itica#" and educationa#&
The ost inf#uentia# institutions within conte!orary societies ay be their econoic
institutions& These are designed to achie$e two ends+
-*. Lroduction of the goods and ser$ices the ebers of society want and need&
-B. 5istribution of these goods and ser$ices to the $arious ebers of society&
Thus" econoic institutions deterine who wi## carry out the work of !roduction" how that
work wi## be organi(ed" what resources that work wi## consue" and how its !roducts and
benefits wi## be distributed aong societys ebers&
Business enter!rises are the !riary econoic institutions through which !eo!#e in odern
societies carry on the tasks of !roducing and distributing goods and ser$ices& They !ro$ide the
fundaenta# structures within which the ebers of society cobine their scare resources?
#and" #abor" ca!ita#" and techno#ogy?into usab#e goods" and they !ro$ide the canne#s through
which these goods are distributed in the for of consuer !roducts" e!#oyee sa#aries"
in$estors return" and go$ernent ta0es& Mining" anufacturing" retai#ing" banking" arketing"
trans!orting" insuring" constructing" and ad$ertising are a## different facets of the !roducti$e
and distributi$e !rocesses of our odern business institutions&
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The ost significant kinds of odern business enter!rises are cor!orations+ organi(ations that
the #aw endows with s!ecia# #ega# rights and !owers& Today #arge cor!orate organi(ations
doinate our econoies& 'n 3002" Genera# Motors" the wor#d,s #argest autoobi#e co!any"
had re$enues of 11MK&6 bi##ion and e!#oyed ore than 23K"000 workersI 9a#%Mart" the
wor#d,s #argest retai#er" had sa#es of 13K)&D bi##ion and 1"J00"000 e!#oyeesI Genera# E#ectric"
the wor#d,s #argest aker of e#ectrica# e7ui!ent" had sa#es of 112J bi##ion and 20K"000
e!#oyeesI and 'BM" the wor#d,s #argest co!uter co!any" had re$enues of 1)M bi##ion and
21M"000 e!#oyees&
,
Modern cor!orations are organi(ations that the #aw treats as iorta# fictitious B!ersonsB who
ha$e the right to sue and be sued" own and se## !ro!erty" and enter into contracts" a## in their
own nae& *s an organi(ation" the odern cor!oration consists of -a. stockho#ders who
contribute ca!ita# and who own the cor!oration but whose #iabi#ity for the acts of the
cor!oration is #iited to the oney they contributed" -b. directors and officers who adinister
the cor!oration,s assets and who run the cor!oration through $arious #e$e#s of Bidd#e
anagers"B and -c. e!#oyees who !ro$ide #abor and who do the basic work re#ated direct#y to
the !roduction of goods and ser$ices& To co!e with their co!#e0 coordination and contro#
!rob#es" the officers and anagers of #arge cor!orations ado!t fora# bureaucratic systes of
ru#es that #ink together the acti$ities of the indi$idua# ebers of the organi(ation so as to
achie$e certain outcoes or ob<ecti$es& ;o #ong as the indi$idua# fo##ows these ru#es" the
outcoe can be achie$ed e$en if the indi$idua# does not know what it is and does not care
about it&
Business Ethics is a study of ora# standards and how these a!!#y to the systes and
organi(ations through which odern societies !roduce and distribute goods and ser$ices" and
to the !eo!#e who work within these organi(ations& Business ethics" in other words" is a for of
a!!#ied ethics& 't inc#udes not on#y the ana#ysis of ora# nors and ora# $a#ues" but a#so
atte!ts to a!!#y the conc#usions of this ana#ysis to that assortent of institutions"
techno#ogies" transactions" acti$ities" and !ursuits that we ca## Business.
*s this descri!tion of business ethics suggests" the issues that business ethics co$ers enco!ass
a wide $ariety of to!ics& To introduce soe order into this $ariety" it he#!s if we distinguish
three different kinds of issues that business ethics in$estigates&
Though business ethics co$er a $ariety of to!ics" there are three basic ty!es of issues+
1& Systemic issues 8uestions rose about the econoic" !o#itica#" #ega#" or other socia#
systes within which businesses o!erate& These inc#ude 7uestions about the ora#ity of
ca!ita#is or of the #aws" regu#ations" industria# structures" and socia# !ractices within
which *erican businesses o!erate&
3& Corporate issues 8uestions rose about a !articu#ar co!any& These inc#ude 7uestions
about the ora#ity of the acti$ities" !o#icies" !ractices" or organi(ationa# structure of an
indi$idua# co!any taken as a who#e&
2& Individual issues 8uestions about a !articu#ar indi$idua# within an organi(ation and
their beha$iors and decisions& These inc#ude 7uestions about the ora#ity of the
decisions" actions" or character of an indi$idua#&
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LESSON 03
T"EOR# O$ ET"IC%& RE&%TIVI'M
;oe theorists aintain that ora# notions a!!#y on#y to indi$idua#s" not to cor!orations
these#$es& They say that it akes no sense to ho#d businesses Bres!onsib#eB since businesses
are ore #ike achines than !eo!#e& Athers counter that cor!orations do act #ike indi$idua#s"
ha$ing ob<ecti$es and actions" which can be ora# or iora# <ust as an indi$idua#,s action
ight be&
'n 3003" for e0a!#e" the =ustice 5e!artent charged the accounting fir of *rthur *ndersen
for obstruction of <ustice& *rthur *ndersen was caught shredding docuents showing how they
he#!ed Enron hide its debt through the use of se$era# accounting tricks& Critics afterward
c#aied that the =ustice 5e!artent shou#d ha$e charged the indi$idua# e!#oyees of *rthur
*ndersen" not the co!any" because BCo!anies don,t coit cries" !eo!#e do&B
Lerha!s neither e0tree $iew is correct& Cor!orate actions do de!end on huan indi$idua#s
who shou#d be he#d accountab#e for their actions& /owe$er" they a#so ha$e !o#icies and cu#ture
that direct indi$idua#s" and shou#d therefore be he#d accountab#e for the effects of these
cor!orate artifacts&
@onethe#ess" it akes !erfect#y good sense to say that a cor!orate organi(ation has ora# duties
and that it is ora##y res!onsib#e for its acts& /owe$er" organi(ations ha$e ora# duties and are
ora##y res!onsib#e in a secondary senseI a cor!oration has a ora# duty to do soething on#y
if soe of its ebers ha$e a ora# duty to ake sure it is done" and a cor!oration is ora##y
res!onsib#e for soething on#y if soe of its ebers are ora##y res!onsib#e for what
ha!!ened&
Firtua##y a## of the K00 #argest G&;& industria# cor!orations today are u#tinationa#s& A!erating
in ore than one country at once !roduces a new set of ethica# di#eas& Mu#tinationa#s can
esca!e en$ironenta# regu#ations and #abor #aws by shifting to another country" for e0a!#e&
They can shift raw ateria#s" goods" and ca!ita# so that they esca!e ta0es& 'n addition" because
they ha$e new techno#ogies and !roducts that #ess de$e#o!ed countries do not" u#tinationa#s
ust decide when a !articu#ar country is ready to assii#ate these new things& They are a#so
faced with the different ora# codes and #aws of different countries& E$en if a !articu#ar nor
is not unethica#" they ust sti## decide between co!eting standards in their any o!erations&

Ethical relativism is the theory that" because different societies ha$e different ethica# be#iefs" there
is no rationa# way of deterining whether an action is ora##y right or wrong other than by asking
whether the !eo!#e of this or that society be#ie$e it to be right or wrong by asking whether !eo!#e of
a !articu#ar society be#ie$e that it is& 'n fact" the u#ti!#icity of ora# codes deonstrates that there
is no one BrightB answer to ethica# 7uestions& The best a co!any can do is fo##ow the o#d adage"
B9hen in 6oe" do as the 6oans do&B 'n other words" there are no abso#ute ora# standards&
Cultural relativism asserts that ora#ity $aries fro one cu#ture to another" since sii#ar
!ractices are regarded as right in soe cu#tures and wrong in others& /owe$er" regarding
!ractices as right or wrong does not necessari#y ake the so" nor does it e0c#ude the
!ossibi#ity of deonstrating that ora# be#iefs are istaken& 4or this reason" cu#tura# re#ati$is
does not !rohibit the !ossibi#ity of <ustification& Ethical relativism" on the other hand" akes
the !hi#oso!hica# assertion that there is no standard of right or wrong a!art fro the ora#ity of
a cu#ture& 9hate$er !ractices a cu#ture ho#ds to be right is actua##y right for that cu#ture& There
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is no !ossibi#ity for <ustification because there e0ists no standard outside that cu#ture& Ethica#
re#ati$is resu#ts in an uncritica# acce!tance of a## ora# be#iefs as e7ua##y $a#id&
Critics of ethica# re#ati$is !oint out that it is i##ogica# to assue that because there is ore
than one answer to an ethica# 7uestion that both answers are e7ua##y correct or e$en that
either answer is correct& They a#so aintain that there are ore sii#arities than differences
e$en aong what see to be $ery di$ergent societies&
The #ate Lhi#oso!her =aes 6ache#s !ut the atter 7uite succinct#y+
The fact that different societies ha$e different ora# codes !ro$es nothing& There is a#so
disagreeent fro society to society about scientific atters+ in soe cu#tures it is be#ie$ed
that the earth is f#at" and e$i# s!irits cause disease& 9e do not on that account conc#ude that
there is no truth in geogra!hy or in edicine& 'nstead" we conc#ude that in soe cu#tures !eo!#e
are better infored than in others& ;ii#ar#y" disagreeent in ethics ight signa# nothing ore
than that soe !eo!#e are #ess en#ightened than others& *t the $ery #east" the fact of
disagreeent does not" by itse#f" entai# that truth does not e0ist&
9hy shou#d we assue that" if ethica# truth e0ists" e$eryone ust know it:
,
/owe$er" the ost te##ing criticiss of the theory !oint out that it has incoherent conse7uences&
4or e0a!#e" it becoes i!ossib#e to critici(e a !ractice of another society as #ong as
ebers of that society confor to their own standards& /ow cou#d we aintain that @a(i
Gerany or !re%Ci$i# 9ar Firginia were wrong if we were consistent re#ati$ists: There ust
be criteria other than the society,s own ora# standards by which we can <udge actions in any
!articu#ar society& Though we shou#d not disiss the ora# be#iefs of other cu#tures" we
#ikewise shou#d not conc#ude that a## systes of ora#ity are e7ua##y acce!tab#e&
4ina##y" new techno#ogies de$e#o!ed in the c#osing decades of the 30th century and the o!ening
years of the 31st century are again transforing society and business and creating the !otentia#
for new ethica# !rob#es& They bring with the 7uestions of risks" which ay be un!redictab#e
andNor irre$ersib#e& 9ho shou#d decide whether the benefits of a !articu#ar techno#ogy are
worth the risks: /ow wi## $ictis of bad techno#ogy be co!ensated for their #oss: /ow wi##
risk be distributed: /ow wi## !ri$acy be aintained: /ow wi## !ro!erty rights be !rotected:
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Business Ethics MGT610 VU
LESSON 04
MOR%& DEVE&O(MENT' %ND MOR%& RE%'ONIN)
Moral Develo!ments an Moral Reasonin*
This section in$estigates how we e0aine our own ora# standards and a!!#y the to concrete
situations and issues& 't first #ooks at the !rocess of ora# de$e#o!ent itse#f&
9e soeties assue that a !erson,s $a#ues are fored during chi#dhood and do not change&
'n fact" a great dea# of !sycho#ogica# research" as we## as one,s own !ersona# e0!erience"
deonstrates that as !eo!#e ature" they change their $a#ues in $ery dee! and !rofound ways&
=ust as !eo!#e,s !hysica#" eotiona#" and cogniti$e abi#ities de$e#o! as they age" so a#so their
abi#ity to dea# with ora# issues de$e#o!s as they o$e through their #i$es&
Moral Reasonin* + ,ohl-er*s. Resaech
Lawrence Eoh#berg identified si0 stages of ora# de$e#o!ent+
Level One: Pre-conventional Stages
1& Lunishent and Abedience Arientation % *t this stage" the !hysica# conse7uences of an
act who##y deterine the goodness or badness of that act& The chi#d,s reasons for doing
the right thing are to a$oid !unishent or defer to the su!erior !hysica# !ower of
authorities& There is #itt#e awareness that others ha$e needs sii#ar to ones own&
3& 'nstruent and 6e#ati$ity Arientation% *t this stage" right actions becoe those that can
ser$e as instruents for satisfying the chi#ds own needs or the needs of those for who
the chi#d cares&
*t these first two stages" the chi#d is ab#e to res!ond to ru#es and socia# e0!ectations and can
a!!#y the #abe#s good" bad" right" and wrong& These ru#es" howe$er" are seen as soething
e0terna##y i!osed on the se#f& 6ight and wrong are inter!reted in ters of the !#easant or
!ainfu# conse7uences of actions or in ters of the !hysica# !ower of those who set the ru#es&
Level Two: Conventional Stages
Maintaining the e0!ectations of one,s own fai#y" !eer grou!" or nation is now seen as $a#uab#e
in its own right" regard#ess of the conse7uences&
1& 'nter!ersona# Concordance Arientation % Good beha$ior at this ear#y con$entiona# stage
is #i$ing to the e0!ectations of those for who one fee#s #oya#ty" affection" and trust"
such as fai#y and friends& 6ight action is confority to what is genera##y e0!ected in
one,s ro#e as a good son" daughter" brother" friend" and so on&
3& Law and Arder Arientation % 6ight and wrong at this ore ature con$entiona# stage
now coe to be deterined by #oya#ty to one,s own #arger nation or surrounding
society& Laws are to be u!he#d e0ce!t where they conf#ict with other fi0ed socia# duties&
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Level Three: Post-conventional, Autonomous, or Principled Stages
1& ;ocia# Contract Arientation % *t this first !ost%con$entiona# stage" the !erson becoes
aware that !eo!#e ho#d a $ariety of conf#icting !ersona# $iews and o!inions and
e!hasi(es fair ways of reaching consensus by agreeent" contract" and due !rocess&
3& Gni$ersa# Ethica# Lrinci!#es Arientation % *t this fina# stage" right action coes to be
defined in ters of ora# !rinci!#es chosen because of their #ogica# co!rehensi$eness"
uni$ersa#ity" and consistency&
*t these stages" the !erson no #onger si!#y acce!ts the $a#ues and nors of the grou!s to
which he or she be#ongs& 'nstead" the !erson now tries to see situations fro a !oint of $iew
that i!artia##y takes e$eryone,s interests into account& The !erson 7uestions the #aws and
$a#ues that society has ado!ted and redefines the in ters of se#f%chosen ora# !rinci!#es that
can be <ustified in rationa# ters&
Eoh#berg,s own research found that any !eo!#e reain stuck at an ear#y stage of ora#
de$e#o!ent& /is structure i!#ies that #ater stages are better than the ear#ier ones& Eoh#berg
has been critici(ed for this i!#ication" and for not offering any arguent to back it u!&
Carol )illi*an -born @o$eber 3)" 1M26. is an *erican feinist" ethicist" and !sycho#ogist
best known for her work with and against Lawrence Eoh#berg on ethica# counity and
ethica# re#ationshi!s" and certain sub<ect%ob<ect !rob#es in ethics& Gi##igan wou#d go on to
critici(e Eoh#berg,s work& This was based on two things& 4irst" he on#y studied !ri$i#eged" white
en and boys& ;he fe#t that this caused a biased o!inion against woen& ;econd#y" in his stage
theory of ora# de$e#o!ent" the a#e $iew of indi$idua# rights and ru#es was considered a
higher stage than woen,s !oint of $iew of de$e#o!ent in ters of its caring effect on huan
re#ationshi!s&
9oen were taught to care for other !eo!#e and e0!ect others to care for the& ;he he#!ed to
for a new !sycho#ogy for woen by #istening to the and rethinking the eaning of se#f and
se#fishness& ;he asked four 7uestions about woen,s $oices+ who is s!eaking" in what body"
te##ing what story" and in what cu#tura# fraework is the story !resented:
;he out#ines three stages of ora# de$e#o!ent !rogressing fro se#fish" to socia# or
con$entiona# ora#ity" and fina##y to !ost con$entiona# or !rinci!#ed ora#ity& 9oen ust
#earn to tend to their own interests and to the interests of others& ;he thinks that woen hesitate
to <udge because they see the co!#e0ities of re#ationshi!s&
Gi##igan !ro!oses a stage theory of ora# de$e#o!ent for woen& 'f you know anything about
de$e#o!enta# !sycho#ogy" you know stage theories are i!ortant& But in fact there are
a#ternati$es to stage theories that we wi## not co$er in this c#ass& Much of the research in current
de$e#o!enta# !sycho#ogy is not focused on stages" and does not assue their !riacy in
e0!#aining de$e#o!enta# !rogress& 'nstead" any de$e#o!enta# !sycho#ogists #ook carefu##y
at how soe !articu#ar ski## -e&g& drawing" abstract thinking" thinking about other !eo!#e"
aking e0cuses" he#!ing others. de$e#o!s o$er tie& Much of this research suggests that the
stage theories are too si!#istic in their !icture of changes in ski##s" attributes" and
co!etencies o$er tie&
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Both Gi##igan and Eoh#berg agree that there are stages of growth in ora# de$e#o!ent"
o$ing fro a focus on the se#f through con$entiona# stages and onto a ature stage where we
critica##y and ref#ecti$e#y e0aine the ade7uacy of our ora# standards& Therefore" one of the
centra# ais of ethics is the stiu#ation of this ora# de$e#o!ent by discussing" ana#y(ing"
and critici(ing the ora# reasoning that we and others do" finding one set of !rinci!#es BbetterB
when it has been e0ained and found to ha$e better and stronger reasons su!!orting it&
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LESSON 05
MOR%& RE%'ONIN)
Mora# reasoning itse#f has two essentia# co!onents+ an understanding of what reasonab#e
ora# standards re7uire" and e$idence or inforation concerning whether a !articu#ar !o#icy"
!erson" institution" or beha$ior has the features of these ora# standards& Leo!#e often fai# to
ake their ora# standards e0!#icit when they ake a ora# <udgent" ain#y because they
assue the to be ob$ious& This assu!tion is not a#ways true" howe$erI often we ust retrace
a !erson,s ora# reasoning to deduce what their ora# standards are& Af course" it is not a#ways
easy to se!arate factua# inforation fro ora# standards&
Moral reasonin* refers to the reasoning !rocess by which huan beha$iors" institutions" or
!o#icies are <udged to be in accordance with or in $io#ation of ora# standards& Mora# reasoning
a#ways in$o#$es two essentia# co!onents+ -a. an understanding of what reasonab#e ora#
standards re7uire" !rohibit" $a#ue" or condenI and -b. e$idence or inforation that shows that
a !articu#ar !erson" !o#icy" institution" or beha$ior has the kinds of features that these ora#
standards re7uire" !rohibit" $a#ue" or conden& /ere is an i##ustration of ora# reasoning whose
author is offering us his reasons for c#aiing that *erican socia# institutions are un<ust&
O!oi<!
E0a!#e+ H* society is E0a!#e+ H'n *erican E0a!#e+
Gn<ust if it does not treat society" J1P of @egroes fa## H*erican society
Minorities e7ua# to whites&C Be#ow the !o$erty #ine as is un<ust&C
Co!ared with 13P whites&
To e$a#uate the ade7uacy of ora# reasoning" ethicists e!#oy three ain criteria+
1& Mora# reasoning must be logical& The ana#ysis of ora# reasoning re7uires that the #ogic
of the arguents used to estab#ish a ora# <udgent be rigorous#y e0ained" a## the
uns!oken ora# and factua# assu!tion be ade e0!#icit" and both assu!tions and
!reises be dis!#ayed and sub<ected to criticis&
3& 4actua# e$idence must be accurate, relevant, and complete& 4or e0a!#e" the i##ustration
of ora# reasoning 7uoted cites se$era# statistics -H9hereas @egroes ake u! 11
!ercent of nations work force" they ha$e but 6 !ercent of the nations technica# and
!rofessiona# <obsC. and re#ationshi! -HThe non white contribute chea! #abor which
enab#es others to #i$e dis!ro!ortionate#y we##C. that a!!arent#y e0ist in *erica& 'f the
ora# reasoning is to be ade7uate these statistics and re#ationshi!s ust be accurate. 'n
addition" e$idence ust be relevant: it ust show that the beha$ior" !o#icy" or
institution being <udged has !recise#y those characteristics that are !roscribed by the
ora# standards in$o#$ed& E$idence ust be complete: it ust take into account a##
re#e$ant inforation and ust not se#ecti$e#y ad$ert on#y to the e$idence that tends to
su!!ort a sing#e !oint of $iew&
2& Mora# standards must be consistent& They ust be consistent with each other and with
the other standards and be#iefs the !erson ho#ds& 'nconsistency between a !ersons
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Mora#
;tandards
4actua# inforation
concerning the
!o#icy" institution"
or beha$ior under
consideration&
Mora# <udgent on
the rightness or
wrongness of the
!o#icy institution" or
beha$ior&
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Business Ethics MGT610 VU
ora# standards can be unco$ered by e0aining situations in which these ora#
standards re7uire inco!atib#e things&
Consistency refers not on#y to the fact that one,s standards ust be ab#e to coe0ist with each
other" but a#so to the re7uireent that one ust be wi##ing to acce!t the conse7uences of
a!!#ying one,s ora# standards consistent#y to others in sii#ar circustances& The consistency
re7uireent is" in fact" the basis of an i!ortant critica# ethod in ethics+ the use of
countere0a!#es and hy!othetica# e0a!#es&
This consistency re7uireent can be !hrased as fo##ows+
'f ' <udge that a certain !erson is ora##y <ustified -or un<ustified. in doing * in
circustance C" then ' ust acce!t that it is ora##y <ustified -or un<ustified. for any other
!erson+
-a.To !erfor any act re#e$ant#y sii#ar to *
-b.'n any circustances re#e$ant#y sii#ar to C&

%r*uments $or an %*ainst Business Ethics
;oe !eo!#e ob<ect to the entire notion that ethica# standards shou#d be brought into business
organi(ations& They ake three genera# ob<ections&
4irst" they argue that the !ursuit of !rofit in !erfect#y co!etiti$e free arkets wi##" by itse#f"
ensure that the ebers of a society are ser$ed in the ost socia##y beneficia# ways& Af course"
the assu!tion that industria# arkets are !erfect#y co!etiti$e is high#y sus!ect& E$en ore"
there are se$era# ways of increasing !rofits that wi## actua##y har society& Lroducing what the
buying !ub#ic wants ay not be the sae as !roducing what the entirety of society needs& The
arguent is essentia##y aking a norati$e <udgent on the basis of soe assued but
un!ro$ed ora# standards -B!eo!#e shou#d do whate$er wi## benefit those who !artici!ate in
arketsB.& Thus" a#though the arguent tries to show that ethics does not atter" it can do this
on#y by assuing an un!ro$ed ora# standard that at #east a!!ears istaken&
;econd" they c#ai that e!#oyees" as B#oya# agents"B are ob#igated to ser$e their e!#oyers
sing#e%inded#y" in whate$er ways wi## ad$ance the e!#oyer,s se#f%interest&
*s a #oya# agent of his or her e!#oyer" the anager has a duty to ser$e his or her
e!#oyer as the e!#oyer wou#d want to be ser$ed -if the e!#oyer had the agent,s
e0!ertise.& *n e!#oyer wou#d want to be ser$ed in whate$er ways wi## ad$ance
his or her se#f%interests&
Therefore" as a #oya# agent of his or her e!#oyer" the anager has a duty to ser$e
his or her e!#oyer in whate$er ways wi## ad$ance the e!#oyer,s se#f%interests&
But this arguent itse#f rests on an un!ro$en ora# standard that the e!#oyee has a duty to
ser$e his or her e!#oyer and there is no reason to assue that this standard is acce!tab#e& *n
agent,s duties are defined by what is ca##ed the #aw of agency" -i&e&" the #aw that s!ecifies the
duties of !ersons OagentsQ who agree to act on beha#f of another !arty and who are authori(ed
by the agreeent so to act.& *#so" agreeents to ser$e another do not autoatica##y <ustify
doing wrong on another,s beha#f&
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Third" they say that obeying the #aw is sufficient for businesses and that business ethics is"
essentia##y" nothing ore than obeying the #aw& /owe$er" the #aw and ora#ity do not a#ways
coincide -again" s#a$ery and @a(i Gerany are re#e$ant e0a!#es.& ;oe #aws ha$e nothing to
do with ora#ity because they do not in$o#$e serious atters& These inc#ude !arking #aws" dress
codes" and other #aws co$ering sii#ar atters& Ather #aws ay e$en $io#ate our ora#
standards so that they are actua##y contrary to ora#ity&
Thus" none of the arguents for kee!ing ethics out of business sees forcefu#& 'n contrast"
there are fair#y strong arguents for bringing ethics into business&
Ane arguent !oints out that since ethics shou#d go$ern a## huan acti$ity" there is no reason
to e0e!t business acti$ity fro ethica# scrutiny& Business is a coo!erati$e acti$ity whose $ery
e0istence re7uires ethica# beha$ior& *nother ore de$e#o!ed arguent !oints out that no
acti$ity" business inc#uded" cou#d be carried out in an ethica# $acuu&
Ane interesting arguent actua##y c#ais that ethica# considerations are consistent with
business acti$ities such as the !ursuit of !rofit& 'ndeed" the arguent c#ais that ethica#
co!anies are ore !rofitab#e than other co!anies& The data is i0ed on this 7uestion" but
e$en though it cannot deonstrate that ethica# beha$ior is a#ways ore !rofitab#e" it does
c#ear#y show that it is not a drag on !rofits&
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LESSON 06
MOR%& RE'(ON'IBI&IT# %ND B&%ME
Moral Res!onsi-ility an Blame
Mora# res!onsibi#ity is directed not on#y at <udgents concerning right or wrong& ;oeties"
they are directed at deterining whether a !erson or organi(ation is ora##y res!onsib#e for
ha$ing done soething wrong& Leo!#e are not a#ways res!onsib#e for their wrongfu# or
in<urious acts+ ora# res!onsibi#ity is incurred on#y when a !erson knowing#y and free#y acts in
an iora# way or fai#s to act in a ora# way&
* <udgent about a !ersons ora# res!onsibi#ity for a wrongfu# in<ury is a <udgent about the
e0tent to which the !erson deser$es b#ae or !unishent" or shou#d !ay restitution for the
in<ury& 4or e0a!#e" if an e!#oyer de#iberate#y in<ures the heath of her e!#oyees" we wou#d
<udge the e!#oyer ora##y res!onsib#e for those in<uries& 9e are then saying the e!#oyer is
to b#ae for those in<uries and !erha!s deser$es !unishent and shou#d co!ensate the
$ictis&
't is i!ortant not to confuse this eaning of moral responsibility
'gnorance and inabi#ity to do otherwise are two conditions" ca##ed excusing conditions, that
co!#ete#y e#iinate a !erson,s ora# res!onsibi#ity for causing wrongfu# in<ury& 'gnorance and
inabi#ity do not a#ways e0cuse a !erson" howe$er& 9hen one de#iberate#y kee!s onese#f
ignorant to esca!e res!onsibi#ity" that ignorance does not e0cuse the wrongfu# in<ury& * !erson
is ora##y res!onsib#e for an in<ury or a wrong if+
1& The !erson caused or he#!ed cause it" or fai#ed to !re$ent it when he cou#d and shou#d ha$eI
3& The !erson did so knowing what he or she was doingI
2& The !erson did so of his own free wi##&
'gnorance ay concern the re#e$ant facts or the re#e$ant ora# standards& Genera##y" ignorance
of the facts e#iinates ora# res!onsibi#ity& This is because ora# res!onsibi#ity re7uires
freedo" which is i!ossib#e in the case of ignorance of the re#e$ant facts& 'nabi#ity e#iinates
res!onsibi#ity because a !erson cannot ha$e a ora# ob#igation to do soething o$er which he
or she has no contro#& * !erson is @AT ora##y res!onsib#e for an in<ury or a wrong if+
1& The !erson did not cause and cou#d not !re$ent the in<ury or wrongI
3& The !erson did not know he was inf#icting the in<ury or the wrongI
2& The !erson did not inf#ict the in<ury or the wrong of his own free wi##I
'n addition to the e0cusing conditions" there are a#so three itigating factors that diinish
ora# res!onsibi#ity& They are+
1& Circustances that #ea$e a !erson uncertain -but not unsure. about what he or she is
doingI
3& Circustances that ake it difficu#t -but not i!ossib#e. for the !erson to a$oid doing itI
2& Circustances that inii(e -but do not reo$e. a !erson,s in$o#$eent in an act&
The e0tents to which these itigating circustances can diinish an agent,s res!onsibi#ity
de!end on the seriousness of the in<ury& Genera##y" the ore serious the in<ury" the #ess the
itigating circustances wi## diinish res!onsibi#ity&
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9e begin with a discussion of a!artheid%era ;outh *frica and Ca#te0" an *erican oi#
co!any o!erating in ;outh *frica during that tie& * #arge nuber of Ca#te0 stockho#ders
o!!osed the co!any,s o!erations in ;outh *frica" and introduced a series of shareho#der
reso#utions re7uiring Ca#te0 to #ea$e ;outh *frica" which they saw as racist and iora#&
Ca#te0s anageent did not agree& 6ather than focusing on the financia# assistance they were
gi$ing the ;outh *frican go$ernent" they !ointed to the !ositi$e effects their o!erations had
on b#ack workers&
;outh *frican #eaders" such as *rchbisho! 5esond Tutu" were not con$inced by Ca#te0,s
arguents& /e su!!orted the shareho#der reso#utions" saying that cofort under an iora#
regie was not !referab#e to freedo" e$en at the cost of econoic hardshi!&
The !oint of this e0a!#e is to show how a rea# ora# debate in business works& The arguents
on both sides a!!ea#ed to ora# considerations and four basic ty!es of ora# standards+
uti#itarianis" rights" <ustice" and caring& The shareho#ders, arguent referred to the un<ust
!o#icies of the a!artheid go$ernent and the fact that these !o#icies $io#ated the ci$i# rights of
b#ack citi(ens& An the other side" Ca#te0,s anageent ade uti#itarian arguents and
arguents about caring+ it was in b#acks, best interests to ha$e Ca#te0 <obs" and Ca#te0 had a
duty to take care of these workers as best it cou#d& 'n addition" both sides refer to the ora#
character of the grou!s in$o#$ed" basing these distinctions on what is ca##ed the ethic of $irtue&
The fo##owing sections of this cha!ter e0!#ain each of these a!!roaches" identifying their
strengths and weaknesses and showing how they can be used to c#arify the ora# issues we
confront in business&
Utilitarianism/ 0ei*hin* 'ocial Costs an Bene1its
Gti#itarianis -or conse7uentia#is. characteri(es the ora# a!!roach taken by Ca#te0,s
anageent& *nother e0a!#e" 4ord and its infaous Linto" deonstrates <ust how c#ose#y the
weighing of costs and benefits can be done&
4ord knew that the Linto wou#d e0!#ode when rear%ended at on#y 30 !h" but they a#so knew
that it wou#d cost 112D i##ion to fi0 the !rob#e& ;ince they wou#d on#y ha$e to !ay 1JM
i##ion in daages to in<ured $ictis and the fai#ies of those who died" they ca#cu#ated that it
was not right to s!end the oney to fi0 the cars when society set such a #ow !rice on the #i$es
and hea#th of the $ictis& The kind of ana#ysis that 4ord anagers used in their cost%benefit
study is a $ersion of what has been traditiona##y ca##ed utilitarianism. Utilitarianism is a
genera# ter for any $iew that ho#ds that actions and !o#icies shou#d be e$a#uated on the basis
of the benefits and costs they wi## i!ose on society& 'n any situation" the BrightB action or
!o#icy is the one that wi## !roduce the greatest net benefits or the #owest net costs -when a##
a#ternati$es ha$e on#y net costs.&
Many businesses re#y on such uti#itarian cost%benefit ana#yses" and aintain that the socia##y
res!onsib#e course to take is the uti#itarian one with the #owest net costs&
=erey Bentha founded traditiona# uti#itarianis& /is $ersion of the theory assues that we
can easure and add the 7uantities of benefits !roduced by an action and subtract the easured
7uantities of har it wi## cause" a##owing us to deterine which action has the ost benefits or
#owest tota# costs and is therefore ora#& The uti#ity Bentha had in ind was not the greatest
benefit for the !erson taking the action" but rather the greatest benefit for a## in$o#$ed& 4or
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Bentha+
H*n action is right fro an ethica# !oint of $iew if and on#y if the su tota# of
uti#ities !roduced by that act is greater than the su tota# of uti#ities !roduced by
any other act the agent cou#d ha$e !erfored in its !#ace&C
*#so" it is i!ortant to note that on#y one action can ha$e the #owest net costs and greatest net
benefits&
To deterine what the ora# thing to do on any !articu#ar occasion ight be" there are three
considerations to fo##ow+
1& Rou ust deterine what a#ternati$e actions are a$ai#ab#e&
3& Rou ust estiate the direct and indirect costs and benefits the action wou#d !roduce
for a## in$o#$ed in the foreseeab#e future&
2& Rou ust choose the a#ternati$e that !roduces the greatest su tota# of uti#ity&
Gti#itarianis is attracti$e to any because it atches the $iews we tend to ho#d when
discussing go$ernenta# !o#icies and !ub#ic goods& Most !eo!#e agree" for e0a!#e" that when
the go$ernent is trying to deterine on which !ub#ic !ro<ects it shou#d s!end ta0 onies" the
!ro!er course of action wou#d be for it to ado!t those !ro<ects that ob<ecti$e studies show wi##
!ro$ide the greatest benefits for the ebers of society at the #east cost& 't a#so fits in with the
intuiti$e criteria that any e!#oy when discussing ora# conduct& Gti#itarianis can e0!#ain
why we ho#d certain ty!es of acti$ities" such as #ying" to be iora#+ it is so because of the
cost#y effects it has in the #ong run& /owe$er" traditiona# uti#itarians wou#d deny that an action
of a certain kind is a#ways either right or wrong& 'nstead" each action wou#d ha$e to be weighed
gi$en its !articu#ar circustances& Gti#itarian $iews ha$e a#so been high#y inf#uentia# in
econoics& * #ong #ine of econoists" beginning in the 1Mth century" argued that econoic
beha$ior cou#d be e0!#ained by assuing that huan beings a#ways atte!t to a0ii(e their
uti#ity and that the uti#ities of coodities can be easured by the !rices !eo!#e are wi##ing to
!ay for the&
Gti#itarianis is a#so the basis of the techni7ues of econoic cost2-ene1it analysis. This ty!e
of ana#ysis is used to deterine the desirabi#ity of in$esting in a !ro<ect -such as a da" factory"
or !ub#ic !ark. by figuring whether its !resent and future econoic benefits outweigh its
!resent and future econoic costs& To ca#cu#ate these costs and benefits" discounted onetary
!rices are estiated for a## the effects the !ro<ect wi## ha$e on the !resent and future
en$ironent and on !resent and future !o!u#ations& 4ina##y" we can note that uti#itarianis fits
nice#y with a $a#ue that any !eo!#e !ri(e+ efficiency& E11iciency can ean different things to
different !eo!#e" but for any it eans o!erating in such a way that one !roduces the ost one
can with the resources at hand&
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Business Ethics MGT610 VU
LESSON 07
UTI&IT%RI%NI'M
Utilitarianism/ 0ei*hin* 'ocial Costs an Bene1its
Gti#itarianis is a !owerfu# and wide#y acce!ted ethica# theory that has s!ecia# re#e$ance to
!rob#es in business& 't !ro$ides a fair#y straightforward decision%aking !rocess to assist in
deterining the best course of action in any situations& 'ts a!!#ication in$o#$es de$e#o!ing a
#ist of a$ai#ab#e a#ternati$es" fo##owing the conse7uences of each as far into the future as
!ossib#e" and se#ecting the a#ternati$e with the greatest ba#ance of benefits o$er hars for
e$eryone& Cha!ter 3 a#so introduces the distinction between te#eo#ogica# and deonto#ogica#
theories and e0!#ores the strengths and weakness of both kinds of theories for the !ur!oses of
business ethics&
Classical Utilitarianism
5ifferent !arts of the uti#itarian doctrine were ad$anced by ancient Greek !hi#oso!hers" but it
wasnt unti# the ear#y nineteenth century that two Eng#ish reforers fashioned the $arious
uti#itarian !ieces into a coherent who#e& These two !hi#oso!hers were =erey Bentha -1DJ)%
1)23. and =ohn ;tuart Mi## -1)06%1)D2.& Bentha,s uti#itarianis a!!ro$es of actions that
augent and disa!!ro$es of actions that diinish the ha!!iness of the !arty in 7uestion& /e
easured this aount of !#easure or !ain by a hedonistic ca#cu#us that considers such factors as
intensity" duration" #ike#ihood of occurrence" and !ro0iity in tie& *ccording to Bentha" if
this !rocess is re!eated for a## indi$idua#s" the resu#ting sus wi## show the good or bad
tendency of an action for an entire counity& /owe$er" critics charge that his conce!tion of
!#easure is too crude to constitute the so#e good for huan beings& Mi## odified Bentha,s
uti#itarianis by !ro!osing that actions are right inasuch as they !roote ha!!iness and
wrong inasuch as they !roote the o!!osite of ha!!iness" where ha!!iness is !#easure and
the absence of !ain& 'n addition" he sti!u#ated that !#easures differ in their 7ua#ity" so that
huans en<oy higher !#easures than ania#s& Ane can argue that Mi## sa$es hedonis fro the
charge of crudeness because the higher !#easures en<oyed by a few with e#e$ated tastes are
un#ike#y to outweigh the tota# su of the base !#easures en<oyed by ost& Mi## gi$es us no
guidance for co!aring the 7ua#ity with the 7uantity of !#easure& /owe$er" in other writings
Mi## sees to c#ai that the de$e#o!ent of our critica# facu#ties and the ca!acity for
autonoous action are ends in these#$es& 4or Bentha+
H*n action is right fro an ethica# !oint of $iew if and on#y if the su tota# of
uti#ities !roduced by that act is greater than the su tota# of uti#ities !roduced by
any other act the agent cou#d ha$e !erfored in its !#ace&C
Cost3Bene1it %nalysis
Bentha,s idea of a !recise 7uantitati$e ethod for decision aking is ost fu##y rea#i(ed in a
cost%benefit ana#ysis& 'n cost%benefit ana#ysis" onetary units are used to e0!ress the benefits
and drawbacks of $arious a#ternati$es in a decision %aking !rocess& The chief ad$antage of
cost%benefit ana#ysis is that the !rices of any goods are set by the arket" which e#iinates
the need to ha$e know#edge of !eo!#e,s !#easures or !reference rankings& Because of its narrow
focus on econoic efficiency in the a##ocation of resources" cost%benefit ana#ysis is not
coon#y used as a basis for !ersona# ora#ity& 'n addition" it cannot deterine such ora#
7uestions as the rights of consuers in atters of !roduct safety or en$ironenta# !rotection
but can be used on#y to deterine a!!ro!riate #e$e#s of both !roduct safety and en$ironenta#
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!rotection& * distinction can be ade between cost-benefit analysis" which is used to se#ect
both the eans to an end and the end itse#f" and cost-effectiveness analysis" which assues that
we a#ready ha$e soe agreed%u!on end" and the on#y 7uestion regards the ost efficient eans
of achie$ing it&
The !ro-lems o1 assi*nin* monetary values
@ot a## costs and benefits ha$e an easi#y deterined onetary $a#ueI e0a!#es inc#ude the
en<oyent of fai#y and friends" !eace and 7uiet" !o#ice !rotection" and freedo fro the risk
of in<ury and death& Moreo$er" the arket !rice of a good does not a#ways corres!ond to its
opportunity cost& 4or e0a!#e" the fact that a yacht costs ore than a co##ege education does
not ean that consuers $a#ue yachts ore high#y than education& Ane can atte!t to
o$ercoe these !rob#es through shadow pricing& This a!!roach enab#es a $a#ue to be !#aced
on goods that ref#ects !eo!#e,s arket and non%arket beha$ior& 4or e0a!#e" by co!aring
the !rices of houses near air!orts with the !rices of sii#ar houses e#sewhere" it is !ossib#e to
infer the $a#ue that !eo!#e !#ace on !eace and 7uiet& But there are #iitations& ;oeone who
buys a house near an air!ort ay be unab#e to afford co!arab#e housing e#sewhere or si!#y
ay not ind the noise&
'houl all thin*s -e assi*ne a monetary value4
;oe argue that !#acing a do##ar $a#ue on certain goods actua##y #essens their !ercei$ed $a#ue"
since they are $a#ued !recise#y because they cannot be bought or so#d& 4riendshi!" #o$e" and
#ife itse#f are e0a!#es of such goods& ;uch arguents are beside the !oint" because cost%
benefit ana#ysis re7uires that a $a#ue be !#aced on goods on#y for the !ur!oses of ca#cu#ation&
Other values in cost3-ene1it analysis
Though cost%benefit ana#ysis !ur!orts to be $a#ue%free" critics c#ai that it is hea$i#y $a#ue%
#aden because ana#ysts cannot entire#y disengage their own $a#ues fro the ana#ysis& Before
such an in$estigation begins" the ana#yst ust ake se$era# $a#ue%#aden decisions" inc#uding+
5. The range of a#ternati$es to be considered in the ana#ysis&
6. 9hat constitutes a cost and a benefit as we## as whose $a#ues deterine this&
7. 9hat counts as a conse7uence of a !articu#ar act&
8. The nuber of Bs!i##o$er effectsB or e0terna#ities that are inc#uded&
9. The distance into the future that the conse7uences are ca#cu#ated&
'n the end" we ust reeber that cost%benefit ana#ysis is on#y as good as the ana#yst who
!erfors it and that this ethod is not intended to be the so#e eans for arri$ing at i!ortant
decisions we ake as a society&
*#so" it is i!ortant to note that on#y one action can ha$e the #owest net costs and greatest net
benefits&
To deterine what the ora# thing to do on any !articu#ar occasion ight be" there are three
considerations to fo##ow+
1& Rou ust deterine what a#ternati$e actions are a$ai#ab#e&
3& Rou ust estiate the direct and indirect costs and benefits the action wou#d !roduce
for a## in$o#$ed in the foreseeab#e future&
2& Rou ust choose the a#ternati$e that !roduces the greatest su tota# of uti#ity&
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Gti#itarianis is attracti$e to any because it atches the $iews we tend to ho#d when
discussing go$ernenta# !o#icies and !ub#ic goods& Most !eo!#e agree" for e0a!#e" that when
the go$ernent is trying to deterine on which !ub#ic !ro<ects it shou#d s!end ta0 onies" the
!ro!er course of action wou#d be for it to ado!t those !ro<ects that ob<ecti$e studies show wi##
!ro$ide the greatest benefits for the ebers of society at the #east cost& 't a#so fits in with the
intuiti$e criteria that any e!#oy when discussing ora# conduct& Gti#itarianis can e0!#ain
why we ho#d certain ty!es of acti$ities" such as #ying" to be iora#+ it is so because of the
cost#y effects it has in the #ong run& /owe$er" traditiona# uti#itarians wou#d deny that an action
of a certain kind is a#ways either right or wrong& 'nstead" each action wou#d ha$e to be weighed
gi$en its !articu#ar circustances& Gti#itarian $iews ha$e a#so been high#y inf#uentia# in
econoics& * #ong #ine of econoists" beginning in the 1Mth century" argued that econoic
beha$ior cou#d be e0!#ained by assuing that huan beings a#ways atte!t to a0ii(e their
uti#ity and that the uti#ities of coodities can be easured by the !rices !eo!#e are wi##ing to
!ay for the&
Gti#itarianis is a#so the basis of the techni7ues of econoic cost2-ene1it analysis. This ty!e
of ana#ysis is used to deterine the desirabi#ity of in$esting in a !ro<ect -such as a da" factory"
or !ub#ic !ark. by figuring whether its !resent and future econoic benefits outweigh its
!resent and future econoic costs& To ca#cu#ate these costs and benefits" discounted onetary
!rices are estiated for a## the effects the !ro<ect wi## ha$e on the !resent and future
en$ironent and on !resent and future !o!u#ations& 4ina##y" we can note that uti#itarianis fits
nice#y with a $a#ue that any !eo!#e !ri(e+ efficiency& E11iciency can ean different things to
different !eo!#e" but for any it eans o!erating in such a way that one !roduces the ost one
can with the resources at hand&
Though uti#itarianis offers a su!erficia##y c#ear%cut ethod of ca#cu#ating the ora#ity of
actions" it re#ies u!on accurate easureent" and this can be !rob#eatic& There are fi$e a<or
!rob#es with the uti#itarian re#iance on easureent+
1& Co!arati$e easures of the $a#ues things ha$e for different !eo!#e cannot be
ade%we cannot get into each others, skins to easure the !#easure or !ain caused&
3& ;oe benefits and costs are i!ossib#e to easure& /ow uch is a huan #ife
worth" for e0a!#e:
2& The !otentia# benefits and costs of an action cannot a#ways be re#iab#y !redicted" so
they are a#so not ade7uate#y easurab#e&
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LESSON 08
UTI&IT%RI%NI'M (CONTD.)
J& Co!arati$e easures of the $a#ues things ha$e for different !eo!#e cannot be
ade%we cannot get into each others, skins to easure the !#easure or !ain caused&
K& ;oe benefits and costs are i!ossib#e to easure& /ow uch is a huan #ife
worth" for e0a!#e:
6& The !otentia# benefits and costs of an action cannot a#ways be re#iab#y !redicted" so
they are a#so not ade7uate#y easurab#e&
D& 't is unc#ear e0act#y what counts as a benefit or a cost& Leo!#e see these things in
different ways&
)& Gti#itarian easureent i!#ies that a## goods can be traded for e7ui$a#ents of each
other& /owe$er" not e$erything has a onetary e7ui$a#ent&
The critics of uti#itarianis contend that these easureent !rob#es undercut whate$er
c#ais uti#itarian theory akes towards !ro$iding an ob<ecti$e basis for deterining norati$e
issues& These !rob#es ha$e becoe es!ecia##y ob$ious in debates o$er the feasibi#ity of
cor!orate socia# audits&
Gti#itarian defend their a!!roach against the ob<ections raised by these !rob#es by saying that
though idea##y they wou#d #ike accurate easureents of e$erything" they know that this is
#arge#y i!ossib#e& Therefore" when easureents are difficu#t or i!ossib#e to obtain" shared
or coon%sense <udgents of co!arati$e $a#ue are sufficient&
There are two wide#y used coon%sense criteria& Ane re#ies on the distinction between
intrinsic *oos and instrumental *oos. 'ntrinsic goods are things that are desired for their
own sake" such as hea#th and #ife& These goods a#ways take !recedence o$er instruenta#
goods" which are things that are good because they he#! to bring about an intrinsic good& The
other coon%sense criterion de!ends on the distinction between needs and wants& Goods that
bring about needs are ore i!ortant than those that bring about wants& /owe$er" these
ethods are intended to be used on#y when 7uantitati$e ethods fai#&
The ost f#e0ib#e ethod is to easure actions and goods in ters of their onetary
e7ui$a#ents& 'f soeone is wi##ing to !ay twice as uch for one good than for another" we can
assue that the forer is twice as $a#uab#e for that !erson& Many !eo!#e are ade
uncofortab#e by the notion that hea#th and #ife ust be assigned a onetary $a#ue& Gti#itarian
!oint out that we do so e$ery day" howe$er" by !aying for soe safety easures but not for
those easures that are considered ore e0!ensi$e&
The a<or difficu#ty with uti#itarianis" according to soe critics" is that it is unab#e to dea#
with two kinds of ora# issues+ those re#ating to rights and those re#ating to <ustice& 'f !eo!#e
ha$e rights to #ife" hea#th" and other basic needs" and if there is such a thing as <ustice that does
not de!end on ere uti#ity" then uti#itarianis does not !ro$ide a co!#ete !icture of ora#ity&
Gti#itarianis can a#so go wrong" according to the critics" when it is a!!#ied to situations that
in$o#$e socia# <ustice& Gti#itarianis #ooks on#y at how uch uti#ity is !roduced in a
society and fai#s to take into account how that uti#ity is distributed aong the ebers of
society&
Large#y in res!onse to these concerns" uti#itarians ha$e de$ised an a#ternati$e $ersion" ca##ed
rule utilitarianism. 'n this $ersion" instead of #ooking at indi$idua# acts to see whether they
!roduce ore !#easure than the a#ternati$es" one #ooks on#y at ora# ru#es at actions of a
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!articu#ar ty!e& 'f actions of a kind tend to !roduce ore !#easure or ha$e #ower costs" then
they are the ora# ty!es of actions& =ust because an action !roduces ore uti#ity on one
occasion does not show it is right ethica##y&
6u#e uti#itarianis ay not co!#ete#y answer a## of the ob<ections raised by critics of
uti#itarianis& * ru#e ay genera##y !roduce ore uti#ity and sti## be un<ust+ consider ru#es that
wou#d a##ow a #arge a<ority to take unfair ad$antage of a sa##er inority&
The theory of the ru#e uti#itarian" then" has two !arts" which we can suari(e in the fo##owing
two !rinci!#es+
1& *n action is right fro an ethica# !oint of $iew if and on#y if the action wou#d be
re7uired by those ora# ru#es that are correct&
3& * ora# ru#e is correct if and on#y if the su tota# of uti#ities !roduced if e$eryone
were to fo##ow that ru#e is greater than the su tota# uti#ities !roduced if e$eryone
were to fo##ow soe a#ternati$e ru#e.
Thus" according to the ru#e%uti#itarian" the fact that a certain action wou#d a0ii(e uti#ity on
one !articu#ar occasion does not show that it is right fro an ethica# !oint of $iew&
Thus" the two a<or #iits to uti#itarianis difficu#ties of easureent and the inabi#ity to dea#
with rights and <ustice reain" though the e0tent to which they #iit uti#itarian ora#ity is not
c#ear&
Ri*hts
* !erson has a right when that !erson is entit#ed to act in a certain way or is entit#ed to ha$e
others act in a certain way toward hi or her& The Bright to workB" any argue" is a right that
a## huan beings !ossess& ;uch rights" which are ca##ed moral rights or human rights" are based
on ora# nors and !rinci!#es that s!ecify that a## huan beings are !eritted or e!owered
to do soething or are entit#ed to ha$e soething done for the& Mora# rights" un#ike #ega#
rights" are usua##y thought of as being uni$ersa# insofar as they are rights that a## huan beings
of e$ery nationa#ity !ossess to an e7ua# e0tent si!#y by $irtue of being huan beings&
The ost i!ortant ora# rights are rights that impose prohibitions or reuirements on others
and which thereby enab#e indi$idua#s to choose free#y whether to !ursue certain interests or
acti$ities& Mora# rights are tight#y corre#ated with duties& My ora# right to worshi! as ' choose"
for e0a!#e" can be defined in ters of the ora# duties other !eo!#e ha$e to not interfere in
y chosen for of worshi!& !uties, then, are generally the other side of moral rights& Mora#
rights i!ose corre#ati$e duties on others" either duties of non%interference or duties of !ositi$e
!erforance&
Mora# rights !ro$ide indi$idua#s with autonoy and e7ua#ity in the free !ursuit of their
interests& The gains of others do not genera##y <ustify interference with a !erson,s !ursuit of an
interest or an acti$ity when that !ursuit is !rotected by a ora# right& Mora# rights !ro$ide a
basis for <ustifying ones actions and for in$oking the !rotection or aid of others&
Ne*ative an (ositive Ri*hts
Ne*ative ri*hts are distinguished by the fact that its ebers can be defined on#y in ters of
the duties others ha$e to not interfere in certain acti$ities of the !erson who ho#ds a gi$en right&
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Lositi$e rights are a## rights that go beyond non%interference to a#so i!ose a !ositi$e duty of
!ro$iding !eo!#e with soething when they are unab#e to !ro$ide it for these#$es&
(ositive ri*hts" as we know the today" were not e!hasi(ed unti# the 30th%century& Lositi$e
rights becae i!ortant in the 30th century when society increasing#y took it on itse#f to
!ro$ide its ebers with the necessities of #ife that they were unab#e to !ro$ide for these#$es&
Much of the debate o$er ora# rights has concentrated on whether negati$e or !ositi$e rights
shou#d be gi$en !riority& BConser$ati$eB writers" ha$e c#aied that go$ernent efforts shou#d
be #iited to enforcing negati$e rights and not e0!ended on !ro$iding !ositi$e rights& BLibera#B
authors ho#d that !ositi$e rights ha$e as strong a c#ai to being honored as negati$e rights and
that" conse7uent#y" go$ernent has a duty to !ro$ide both&
Lri$acy is an e0a!#e of a negati$e rightI the rights to food" #ife" and hea#th care are !ositi$e& 'n
genera#" ore #ibera# theorists ho#d that society shou#d guarantee !ositi$e as we## as negati$e
rightsI conser$ati$es wish to #iit go$ernent to enforcing negati$e rights& Lositi$e rights were
not e!hasi(ed unti# the 30th century& @egati$e rights were often e!#oyed in the 1Dth and
1)th centuries by writers of anifestos -such as the 5ec#aration of 'nde!endence and the Bi## of
6ights." who were an0ious to !rotect indi$idua#s against the encroachents of onarchica#
go$ernents& Lositi$e rights becae i!ortant in the 30th century when society increasing#y
took it on itse#f to !ro$ide its ebers with the necessities of #ife that they were unab#e to
!ro$ide for these#$es&
Ri*hts an Duties
The discussion of rights and duties begins with a discussion of 9a#t 5isney and its dea#ings
with Chinese co!anies& An March 2" 300J" e0ecuti$es of 9a#t 5isney" the wor#d,s second
#argest edia cong#oerate" were confronted with a grou! of stockho#ders concerned about the
co!any,s huan rights record in China& 9a#t 5isney arkets erchandise based on its
characters and fi#s" inc#uding toys" a!!are#" watches" consuer e#ectronics and accessories&
Much of this erchandise is anufactured in China in factories that contract with 5isney to
!roduce the erchandise according to 5isney,s s!ecifications& The Congressiona#%E0ecuti$e
Coission on China" a grou! estab#ished by the G&;& Congress in 3001" re!orted in 3002"
howe$er" BChina,s !oor record of !rotecting the internationa##y recogni(ed rights of its workers
has not changed significant#y in the !ast year& Chinese workers cannot for or <oin inde!endent
trade unions" and workers who seek redress for wrongs coitted by their e!#oyers often
face harassent and criina# charges& Moreo$er" chi#d #abor continues to be a !rob#e in soe
sectors of the econoy" and forced #abor by !risoners is coon&B 'n its March 3002 Country
"eports on #uman "ights $ractices, the G&;& ;tate 5e!artent said China,s econoy a#so
ade assi$e use of !rison or forced #abor&
'n genera#" a right is a !erson,s entit#eent to soethingI one has a right to soething when one
is entit#ed to act a certain way or to ha$e others act in a certain way towards onese#f& *n
entit#eent is ca##ed a le*al ri*ht. Entit#eents can coe fro #aws or ora# standardsI the
#atter are ca##ed moral ri*hts or human ri*hts& They s!ecify" in genera#" that a## huans are
!eritted to do soething or are entit#ed to ha$e soething done for the&
'n our ordinary discourse" we use the ter right to co$er a $ariety of situations in which
indi$idua#s are enab#ed to ake such choices in $ery different ways& 4irst" we soeties use
the ter right to indicate the ere absence of !rohibitions against !ursuing soe interest or
acti$ity& ;econd" we soeties use the ter right to indicate that a !erson is authori(ed or
e!owered to do soething either to secure the interests of others or to secure one,s interests&
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Third" the ter right is soeties used to indicate the e0istence of !rohibitions or re7uireents
on others that enab#e the indi$idua# to !ursue certain interests or acti$ities
The ost i!ortant rights are those that i!ose re7uireents or !rohibitions on others"
enab#ing !eo!#e to choose whether or not to do soething& Mora# rights ha$e three i!ortant
features defining the+
1& Mora# rights are c#ose#y corre#ated with duties&
3& Mora# rights !ro$ide indi$idua#s with autonoy and e7ua#ity in the free !ursuit of their
interests&
2& Mora# rights !ro$ide a basis for <ustifying one,s actions and in$oking the aid of others&
J& Mora# <udgents ade on the basis of rights differ substantia##y fro those based on
uti#ity&
4irst" they are based on the indi$idua#" whereas uti#itarianis is based on society as a who#e&
;econd" rights #iit the $a#idity of !referring nubers and socia# benefits to the indi$idua#& An
the other hand" a#though rights genera##y o$erride uti#itarian standards" they do not a#ways do
so& 'n ties of war" for e0a!#e" ci$i# rights are coon#y restricted for the !ub#ic good&
Contractual Ri*hts an Duties
There are other rights as we##& Those ost c#ose#y connected to business acti$ity are
contractual ri*hts: soeties ca##ed s!ecial ri*hts an uties or s!ecial o-li*ations. These
rights attach on#y to s!ecific indi$idua#s" and the duties they gi$e rise to attach on#y to s!ecific
indi$idua#s& 'n addition" they arise out of s!ecific transactions between !arties and de!end u!on
a !re%e0isting !ub#ic syste of ru#es& 'f ' contract to do soething for you" then you are entit#ed
to y !erforance+ you ac7uire a contractua# right to whene$er ' !roise" and ' ha$e a
contractua# duty to !erfor as ' !roised& Contractua# rights and duties de!end on a !ub#ic#y
acce!ted syste of ru#es that define the transactions that gi$e rise to those rights and duties&
Contractua# rights and duties a#so !ro$ide a basis for the s!ecia# duties or ob#igations that
!eo!#e ac7uire when they acce!t a !osition or a ro#e within a #egitiate socia# institution or
organi(ation& Married !arents" ha$e a s!ecia# duty to care for the u!bringing of their chi#dren&
9hat are the ethica# ru#es go$erning contracts:
1& Both of the !arties to a contract ust ha$e fu## know#edge of the nature of the
agreeent they are entering&
3& @either !arty to a contract ust intentiona##y isre!resent the fact of the contractua#
situation to the other !arty&
2& @either !arty to the contract ust be forced to enter the contract under duress or
coercion&
J& The contract ust not bind the !arties to an iora# act&
Genera##y" a contract that $io#ates one or ore of these conditions is considered $oid&
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Utilitarianism.s !ro-lem ;ith Ri*hts an <ustice
The a<or difficu#ty with uti#itarianis" according to soe critics" is that it is unab#e to dea#
with two kinds of ora# issues+ those re#ating to 6ights and those re#ating to =ustice& The
uti#itarian !rinci!a# i!#ies that certain actions are ora##y right when in fact they are un<ust or
they $io#ate !eo!#e,s rights&
The great benefits a syste ay ha$e for the a<ority does not <ustify the e0tree burdens that
it i!oses on a sa## grou!& The shortcoing of uti#itarianis is that it a##ows benefits and
burdens to be distributed aong the ebers of society in any way whatsoe$er so #ong as the
tota# aount of benefits is a0ii(ed& Gti#itarianis #ooks on#y at how uch uti#ity is
!roduced in a society and fai#s to take into account how that uti#ity is distributed aong the
ebers of society&
Considerations of =ustice -which #ook at how benefits and burdens are distributed aong
!eo!#e. and 6ights -which #ook at indi$idua# entit#eents to freedo of choice and to we##%
being. seeed to be ignored by ana#ysis that #ooks on#y at the costs and benefits of decisions&
% Basis 1or Moral Ri*hts/ ,ant
Gti#itarianis and Eantian ethics" they both ha$e different $iews to what they be#ie$e about
#i$es being of e7ua# ora# $a#ue& The two a#so ha$e different $iews of what ora#
considerabi#ity is" which eans the certain traits that gi$e you your !ersonhood& 9hen those
ideas are then out in to action" they wi## yie#d two different resu#ts" such as the case when one
#ooks at abortion& 'n genera#" !eo!#e who fo##ow Eantian ethics are ore concerned and
centered on the fact that if a !erson a #i$ing" breathing being" they are of ora# $a#ue" not
gi$ing as uch concern to the 7ua#ity of #ife that the !erson has& 9hen you #ook at these two
genera# ideas of the different ty!es of ethics" Eantian Ethics sees to be the uch ore sound
and ora# $iew& 't is inc#ined to #ook at the fact that the !erson is a !erson and can contribute to
society in soe fashion& E$en though uti#itarianis c#ai to be ore concerned with the
we#fare of the ebers of a society" it rea##y <ust takes the $a#ue and i!ortance out of huan
beings&
%hen tal&ing about 'tilitarianism and (antian ethics, one of the things that separates the two
views is the way in which they differentiate between moral considerablility.
Eants theory of ora#ity is the ost feasib#e in deterining a !ersons duty in a ora#
situation& The basis for his theory is !erha!s the ost nob#e of any" acting ora##y because
doing so is the right thing to do& /is ideas" no atter how $ague or o$er#y rigid" work easi#y in
ost situations& ;oe e0ce!tions do e0ist" but are we## out down by the ones that do occur in
e$ery situation& But des!ite these e0ce!tions" the !rocess Eant describes of con$erting a0is
to uni$ersa# #aws to test their ora# be#iefs& This !ro$ides us with a usefu# guide and a syste
of ethics and ora#ity&
The 1irst 1ormulation o1 ,ant.s Cate*orical Im!erative
Eants first foru#ation of the categorica# i!erati$e is as fo##ows+ H' ought ne$er to act e0ce!t
in such a way that ' can a#so wi## that y a0i shou#d becoe a uni$ersa# #aw&C * maxim for
Eant is the reason a !erson in a certain situation has for doing what he or she !#ans to do& *
a0i whoud Hbecoe a uni$ersa# #awC if e$ery !erson in a sii#ar situation chose to do the
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sae thing for the sae reason& Eants first $ersion of the caregorica# i!erit$e" then coe
down to the fo##owing !rinci!#e+
H*n action is ora##y right for a !erson in a certain situation if" and on#y if" the !erson,s
reason for carrying out the action is a reason that he or she wou#d be wi##ing to ha$e
e$ery !erson act on" in any sii#ar situation.)
*n e0a!#e ay he#! to c#arify the eaning of Eants !rinci!#e& ;u!!ose that ' a trying to
decide whether to fire an e!#oyee because ' do not #ike the e!#oyees race& *ccording to
Eants !rinci!#e" ' ust ask yse#f whether ' wou#d be wi##ing to ha$e an e!#oyer fire any
e!#oyee whene$er the e!#oyer does not #ike the race of his or her e!#oyee& 'n !articu#ar" '
ust ask yse#f whether ' wou#d be wi##ing to be fired yse#f shou#d y e!#oyer not #ike y
race& 'f ' a not wi##ing to ha$e e$eryone act in this way" e$en toward e" then it is ora##y
wrong for e to act in this way toward others& * !ersons reasons for acting" then" ust be
Hre$ersib#eC+ one ust be wi##ing to ha$e a## others use those reasons e$en against onese#f&
There is an ob$ious sii#arity" then" between the categorica# i!erati$e and the so%ca##ed
golden rule. H5o unto others as you wou#d ha$e the do unto you&C
The first foru#ation of the categorica# i!erati$e" then" incor!orates two criteria for
deterining ora# right and wrong?uni$ersa#i(abi#ity and re$ersibi#ity&
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LESSON 09
UNIVER'%&I=%BI&IT# + REVER'IBI&IT#
The categorica# i!erati$e incor!orates two criteria for deterining ora# right and wrong+
universali>a-ility and reversi-ility& Gni$ersa#i(abi#ity eans the !erson,s reasons for acting
ust be reasons that e$eryone cou#d act on at #east in !rinci!#e& 6e$ersibi#ity eans the
!erson,s reasons for acting ust be reasons that he or she wou#d be wi##ing to ha$e a## others
use" e$en as a basis of how they treat hi or her& That is" one,s reasons for acting ust be
reasons that e$eryone cou#d act u!on in !rinci!#e" and the !erson,s reasons ust be such that he
wou#d be wi##ing to ha$e a## others use the as we##& Gn#ike uti#itarianis" which focuses on
conse7uences" Eantian theory focuses on interior oti$ations&
The secon 1ormulation ,ant.s Cate*orical Im!erative
The second foru#ation Eant gi$es of the categorica# i!erati$e is this+ B*ct in such a way that
you a#ways treat huanity" whether in your own !erson or in the !erson of any other" ne$er
si!#y as a eans" but a#ways at the

sae tie as an end&B Ar ne$er treat !eo!#e on#y as eans"
but a#ways a#so as ends& 9hat Eant eans by Btreating huanity as an endB is that e$eryone
shou#d treat each huan being as a being whose e0istence as a free rationa# !erson shou#d be
!rooted& 4or Eant" this eans two things+ -a. res!ect each !erson,s freedo by treating
!eo!#e on#y as they ha$e free#y consented to be treated beforehand" and -b. de$e#o! each
!erson,s ca!acity to free#y choose for hi or herse#f the ais he or she wi## !ursue& Eant,s
second $ersion of the categorica# i!erati$e can be e0!ressed in the fo##owing !rinci!#e+
H*n action is ora##y right for a !erson if" and on#y if" in !erforing the action" the
!erson does not use others ere#y as a eans for ad$ancing his or her own interests"
but a#so both res!ects and de$e#o!s their ca!acity to choose free#y for these#$es&C
This $ersion of the categorica# i!erati$e i!#ies that huan beings ha$e an e7ua# dignity that
sets the a!art fro things such as too#s or achines and that is inco!atib#e with their being
ani!u#ated" decei$ed" or otherwise unwi##ing#y e0!#oited to satisfy the se#f%interests of
another&
/owe$er" e$en if the categorica# i!erati$e e0!#ains why !eo!#e ha$e ora# rights" it cannot
by itse#f te## us what !articu#ar ora# rights huans ha$e& *nd when rights coe into conf#ict"
it cannot te## us which right shou#d take !recedence& ;ti##" there see to be three basic rights
that can be defended on Eantian grounds+
1& /uans ha$e a c#ear interest in being !ro$ided with the work" food" c#othing"
housing" and edica# care they need to #i$e&
3& /uans ha$e a c#ear interest in being free fro in<ury and in being free to #i$e and
think as they choose&
2& /uans ha$e a c#ear interest in !reser$ing the institution of contracts&
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Kantian Rights
4irst" huan beings ha$e a c#ear interest in being he#!ed by being !ro$ided with the work"
food" c#othing" housing" and edica# care they need to #i$e on when they cannot !ro$ide these
for these#$es& ;econd" huan beings a#so ha$e a c#ear interest in being free fro in<ury or
fraud and in being free to think" associate" s!eak" and #i$e !ri$ate#y as they choose&
(ro-lems ;ith ,ant
5es!ite the attracti$eness of Eant,s theory" critics ha$e argued that" #ike uti#itarianis" it has its
#iitations and inade7uacies&
1& * first !rob#e that critics ha$e traditiona##y !ointed out is that Eant,s theory is not
!recise enough to a#ways be usefu#&
3& ;econd" soe critics c#ai that a#though we ight be ab#e to agree on the kinds of
interests that ha$e the status of ora# rights" there is substantia# disagreeent
concerning what the #iits of each of these rights are and concerning how each of these
rights shou#d be ba#anced against other conf#icting rights&
2& * third grou! of criticiss that ha$e been ade of Eant,s theory is that there are
countere0a!#es that show the theory soeties goes wrong& Most countere0a!#es to
Eant,s theory focus on the criteria of uni$ersa#i(abi#ity and re$ersibi#ity&
The Libertarian objection: Nozick
* $ery different $iew of rights is based on the work of #ibertarian !hi#oso!hers such as 6obert
@o(ick& They c#ai that freedo fro constraint is necessari#y good" and that a## constraints
i!osed on one by others are necessary e$i#s" e0ce!t when they !re$ent e$en greater huan
constraints& The on#y basic right we a## !ossess is the negati$e right to be free fro the coercion
of other huan beings&
Libertarians ay !ass too 7uick#y o$er the fact that the freedo of one !erson necessari#y
i!oses constraints on other !ersons" if on#y that others ust be constrained fro interfering
with that !erson& 'f ' ha$e the right to unioni(e" for e0a!#e" ' constrain the rights of y
e!#oyer to treat e as he sees fit& Though #ibertarians tend to use Eant to su!!ort their $iews"
there is no consensus on whether or not this is actua##y !ossib#e& There is a#so no good reason to
assue that on#y negati$e rights e0ist&
<ustice an $airness
The dis!ute o$er Bbrown #ungB disease caused by cotton dust i##ustrates how references to
<ustice and fairness !ereate such concerns& =ustice and fairness are essentia##y co!arati$e&
They are concerned with the co!arati$e treatent gi$en to the ebers of a grou! when
benefits and burdens are distributed" when ru#es and #aws are adinistered" when ebers of a
grou! coo!erate or co!ete with each other" and when !eo!#e are !unished for the wrongs they
ha$e done or co!ensated for the wrongs they ha$e suffered& <ustice genera##y refers to
atters that are ore serious than fairness" though soe !hi#oso!hers aintain that fairness is
ore fundaenta#& 'n genera#" we think that considerations of <ustice are ore i!ortant than
uti#itarian concerns+ greater benefits for soe do not <ustify in<ustices to others& /owe$er"
standards of <ustice not genera##y o$erride indi$idua# ora# rights& This is !robab#y because
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<ustice is" to soe e0tent" based on indi$idua# ora# rights&
There are three categories of issues in$o#$ing <ustice+
1& Distri-utive ?ustice is concerned with the fair distribution of society,s benefits and
burdens&
3& Retri-utive ?ustice refers to the <ust i!osition of !ena#ties and !unishents
2& Com!ensatory ?ustice is concerned with co!ensating !eo!#e for what they #ose
when hared by others&
8uestions of distributi$e <ustice arise when there is a scarcity of benefits or a !#ethora of
burdensI not enough food or hea#th care" for e0a!#e" or too uch un!#easant work& 9hen
resources are scarce" we ust de$e#o! !rinci!#es to a##ocate the fair#y& The fundaenta#
!rinci!#e in$o#$ed is that e7ua#s shou#d be treated e7ua##y -and une7ua#s treated une7ua##y.&
/owe$er" it is not c#ear in <ust what res!ects !eo!#e ust be e7ua#& The fundaenta# !rinci!#e
of distributi$e <ustice ay be e0!ressed as fo##ows+
H'ndi$idua#s who are sii#ar in a## res!ects re#e$ant to the kind of treatent in
7uestion shou#d be gi$en sii#ar benefits and burdens" e$en if they are dissii#ar in
other irre#e$ant res!ectsI and indi$idua#s who are dissii#ar in a re#e$ant res!ect
ought to be treated dissii#ar#y" in !ro!ortion to their dissii#arity&C
Ega#itarians ho#d that there are no re#e$ant differences aong !eo!#e that can <ustify une7ua#
treatent& *ccording to the ega#itarian" a## benefits and burdens shou#d be distributed according
to the fo##owing foru#a+
HE$ery !erson shou#d be gi$en e0act#y e7ua# shares of a society,s or a grou!,s
benefits and burdens&C
Though e7ua#ity is an attracti$e socia# idea# for any" ega#itarianis has been strong#y
critici(ed& ;oe critics c#ai that need" abi#ity" and effort are a## re#e$ant differences aong
!eo!#e" and that it wou#d be un<ust to ignore these differences&
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LESSON 10
E)%&IT%RI%N'. VIE0
<ustice as E@uality/ E*alitarianism
Ega#itarianis ho#ds that there are no re#e$ant differences aong !eo!#e that can <ustify
une7ua# treatent& *ccording to the Ega#itarian" a## benefits and burdens shou#d be distributed
according to the fo##owing foru#a+
Every person should be given eual shares of a society*s or a group*s benefits and burdens.
Ega#itarians base their $iew on the !ro!ositions that a## huan beings are e7ua# in soe
fundaenta# res!ect and that" in $irtue of this" each !erson has an e7ua# c#ai to societys
goods& *ccording to Ega#itarian" this i!#ies that goods shou#d be a##ocated to !eo!#e in e7ua#
!ortions&
E7ua#ity has been !ro!osed as a !rinci!#e of <ustice not on#y for entire societies" but a#so within
sa##er grou!s or organi(ations& 9ithin a fai#y" for e0a!#e" it is often assued that chi#dren
shou#d" o$er the course of their #i$es" recei$e e7ua# share of goods !arents ake a$ai#ab#e to
the& 'n soe co!anies and in soe workgrou!s" !articu#ar#y when the workgrou! has strong
fee#ings of so#idarity and is working at tasks that re7uire coo!eration" workers fee# that a##
shou#d recei$e e7ua# co!ensation for the work they are doing& 'nteresting#y" when workers in
a grou! recei$e e7ua# co!ensation" they tend to becoe ore coo!erati$e with each other and
to fee# greater so#idarity with each other& *#so interesting#y" workers in countries such as =a!an"
which is characteri(ed as ha$ing ore co##ecti$ist cu#ture" !refer the !rinci!#es of e7ua#ity ore
than workers in countries such as the Gnited ;tates" which is characteri(ed as ha$ing a ore
indi$idua# cu#ture&

<ustice Base on Contri-ution/ Ca!italist <ustice
;oe writers ha$e argued that a societys benefits shou#d be distributed in !ro!ortions to what
each indi$idua# contributes to a society andNor to grou!& The ore a !erson contributes to a
societys !oo# of econoic goods" for e0a!#e" the ore that !erson is entit#ed to take fro
that !oo#I the #ess an indi$idua# contributes" the #ess that indi$idua# shou#d get& The ore a
worker contributes to a !ro<ect" the ore he or she shou#d be !aid& *ccording to this ca!ita#ist
$iew of <ustice" when !eo!#e engage in econoic e0changes each other" what a !erson gets out
of the e0change shou#d be at #east e7ua# in $a#ue to what he or she contributed& =ustice re7uires"
then" that the benefits a !erson recei$es shou#d be !ro!ortiona# to the $a#ue of his or her
contribution& 8uite si!#y+
Benefits should be distributed according to the value of the contribution the individual ma&es
to a society, a tas&, a group, or an exchange.
The !rinci!#e of contribution is !erha!s the ost wide#y used !rinci!#e of fairness used to
estab#ish sa#aries and wages in *erican co!anies& 'n workgrou!s" !articu#ar#y when
re#ationshi!s aong the ebers of the grou! are i!ersona# and the !roduct of each worker
is inde!endent of the efforts of the others" workers tend to fee# that they shou#d be !aid in
!ro!ortion to the work they ha$e contributed& ;a#es !eo!#e out on the road" for e0a!#e" or
workers at indi$idua# sewing achines sewing indi$idua# garents or doing other !iece%work
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tend to fee# that they shou#d be !aid in !ro!ortion to the 7uantity of good they ha$e indi$idua##y
so#d or ade& 'nteresting#y" when workers are !aid in accordance with the !rinci!#e of
contribution" this tends to !roote aong the an uncoo!erati$e and e$en co!etiti$e
atos!here in which resources and inforation are #ess wi##ing#y shared and in which status
differences eerge& 9orkers in countries that are characteri(ed as ha$ing a ore co##ecti$ist
cu#ture" such as =a!an&
The ain 7uestion raised by the contributi$e !rinci!#e of distributi$e <ustice is how the H$a#ue
of the contributionC if each indi$idua# is to be easured& Ane #ong%#i$ed tradition has he#d that
contributions shou#d be easured in ters work effort& The ore effort !eo!#e !ut forth in their
work" the greater the share of benefits to which they are entit#ed& The harder one works" the
ore one deser$es" this is the assu!tion behind the Luritan ethic" which he#d that e$ery
indi$idua# had a re#igious ob#igation to work hard at his ca##ing -the career to which God
suons each indi$idua#. and that God <ust#y rewards hard work with wea#th and success"
whi#e /e <ust#y !unishes #a(iness with !o$erty and fai#ure& 'n the Gnited ;tates" this !uritan
ethic has e$o#$ed into a secu#ari(ed work ethic" which !#aces a high $a#ue on indi$idua# effort
and which assues that" whereas hard work does and shou#d #ead to success" #oafing is and
shou#d be !unished&
/owe$er" there are any !rob#es with using effort as the basis of distribution& 4irst to reward
a !ersons efforts without any reference to whether the !erson !roduces anything worthwhi#e
through these efforts is to reward inco!etence and inefficiency& ;econd" if we reward !eo!#e
so#e#y for their efforts and ignore their abi#ities and re#ati$e !roducti$ity" then ta#ented and
high#y !roducti$e !eo!#e wi## be gi$en #itt#e incenti$e to in$est their ta#ent and !roducti$ity in
!roducing goods for society& *s a resu#t" societys we#fare wi## dec#ine&
* second i!ortant tradition has he#d that contributions shou#d be easured in ters of
!roducti$ity+ the better the 7ua#ity of a !ersons contributed !roduct" the ore he or she shou#d
recei$e& -Lroduct here shou#d be inter!reted broad#y to inc#ude ser$ices rendered" ca!ita#
in$ested" coodities anufactured" and any ty!e of #iteracy" scientific" or aesthetic work
!roduced&. * a<or !rob#e with this second !ro!osa# is that it ignores !eo!#es needs&
/andica!!ed" i##" untrained" and iature !ersons ay be unab#e to !roduce anything
worthwhi#eI if !eo!#e are rewarded on the basis of their !roducti$ity" the needs of these
disad$antaged grou!s wi## not be et& The ain !rob#e with this second !ro!osa# is that it is
difficu#t to !#ace any ob<ecti$e easure on the $a#ue of a !ersons !roduct" es!ecia##y in fie#ds
such as the sciences" the arts" entertainent" ath#etics" education" theo#ogy" and hea#thcare& 9ho
wou#d want to ha$e their !roducts !riced on the basis of soeone e#ses sub<ecti$e estiates:
To dea# with the #ast difficu#ty entioned" soe authors ha$e suggested a third and high#y
inf#uentia# $ersion of the !rinci!#e of contribution+ they ha$e argued that the $a#ue of a !ersons
!roduct shou#d be deterined by the arket forces of su!!#y and deand& The $a#ue of a
!roduct wou#d then de!end not on its intrinsic $a#ue" but on the e0tent to which it is both
re#ati$e#y scarce and its $iewed by the buyers as desirab#e& 'n other words" the $a#ue of a
!ersons contribution wou#d se## for in a co!etiti$e arket& Leo!#e then deser$e to recei$e in
e0change with others whate$er the arket $a#ue of their !roduct is worth& Gnfortunate#y" this
ethod of easuring the $a#ue of a !ersons !roduct sti## ignores !eo!#es needs& Moreo$er" to
any !eo!#e" arket !rices are an un<ust ethod of e$a#uating the $a#ue of a !ersons !roduct
!recise#y because arkets ignore the intrinsic $a#ues of things& Markets" for e0a!#e" reward
entertainers ore than doctors& *#so arkets often reward a !erson who" through !ure chance"
has ended with soething -e&g&" an inheritance. that is scarce and that !eo!#e ha!!en to want&
This" to any" sees the height of in<ustice&
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<ustice Base on nees an %-ilities/ 'ocialism
Business there are !robab#y as any kinds of socia#is as there are socia#ist" it is soewhat
inaccurate to s!eak of HtheC socia#ist !osition on distributi$e <ustice& @onethe#ess" the dictu
!ro!osed first by Louis B#anc -1)11%1))3. and than by Ear# Mar0 -1)1)%1))2. and @iko#ai
Lenin -1)D0%1M3J. is traditiona##y taken to re!resent the socia#ist $iew on distribution+ H4ro
each according to his abi#ity" to each according to his needs&C The socia#ist !rinci!#e" then" can
be !ara!hrased as fo##ows+
%or& burdens should be distributed according to people*s abilities, and benefits should
be distributed according to people*s needs.
This socia#ist !rinci!#e is based first on the idea that !eo!#e rea#i(e their huan !otentia# by
e0ercising their abi#ities in !roducti$e work&

Because the rea#i(ation of ones fu## !otentia#ity is
a $a#ue" work that a !erson can be as !roducti$e as !ossib#e& and this i!#ies distributing work
according to abi#ity& ;econd" the benefits !roduced through work shou#d be used to !roote
huan ha!!iness and we## being& This eans distributing the so that !eo!#es basics and
bio#ogica# needs are et" and than using what is #eft o$er to eet !eo!#es none basic needs&
Lerha!s ost fundaenta# to the socia#ist $iew is the nation that societies shou#d be
counities in which benefits and burdens are distributed on the ode# of a fai#y& =ust as
ab#e fai#y ebers wi##ing#y su!!ort the fai#y& *nd <ust as needy fai#y ebers are
wi##ing#y su!!orted by the fai#y" so a#so the ab#e ebers of a society shou#d contribute their
abi#ities to society by taking u! its burdens whi#e the needy shou#d be a##owed to share in its
benefits&
*s the e0a!#e of the fai#y suggests" the !rinci!#e of distribution according to need and
abi#ity is used within sa## grou!s as we## as within #arger society& 'n ath#etics" for e0a!#e" the
eber of a tea wi## distribute burdens according to each ath#etes abi#ity and wi## tend to
stand together and he#! each other according to each ones need& The !rinci!#e of need and
abi#ity" howe$er" is the !rinci!#e that tends to the #east acknow#edged in business& Managers
soe ties in$oke the !rinci!#e when they !ass out the ore ab#e" but the often retreat when
these workers co!#ain that they are being gi$en #arger burdens without higher co!ensation&
Managers a#so soeties in$oke the !rinci!#e when they ake s!ecia##y a##owance for workers
who see to ha$e s!ecia# needs& -This was" in fact" a key consideration when congress !assed
the *ericans with disabi#ities act&. /owe$er they rare#y do so and are often critici(ed for
showing fa$oritis when the do this&
@e$erthe#ess there is soething to be said for the socia#ist !rinci!#e+ needs and abi#ities
certain#y shou#d be taken into account when deterining how benefits and burdens shou#d be
distributed aong the ebers of a grou! or society& Most !eo!#e wou#d agree" for e0a!#e"
that we shou#d ake a greater contribution to the #i$es of cotton i## workers with brown #ung
disease who ha$e greater needs then to #i$es of hea#thy !ersons who ha$e a## they need& Most
!eo!#e wou#d a#so agree that indi$idua#s shou#d be e!#oyed in occu!ations for which they are
fitted" and that this eans atching each !ersons abi#ities to his or her <ob as for as !ossib#e&
Focationa# tests in high schoo# and co##ege" for e0a!#e" are su!!osed to he#! students find
carrier that atch their abi#ities&
<ustice as 1reeom/ &i-ertarianism
The #ast section discussed #ibertarian $iews on ora# rights& Libertarians a#so ha$e soe c#ear
and re#ated $iews on the nature of <ustice& The #ibertarian ho#ds that no !articu#ar way of
distributing goods can be said to <ust or un<ust a!art fro the free choices indi$idua#s ake&
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*ny distribution of benefits and burdens is <ust if it is the resu#t of indi$idua#s free#y choosing
to e0change with each other the goods each !erson a#ready owns& 6obert @o(ick" a #eading
#ibertarian suggests this !rinci!#e as the basic !rinci!#e as the distributi$e <ustice&
+rom each according to what he chooses to do, to each according to what he ma&es for himself
,perhaps with the contracted aid of others- and what others choose to do for him and choose to
give him of what they*ve been given previously ,under this maxim- and haven*t yet extended or
transferred.
8uite si!#y" H4ro each as they choose to each as they are chosen&C 4or e0a!#e if ' choose
to write a no$e# or car$e a statue of a !iece of driftwood then ' shou#d be a##owed to kee! the
no$e# or statue if ' choose to it& 'f ' choose ' shou#d be a##owed to gi$e the away to soeone
e#se or e0change the for other ob<ects to whoe$er ' choose& 'n genera#" !eo!#e shou#d be
a##owed to kee! e$erything they ake and e$erything they are free#y gi$en& Ab$ious#y" this
eans it wou#d be wrong to ta0 one !erson -i&e& take the !ersons oney. to !ro$ide we#fare
benefits for soeone e#se needs&
@o(icks !rinci!#e is based on the c#ai -which we ha$e a#ready discussed. that e$ery
!erson has a right to freedo fro coercion that takes !riority o$er a## other rights and $a#ues&
The on#y distribution that is <ust" according to @o(ick" is one that resu#ts fro free indi$idua#
choices& *ny distribution that resu#ts fro any atte!t to i!ose a certain !attern on society
-e&g&" i!osing e7ua#ity on e$eryone or taking fro the ha$es and gi$en to the ha$e nots. wi##
therefore be un<ust&

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LESSON 11
<O"N R%0&'A T"EOR# O$ <U'TICE
=ohn 6aw#s, theory of <ustice as fairness is an atte!t to bring any of these dis!arate ideas
together in a co!rehensi$e way& *ccording to his theory" the distribution of benefits and
burdens in a society is <ust if+
1& Each !erson has an e7ua# right to the ost e0tensi$e basic #iberties co!atib#e with
e7ua# #iberties for a## ,the principle of eual liberty-. and
3& ;ocia# and econoic ine7ua#ities are arranged so that they are both+
a. To the greatest benefit of the #east ad$antaged ,the difference principle-, and
b. *ttached to offices and !ositions o!en fair#y and e7ua##y to a## ,the principle of
eual opportunity-.
6aw#s te##s us that Lrinci!#e 1 is su!!osed to take !riority o$er Lrinci!#e 3 shou#d the two of the
e$er coe into conf#ict" and within Lrinci!#e 3" Lart b is su!!osed to take !riority o$er Lart a&
Lrinci!#e 1 is ca##ed the !rinci!le o1 e@ual li-erty. Essentia##y" it says that each citi(en,s
#iberties ust be !rotected fro in$asion by others and ust be e7ua# to those of others& These
basic #iberties inc#ude the right to $ote" freedo of s!eech and conscience and the other ci$i#
#iberties" freedo to ho#d !ersona# !ro!erty" and freedo fro arbitrary arrest& Lart of Lrinci!#e
3 is ca##ed the i11erence !rinci!le. 't assues that a !roducti$e society wi## incor!orate
ine7ua#ities" but it then asserts that ste!s ust be taken to i!ro$e the !osition of the ost
needy ebers of society" such as the sick and the disab#ed" un#ess such i!ro$eents wou#d
so burden society that they ake e$eryone" inc#uding the needy" worse off than before& Lart b
of Lrinci!#e 3 is ca##ed the !rinci!le o1 1air e@uality o1 o!!ortunity. 't says that e$eryone
shou#d be gi$en an e7ua# o!!ortunity to 7ua#ify for the ore !ri$i#eged !ositions in society,s
institutions&
Therefore" according to 6aw#s" a !rinci!#e is ora# if it wou#d be acce!tab#e to a grou! of
rationa#" se#f%interested !ersons who know they wi## #i$e under it these#$es& This incor!orates
the Eantian !rinci!#es of re$ersibi#ity and uni$ersa#i(abi#ity" and treats !eo!#e as ends and not
as eans& ;oe critics of 6aw#s !oint out" howe$er" that <ust because a grou! of !eo!#e wou#d
be wi##ing to #i$e under a !rinci!#e does not ean that it is ora##y <ustified&
Two fina# ty!es of <ustice are retributi$e and co!ensatory <ustice" both of which dea# with
how best to dea# with wrongdoers& Retri-utive ?ustice concerns b#aing or !unishing those
who do wrongI com!ensatory ?ustice concerns restoring to a hared !erson what he #ost when
soeone e#se wronged hi& Traditiona##y" theorists ha$e he#d that a !erson has a ora#
ob#igation to co!ensate an in<ured !arty on#y if three conditions !ertain+
1& The action that inf#icted the in<ury was wrong or neg#igent&
3& The action was the rea# cause of the in<ury&
2& The !erson did the action $o#untari#y&
The ost contro$ersia# fors of co!ensation undoubted#y are the !referentia# treatent
!rogras that atte!t to reedy !ast in<ustices against grou!s&
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The Ethics o1 Care
*s the Ma#den Mi##s fire and rebui#ding shows" there are !ers!ecti$es on ethics that are not
e0!#ainab#e fro the !oint of $iew of uti#itarianis" rights" or Eantian !hi#oso!hy& The owner
had no duty to rebui#d -or to !ay his workers when they were not working. fro any of these
!ers!ecti$esI sti##" he aintained that he had a res!onsibi#ity to his workers and to his
counity& 6ather than being i!artia# -which a## of these theories aintain is crucia#." this
owner treated his counity and workers !artia##y&
This is centra# to the !oint of $iew known as the ethics o1 care: an a!!roach to ethics that any
feinist ethicists ha$e recent#y ad$anced& *ccording to this ethod" we ha$e an ob#igation to
e0ercise s!ecia# care toward the !eo!#e with who we ha$e $a#uab#e" c#ose re#ationshi!s&
Co!assion" concern" #o$e" friendshi!" and kindness are a## sentients or $irtues that nora##y
anifest this diension of ora#ity& Thus" an ethic of care e!hasi(es two ora# deands+
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LESSON 12
T"E ET"IC' O$ C%RE
The fire that reduced Ma#den Mi##s to rubb#e on the e$ening of 5eceber 11" 1MMK was one of
the worst in the state,s history& ;e$en hundred !eo!#e were at work in the factory when" at a
#itt#e !ast )+00 !&&" a boi#er e0!#oded in one of the i## bui#dings& The e0!#osion was so
!owerfu# that it ru!tured gas ainsI fire 7uick#y engu#fed the bui#dings& E!#oyees f#ed into
the streetsI 22 were in<ured" four of the critica##y&
4ue#ed by the cheica#s and f#aab#e ateria#s used in te0ti#e !roduction" the si0%a#ar fire
gutted the i## co!#e0& More than 300 firefighters fro as far away as @ew /a!shire and
Boston,s ;outh ;hore batt#ed K0%foot wa##s of f#ae& ;trong" gusty winds and te!eratures near
(ero degrees ha!ered the effort& The fire raged out of contro# for uch of the night" forcing
nearby residents to e$acuate& By orning" the once%busy te0ti#e co!#e0 was a scene of utter
de$astation&
This ha!!ened <ust two weeks before Christas" thousands of workers faced une!#oyent
and the fear that the i##,s owner wou#d take the insurance oney and fo##ow other te0ti#e
co!anies south& The ne0t day" co!any !resident *aron 4euerstein announced that he wou#d
rebui#d in Lawrence" and he !roised to kee! his e!#oyees on the !ayro## during the tie it
wou#d take to reconstruct the !#ant& Fenerated as Ba an of his wordB and Be0tree#y
co!assionate"B 4euerstein becae a nationa# fo#k hero&
The Ma#den Mi##s incident suggests a !ers!ecti$e on ethics that is not ade7uate#y ca!tured by
the ora# $iews we ha$e so far e0ained& Consider that fro a uti#itarian !ers!ecti$e
4euerstein had no ob#igation to rebui#d the factory in Lawrence not to continue to !ay his
workers whi#e they were not working& Moreo$er" re#ocating the o!erations of Ma#den Mi##s to a
third wor#d country where #abor is chea!er wou#d not on#y ha$e benefited the co!any" it
wou#d a#so ha$e !ro$ided <obs for Third 9or#d workers who are ore des!erate#y needy than
*erican workers& 4ro an i!artia# uti#itarian !ers!ecti$e" then" ore uti#ity wou#d ha$e
been !roduced by bringing <obs to Third 9or#d workers than by s!ending oney to !reser$e
the <obs of current Ma#den Mi##s e!#oyees in Lawrence" Massachusetts& 't is true that Ma#den
i##s workers were c#ose to 4euerstein and that o$er the years they ha$e reained #oya# to hi
and ha$e bui#t a c#ose re#ationshi! with hi& /owe$er" fro and i!artia# stand!oint" the
uti#itarian wou#d say such !ersona# re#ationshi!s are irre#e$ant and shou#d be set aside in fa$or
of whate$er a0ii(es uti#ity&
The ethics o1 care?that we ha$e an ob#igation to e0ercise s!ecia# care toward those !articu#ar
!ersons with who we ha$e $a#uab#e c#ose re#ationshi!s" !articu#ar#y re#ations of de!endency
?is a key conce!t in an Hethics of care"C an a!!roach to ethics that any feinist ethicists
ha$e recent#y ad$anced& * ora#ity of care Hrests on an understanding of re#ationshi!s as
res!onse to another in their ters&C *ccording to this HcareC $iew of ethics" the ora# task is
not to fo##ow uni$ersa# and i!artia# ora# !rinci!#es" but instead to attend and res!ond to the
good of !articu#ar concrete !erson with who we are in a $a#uab#e and c#ose re#ationshi!&
Co!assion" concern" #o$e" friendshi!" and kindness are a## sentients or $irtues that nora##y
anifest this diension of ora#ity& Thus and ethic of care e!hasi(es two ora# deands+
1& 9e each e0ist in a web of re#ationshi!s and shou#d !reser$e and nurture those concrete
and $a#uab#e re#ationshi!s we ha$e with s!ecific !ersons&
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3& 9e each shou#d e0ercise s!ecia# care for those with who we are concrete#y re#ated by
attending to their !articu#ar needs" $a#ues" desires" and concrete we##%being as seen fro
their own !ersona# !ers!ecti$e" and by res!onding !ositi$e#y to these needs" $a#ues"
desires" and concrete we##%being" !articu#ar#y of those who are $u#nerab#e and
de!endent on our care&
*n ethic of care" therefore" can be seen as enco!assing the kinds of ob#igations that a so%
ca##ed counitarian ethic ad$ocates& * communitarian ethic is an ethic that sees concrete
counities and couna# re#ationshi!s as ha$ing a fundaenta# $a#ue that shou#d be
!reser$ed and aintained&
The deands of caring are soeties in conf#ict with the deands of <ustice" though" and no
fi0ed ru#e e0ists to reso#$e these conf#icts& Critics !oint out that the ethics of care can easi#y
degenerate into un<ust fa$oritis& Though the ethics of care can a#so #ead to burnout" the
ad$antage of the theory is that it is a correcti$e to the other a!!roaches that are i!artia# and
uni$ersa#&
Inte*ratin* Utility: Ri*hts: <ustice: an Carin*
;o far" the cha!ter has out#ined four ain kinds of basic ora# considerations+
1& Utilitarian stanars % ust be used when we do not ha$e the resources to attain
e$eryone,s ob<ecti$es" so we are forced to consider the net socia# benefits and socia#
costs conse7uent on the actions -or !o#icies or institutions. by which we can attain these
ob<ecti$es&
3& 'tanars that s!eci1y ho; iniviuals must -e treate % ust be e!#oyed when
our actions and !o#icies wi## substantia##y affect the we#fare and freedo of s!ecifiab#e
indi$idua#s& Mora# reasoning of this ty!e forces consideration of whether the beha$ior
res!ects the basic rights of the indi$idua#s in$o#$ed and whether the beha$ior is
consistent with one,s agreeents and s!ecia# duties&
2& 'tanars o1 ?ustice % indicate how benefits and burdens shou#d be distributed aong
the ebers of a grou!& These sorts of standards ust be e!#oyed when e$a#uating
actions whose distributi$e effects differ in i!ortant ways&
J& 'tanars o1 carin* % indicate the kind of care that is owed to those with who we
ha$e s!ecia# concrete re#ationshi!s& ;tandards of caring are essentia# when ora#
7uestions arise that in$o#$e !ersons ebedded in a web of re#ationshi!s" !articu#ar#y
!ersons with who one has c#ose re#ationshi!s" es!ecia##y those of de!endency&
Ane si!#e strategy for ensuring that a## four kinds of considerations are incor!orated into one,s
ora# reasoning is to in7uire systeatica##y into the uti#ity" rights" <ustice" and caring in$o#$ed
in a gi$en ora# <udgent" as in 4ig& 3&1& Ane ight" for e0a!#e" ask a series of 7uestions
about an action that one is considering+ -a. 5oes the action" as far as !ossib#e" a0ii(e socia#
benefits and inii(e socia# in<uries: -b. 's the action consistent with the ora# rights of those
who it wi## affect: -c. 9i## the action #ead to a <ust distribution of benefits and burdens: -d.
5oes the action e0hibit a!!ro!riate care for the we##%being of those who are c#ose#y re#ated to
or de!endent on onese#f: Gnfortunate#y" there is not yet any co!rehensi$e ora# theory to
show when one of these considerations shou#d take !recedence&
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$i*ure 6.5
%n %lternative to Moral (rinci!les/ Virtue Ethics
Many ethicists critici(e the entire notion that actions are the sub<ect of ethics& The centra# issue
-as '$an Boesky,s case deonstrates. is the kind of !erson an agent ought to be and what the
character of huans ought to be& This does not ean that the conc#usion of this ty!e of ethics
-ca##ed virtue ethics- wi## be uch different" howe$er& 6ather" the $irtues !ro$ide a !ers!ecti$e
that co$ers the sae ground as the four a!!roaches" <ust fro a different !ers!ecti$e&
* moral virtue is an ac7uired dis!osition that is a $a#uab#e !art of a ora##y good !erson"
e0hibited in the !erson,s habitua# beha$ior& 't is !raiseworthy" in !art" because it is an
achie$eent whose de$e#o!ent re7uires effort& The ost basic issue" fro the !ers!ecti$e of
$irtue ethics" is the 7uestion+ 9hat are the traits of character that ake a !erson a ora##y good
huan being: 9hich traits of character are ora# $irtues: *ccording to *ristot#e" ora# $irtues
enab#e huans to act in accordance with their s!ecific !ur!ose -which he he#d to be reasoning.&
Ather !hi#oso!hers" such as *7uinas" ha$e coe u! with different #ists of $irtues&
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4actua# 'nforation+
Concerning the
!o#icy" institution" or
beha$ior" under
consideration
Mora# =udgent
An the rightness or
wrongness of the
!o#icy" institution or
beha$ior
Mora# ;tandards+
-1.Ma0ii(e socia#
uti#ity"
-3.6es!ect ora#
rights"
-2.5istribute
benefits and burdens
<ust#y&
-J. E0ercise caring
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Business Ethics MGT610 VU
LESSON 13
T"E ET"IC' O$ C%RE (CONTD.)
The *erican !hi#oso!her *#asdair Mac'ntyre has c#aied that a $irtue is any huan
dis!osition that is !raised because it enab#es a !erson to achie$e the good at which huan
B!racticesB ai& Lincoffs suggests that $irtues inc#ude a## those dis!ositions to act" fee#" and
think in certain ways that we use as the basis for choosing between !ersons or between
!otentia# future se#$es& 'n genera#" the $irtues see to be dis!ositions that enab#e !eo!#e to dea#
with huan #ife& /owe$er" it a#so sees that what counts as a ora# $irtue wi## de!end on one,s
be#iefs and the situations one faces&
Virtue Ethics
The idea of $irtue in business is not ho!e#ess#y out of !#ace" because $irtuous characteristics
can #ead not on#y to !ersona# success in a career but to the successfu# o!eration of a business&
Centra# to $irtue ethics is the idea that ora#ity is not !erforing certain right actions but
!ossessing a certain character& 'nstead of asking" B9hat actions are right:B $irtue ethics asks"
B9hat kind of !ersons shou#d we be:B 'n the /icomachean Ethics" *ristot#e argued that ethics
enab#es us to #i$e the good #ife and that the good #ife is !ossib#e on#y for $irtuous !ersons&
*ristot#e described !articu#ar $irtues in i##uinating detai#& *fter *ristot#e" !hi#oso!hica#
theory tended to focus ore on right action and duties" but soe conte!orary !hi#oso!hers
argue for a return to $irtue ethics&
Virtue theory says that the ai of the ora# #ife is to de$e#o! the dis!ositions that we ca##
$irtues" and to e0ercise the as we##& The key action guiding i!#ication of $irtue theory" then"
can be sued u! in the c#ai that+
H*n action is ora##y right if" in carrying out the action" the agent e0ercises" e0hibits"
or de$e#o!s a ora##y $irtuous character" and it is ora##y wrong to the e0tent that by
carrying out the action the agent e0ercises" e0hibits" or de$e#o!s a ora##y $icious
character&C
The wrongfu#ness of an action can be deterined by e0aining the character the action tends
to !roduce -or the character that tends to !roduce the action.& 't a#so !ro$ides a usefu# criterion
for e$a#uating our socia# institutions and !ractices&
*n ethic of $irtue" then" is not a fifth kind of ora# !rinci!#e that shou#d take its !#ace a#ongside
the !rinci!#es of uti#itarianis" rights" <ustice" and caring& 'nstead" an ethics of $irtue fi##s out
and adds to uti#itarianis" rights" <ustice" and caring by #ooking not at the actions !eo!#e are
re7uired to !erfor" but at the character they are re7uired to ha$e&
0hat are virtues4
Firtues are s!ecifica##y those traits that everyone needs for the good #ife" regard#ess of their
s!ecific situation& 4or e0a!#e" courage is a $irtue because it enab#es anyone to get what he or
she wants& The $irtues are integra##y re#ated to what *ristot#e ca##ed !ractica# wisdo" which is
what a !erson needs in order to #i$e we##& Firtue is $arious#y described as an excellence that is
adired in a !erson" as a dis!osition to act in a certain way" and as a s!ecific state of character&
Lists of the $irtues genera##y inc#ude+ bene$o#ence" co!assion" courage" courtesy"
de!endabi#ity" friend#iness" honesty" #oya#ty" oderation" se#f%contro#" and to#erance& 'n
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de$e#o!ing a #ist of $irtues" we ust consider not on#y the contribution of a $irtue to soe end
but a#so the end itse#f& *ristot#e considered ha!!iness to be the end of #ife" and so the $irtues
ust a## contribute in soe way to ha!!iness& Thus" the character traits that enab#e a des!ot or
a criina# or a #echer to be successfu# are not $irtues because they do not conduce to ha!!iness&
Moreo$er" the $irtues are not ere#y eans to ha!!iness but are these#$es constituti$e of it&
4or e0a!#e" a !arent cannot e0!erience the <oy of !arenting without actua##y !ossessing the
traits that ake one a good !arent&
Virtue ethics in -usiness
Firtue ethics !resu!!oses soe end -ha!!iness is the end of #ife for *ristot#e." and so a!!#ying
$irtue ethics to business re7uires us to deterine the end toward which business ais&
*do!ting an *ristote#ian a!!roach" 6obert ;o#oon argues that the ain !ur!ose of business is
not ere#y to create wea#th but to enab#e us to #i$e the good #ife& Thus" business is a atter of
getting a#ong with others" ha$ing a sense of se#f%res!ect" and taking !ride in what we do&
Business" fro an *ristote#ian !oint of $iew" is essentia##y a couna# acti$ity in which
!eo!#e work together for a coon good& The $irtues in business are those character traits that
enab#e us to achie$e this end of business& 4or the ost !art" these are the character traits
necessary for e$eryday #ife" but soe e0ce!tions ust be ade& 4or e0a!#e" honesty in
business is co!atib#e with a certain aount of concea#ent that is unacce!tab#e in !ersona#
re#ations" and so the $irtue of honesty ust be redefined for the !ur!oses of business&
'tren*ths an ;eaBnesses o1 virtue ethics
;trength of $irtue ethics is that it fits with our e$eryday ora# e0!erience& The res!onse of
ost !eo!#e to a co!#e0 ethica# di#ea is not to think about how uni$ersa# !rinci!#es can be
a!!#ied but to decide what they fee# cofortab#e with or what a !erson they adire wou#d do&
Codes of !rofessiona# ethics genera##y stress that a !rofessiona# shou#d be a !erson of integrity&
Gn#ike the i!artia#ity stressed by uti#itarianis and Eantianis" $irtue ethics akes better
sense of the ro#e that personal relations !#ay in ora#ity& ;ince business acti$ity is based so
hea$i#y on ro#es and re#ationshi!s in which such conce!ts as #oya#ty and trust figure
!roinent#y" $irtue ethics is high#y re#e$ant to the work!#ace& * weakness of $irtue ethics is its
incompleteness& Firtue ethics can take us on#y so far in dea#ing with genuine ethica# di#eas&
;oe di#eas in$o#$e the #iits of ru#es -such as when concea#ing inforation becoes a
#ie. or conf#icts between ru#es -when te##ing the truth wou#d har an innocent !erson" for
e0a!#e.& Moreo$er" there are soe difficu#t ethica# di#eas to which $irtues do not readi#y
a!!#y& ;oe $irtue ethicists res!ond that the i!ortance of di#eas in ethics has been
o$erstated and that ethics is concerned !riari#y with the !rob#es of e$eryday #ife& *nother
weakness is that $irtue ethics does not address the !rob#e of conflict& *ccording to *ristot#e"
ha!!iness is !ossib#e for anyone who becoes a certain kind of !erson" but insofar as our goa#s
in #ife inc#ude !ossessing #iited goods" not e$eryone can be successfu#& Firtue ethicists
res!ond that ora#ity is ore a atter of #i$ing coo!erati$e#y than of oderating conf#ict&
Morality in International ConteCts
Though the !rinci!#es discussed in the cha!ter so far are c#ear enough" how they are to be
a!!#ied in foreign countries is ore co!#e0& Letty bribery" which is considered unethica# in
the G&;&" is standard !ractice in Me0icoI ne!otis and se0is occur as a atter of course in
soe *rabic business en$ironents& ;hou#d u#tinationa#s fo##ow the #aws of the #ess
de$e#o!ed countries in which they o!erate: ;hou#d they try to introduce their own standards:
/ow do they treat their own e!#oyees doing the sae <ob in two $ery different countries: 5o
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they !ay the the sae wage:
The fo##owing four 7uestions can he#! c#arify what a u#tinationa# cor!oration ought to do in
the face of these difficu#ties+
1& 9hat does the action rea##y ean in the #oca# cu#ture,s conte0t:
3& 5oes the action !roduce conse7uences that are ethica##y acce!tab#e fro the !oint of
$iew of at #east one of the four ethica# theories:
2& 5oes the #oca# go$ernent tru#y re!resent the wi## of a## its !eo!#e:
J& 'f the ora##y 7uestionab#e action is a coon #oca# !ractice" is it !ossib#e to conduct
business there without engaging in it:
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LESSON 14
MOR%&IT# IN INTERN%TION%& CONTEDT'
The fo##owing four 7uestions can he#! c#arify what a u#tinationa# cor!oration ought to do in
the face of these difficu#ties+
1& 9hat does the action rea##y ean in the #oca# cu#ture,s conte0t:
3& 5oes the action !roduce conse7uences that are ethica##y acce!tab#e fro the !oint of
$iew of at #east one of the four ethica# theories:
2& 5oes the #oca# go$ernent tru#y re!resent the wi## of its entire !eo!#e:
J& 'f the ora##y 7uestionab#e action is a coon #oca# !ractice" is it !ossib#e to
conduct business there without engaging in it
This cha!ter e0aines the ethica# as!ects of the arket syste itse#f?how it is <ustified" and
what the strengths and weaknesses of the syste are fro the !oint of $iew of ethics& 't begins
by discussing the econoic conditions in the G&;& at the c#ose of the 30th century" when
!ro!onents of industria# !o#icy were urging the go$ernent to he#! dec#ining industries and
their workers to ad<ust to new econoic conditions& Athers urged caution" ad$ising the
go$ernent to Ba$oid the !itfa##s of !rotectionis&B This dichotoy i##ustrates the difference
between two o!!osite ideo#ogies" those who be#ie$e in the Bfree arketB and those who
ad$ocate a B!#annedB econoy&
These two ideo#ogies take different !ositions on soe $ery basic issues+ 9hat is huan nature
rea##y #ike: 9hat is the !ur!ose of socia# institutions: /ow does society function: 9hat $a#ues
shou#d it try to !rotect:
'n genera#" two i!ortant ideo#ogica# ca!s" the indi$idua#istic and counitarian $iew!oints"
characteri(e odern societies& 'ndi$idua#istic societies !roote a #iited go$ernent whose
!riary !ur!ose is to !rotect !ro!erty" contract rights" and o!en arkets& Counitarian
societies" in contrast" define the needs of the counity first and then define the rights and
duties of counity ebershi! to ensure that those needs are et&
These two ca!s face the !rob#e of coordinating the econoic acti$ities of their ebers in
two distinct ways& Counitarian systes use a coand syste" in which a sing#e authority
decides what to !roduce" who wi## !roduce it" and who wi## get it& 4ree arket systes are
characteristic of indi$idua#istic societies& 'ncor!orating ideas fro thinkers #ike =ohn Locke and
*da ;ith" they a##ow indi$idua# firs to ake their own decisions about what to !roduce
and how to do so&
4ree arket systes ha$e two ain co!onents+ a !ri$ate !ro!erty syste and a $o#untary
e0change syste& Lure free arket systes wou#d ha$e abso#ute#y no constraints on what one
can own and what one can do with it& ;ince such systes wou#d a##ow things #ike s#a$ery and
!rostitution" howe$er" there are no !ure arket systes&
$ree MarBets an Ri*hts/ <ohn &ocBe
=ohn Locke -1623%1D0J." an Eng#ish !o#itica# !hi#oso!her" is genera##y credited with
de$e#o!ing the idea that huan beings ha$e a Bnatura# rightB to #iberty and a Bnatura# rightB to
!ri$ate !ro!erty& Locke argued that if there were no go$ernents" huan beings wou#d find
these#$es in a state of nature. 'n this state of nature" each an wou#d be the !o#itica# e7ua# of
a## others and wou#d be !erfect#y free of any constraints other than the law of nature?that is"
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the ora# !rinci!#es that God ga$e to huanity and that each an can disco$er by the use of
his own God%gi$en reason& *s he !uts it" in a state of nature" a## en wou#d be in+
H* state of !erfect freedo to order their actions and dis!ose of their !ossessions
and !ersons as they think fit" within the bounds of the #aw of nature" without asking
#ea$e" or de!ending u!on the wi## of any other an& * state a#so of e7ua#ity" wherein
a## the !ower and <urisdiction is reci!roca#" no one ha$ing ore than another&&&
without subordination or sub<ection Oto anotherQ&&&& But&&& the state of nature has a
#aw of nature to go$ern it" which ob#iges e$eryone+ and reason" which is that #aw"
teaches a## ankind" who wi## but consu#t it" that being a## e7ua# and inde!endent"
no one ought to har another in his #ife" hea#th" #iberty" or !ossessions&C
Thus" according to Locke" the #aw of nature teaches us that we ha$e a natura# right to #iberty&
But because the state of nature is so dangerous" says Locke" indi$idua#s organi(e these#$es
into a !o#itica# body to !rotect their #i$es and !ro!erty& The !ower of go$ernent is #iited"
howe$er" e0tending on#y far enough to !rotect these $ery basic rights&
Locke,s $iews on !ro!erty rights ha$e been $ery inf#uentia# in *erica& The 4ifth *endent
to the G&;& Constitution e$en 7uotes Locke direct#y& 'n this $iew" go$ernent does not grant or
create !ro!erty rights& 6ather" nature does" and go$ernent ust therefore res!ect and !rotect
these rights& Locke,s $iew that #abor creates !ro!erty rights has a#so been inf#uentia# in the G&;&
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LESSON 15
$REE M%R,ET + (&%NNED ECONOM#
$REE TR%DE T"EORIE'
Economic $reeom/ Iea: (er1ormance: an Trens
Economic freedom is characteri(ed by the absence of go$ernent coercion or constraint on the
!roduction distribution" andNor consu!tion of goods and ser$ices beyond the e0tent necessary
for citi(ens to !rotect and aintain #iberty itse#f& Thus" !eo!#e are free to work" !roduce"
consue" and in$est in the ways they choose& The Economic $reeom IneC a!!ro0iates
the e0tent to which a go$ernent inter$enes in the areas of free choice" free enter!rise" and
arket%dri$en !rices for reasons that go beyond basic nationa# needs& Lresent#y" countries are
c#assified as free, mostly free, mostly unfree" and repressed. 5eterining factors inc#ude+ trade
!o#icy" the fisca# burden of the go$ernent" the e0tent and nature of go$ernent inter$ention in
the econoy" onetary !o#icy" ca!ita# f#ows and in$estent" banking and financia# acti$ities"
wage and !rice #e$e#s" !ro!erty rights" other go$ernent regu#ation" and infora# arket
acti$ities& A$er tie" ore and ore countries ha$e o$ed toward greater econoic freedo&
Countries ranking highest on this inde0 tend to en<oy both the highest standards of #i$ing as
we## as the greatest degree of !o#itica# freedo
The e0!#anatory !ower of the theories of absolute and comparative advantage is #iited to the
deonstration of how econoic growth can occur $ia s!ecia#i(ation and trade& The conce!t of
1ree trae -a !ositi$e%su gae. !ur!orts that nations shou#d neither artificia##y #iit i!orts
nor artificia##y !roote e0!orts& The invisi-le han of the arket wi## deterine which
co!etitors sur$i$e" as custoers buy those !roducts that best ser$e their needs& 4ree trade
i!#ies s!ecia#i(ation?<ust as indi$idua#s and firs efficient#y !roduce certain !roducts that
they then e0change for things they cannot !roduce efficient#y" nations as a who#e s!ecia#i(e in
the !roduction of certain !roducts" soe of which wi## be consued doestica##y" and soe of
which ay be e0!ortedI e0!ort earnings can then in turn be used to !ay for i!orted goods and
ser$ices& This cha!ter e0aines the ethica# as!ects of the arket syste itse#f?how it is
<ustified" and what the strengths and weaknesses of the syste are fro the !oint of $iew of
ethics& 't begins by discussing the econoic conditions in the G&;& at the c#ose of the 30th
century" when !ro!onents of industria# !o#icy were urging the go$ernent to he#! dec#ining
industries and their workers to ad<ust to new econoic conditions& Athers urged caution"
ad$ising the go$ernent to Ba$oid the !itfa##s of !rotectionis&B This dichotoy i##ustrates the
difference between two o!!osite ideo#ogies" those who be#ie$e in the Bfree arketB and those
who ad$ocate a B!#annedB econoy&
These two ideo#ogies take different !ositions on soe $ery basic issues+ 9hat is huan nature
rea##y #ike: 9hat is the !ur!ose of socia# institutions: /ow does society function: 9hat $a#ues
shou#d it try to !rotect:
'n genera#" two i!ortant ideo#ogica# ca!s" the indi$idua#istic and counitarian $iew!oints"
characteri(e odern societies& 'ndi$idua#istic societies !roote a #iited go$ernent whose
!riary !ur!ose is to !rotect !ro!erty" contract rights" and o!en arkets& Counitarian
societies" in contrast" define the needs of the counity first and then define the rights and
duties of counity ebershi! to ensure that those needs are et&
These two ca!s face the !rob#e of coordinating the econoic acti$ities of their ebers in
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two distinct ways& Counitarian systes use a coand syste" in which a sing#e authority
decides what to !roduce" who wi## !roduce it" and who wi## get it& 4ree arket systes are
characteristic of indi$idua#istic societies& 'ncor!orating ideas fro thinkers #ike =ohn Locke and
*da ;ith" they a##ow indi$idua# firs to ake their own decisions about what to !roduce
and how to do so&
4ree arket systes ha$e two ain co!onents+ a !ri$ate !ro!erty syste and a $o#untary
e0change syste& Lure free arket systes wou#d ha$e abso#ute#y no constraints on what one
can own and what one can do with it& ;ince such systes wou#d a##ow things #ike s#a$ery and
!rostitution" howe$er" there are no !ure arket systes&
$ree MarBets an Ri*hts/ <ohn &ocBe
=ohn Locke -1623%1D0J." an Eng#ish !o#itica# !hi#oso!her" is genera##y credited with
de$e#o!ing the idea that huan beings ha$e a Bnatura# rightB to #iberty and a Bnatura# rightB to
!ri$ate !ro!erty& Locke argued that if there were no go$ernents" huan beings wou#d find
these#$es in a state of nature. 'n this state of nature" each an wou#d be the !o#itica# e7ua# of
a## others and wou#d be !erfect#y free of any constraints other than the law of nature?that is"
the ora# !rinci!#es that God ga$e to huanity and that each an can disco$er by the use of
his own God%gi$en reason& *s he !uts it" in a state of nature" a## en wou#d be in+
H* state of !erfect freedo to order their actions and dis!ose of their !ossessions and
!ersons as they think fit" within the bounds of the #aw of nature" without asking #ea$e" or
de!ending u!on the wi## of any other anC&
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LESSON 16
&%0 O$ N%TURE
H* state a#so of e7ua#ity" wherein a## the !ower and <urisdiction is reci!roca#" no one
ha$ing ore than another&&& without subordination or sub<ection Oto anotherQ&&&& But&&&
the state of nature has a #aw of nature to go$ern it" which ob#iges e$eryone+ and
reason" which is that #aw" teaches a## ankind" who wi## but consu#t it" that being a##
e7ua# and inde!endent" no one ought to har another in his #ife" hea#th" #iberty" or
!ossessions&C
Thus" according to Locke" the #aw of nature teaches us that we ha$e a natura# right to #iberty&
But because the state of nature is so dangerous" says Locke" indi$idua#s organi(e these#$es
into a !o#itica# body to !rotect their #i$es and !ro!erty& The !ower of go$ernent is #iited"
howe$er" e0tending on#y far enough to !rotect these $ery basic rights&
Locke,s $iews on !ro!erty rights ha$e been $ery inf#uentia# in *erica& The 4ifth *endent
to the G&;& Constitution e$en 7uotes Locke direct#y& 'n this $iew" go$ernent does not grant or
create !ro!erty rights& 6ather" nature does" and go$ernent ust therefore res!ect and !rotect
these rights& Locke,s $iew that #abor creates !ro!erty rights has a#so been inf#uentia# in the G&;&
*#though Locke ne$er e0!#icit#y used his theory of natura# rights to argue for free arkets"
se$era# 30th%century authors ha$e e!#oyed his theory for this !ur!ose&
1M
4riedrich *& /ayek"
Murray 6othbard" Gottfried 5iet(e" Eric Mack" and any others ha$e c#aied that each !erson
has the right to #iberty and !ro!erty that Locke credited to e$ery huan being and
conse7uent#y" go$ernent ust #ea$e indi$idua#s free to e0change their #abor and their
!ro!erty as they $o#untari#y choose& An#y a free !ri$ate enter!rise e0change econoy" in which
go$ernent stays out of the arket and in which go$ernent !rotects the !ro!erty rights of
!ri$ate indi$idua#s" a##ows for such $o#untary e0changes& The e0istence of the &ocBean ri*hts
to #iberty and !ro!erty" then" i!#ies that societies shou#d incor!orate !ri$ate !ro!erty
institutions and free arkets&
't is a#so i!ortant to note that Locke,s $iews on the right to !ri$ate !ro!erty ha$e had a
significant inf#uence on *erican institutions of !ro!erty e$en in today,s co!uter society&
4irst" and ost i!ortant" throughout ost of its ear#y history" *erican #aw has he#d to the
theory that indi$idua#s ha$e an a#ost abso#ute right to do whate$er they want with their
!ro!erty and that go$ernent has no right to interfere with or confiscate an indi$idua#,s !ri$ate
!ro!erty e$en for the good of society& ;econd" under#ying any *erican #aws regarding
!ro!erty and ownershi! is Locke,s $iew that when a !erson e0!ends his or her #abor and effort
to create or i!ro$e a thing" he or she ac7uires !ro!erty rights o$er that thing&
Theory o1 %-solute %vanta*e
'n 1DD6 *da ;ith asserted that the wea#th of a nation consisted of the goods and ser$ices
a$ai#ab#e to its citi(ens& /is theory of a-solute avanta*e ho#ds that a country can a0ii(e
its own econoic we## being by s!ecia#i(ing in the !roduction of those goods and ser$ices that
it can !roduce ore efficient#y than any other nation and enhance g#oba# efficiency through its
!artici!ation in -unrestricted. free trade& ;ith reasoned that+
-i. 9orkers becoe ore ski##ed by re!eating the sae tasksI
-ii. 9orkers do not #ose tie in switching fro the !roduction of one kind of
!roduct to anotherI and
-iii. Long !roduction runs !ro$ide greater incenti$es for the de$e#o!ent of
ore effecti$e working ethods& ;ith a#so asserted that country%s!ecific
ad$antages can either be natura# or ac7uired&
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1. Natural %vanta*e& * country ay ha$e a natural avanta*e in the !roduction
of !articu#ar !roducts because of gi$en c#iatic conditions" access to !articu#ar
resources" the a$ai#abi#ity of #abor" etc& Fariations in natura# ad$antages aong
countries he#! to e0!#ain where !articu#ar !roducts can be !roduced ost
efficient#y&
2. %c@uire %vanta*e. *n ac@uire avanta*e re!resents a distinct ad$antage in
ski##s" techno#ogy" andNor ca!ita# assets that yie#ds differentiated !roduct offerings
andNor cost%co!etiti$e hoogeneous !roducts& Techno#ogy" in !articu#ar" has
created new !roducts" dis!#aced o#d !roducts" and a#tered trading%!artner
re#ationshi!s&
3. Resource E11iciency ECam!le. 6ea# incoe de!ends on the out!ut of !roducts
as co!ared to the resources used to !roduce the& By defining the cost of
!roduction in ters of the resources needed to !roduce a !roduct" the !rouction
!ossi-ilities curve shows that through the use of s!ecia#i(ation and trade" the
out!ut of two countries wi## be greater" thus o!tii(ing g#oba# efficiency&
Com!arative %vanta*e
'n 1)1D 5a$id 6icardo reasoned that there wou#d sti## be gains fro trade if a country
s!ecia#i(ed in the !roduction of those things it can !roduce ost efficient#y" e$en if other
countries can !roduce those sae things e$en ore efficient#y& Lut another way" 6icardos
theory of com!arative avanta*e ho#ds that a country can a0ii(e its own econoic we##%
being by s!ecia#i(ing in the !roduction of those goods and ser$ices it can !roduce re#ati$e#y
efficient#y and enhance g#oba# efficiency through its !artici!ation in -unrestricted. free trade
Locke,s critics focus on four weaknesses in his arguent+
The assu!tion that indi$idua#s ha$e natura# rights+ This assu!tion is un!ro$en and assues
that the rights to #iberty and !ro!erty shou#d take !recedence o$er a## other rights& 'f huans do
not ha$e the o$erriding rights to #iberty and !ro!erty" then the fact that free arkets wou#d
!reser$e the rights does not ean a great dea#&
The conf#ict between natura# -negati$e. rights and !ositi$e rights+ 9hy shou#d negati$e rights
such as #iberty take !recedence o$er !ositi$e rights: Critics argue" in fact" that we ha$e no
reason to be#ie$e that the rights to #iberty and !ro!erty are o$erriding&
The conf#ict between natura# rights and <ustice+ 4ree arkets create un<ust ine7ua#ities" and
!eo!#e who ha$e no !ro!erty or who are unab#e to work wi## not be ab#e to #i$e& *s a resu#t"
without go$ernent inter$ention" the ga! between the richest and !oorest wi## widen unti# #arge
dis!arities of wea#th eerge& Gn#ess go$ernent inter$enes to ad<ust the distribution of
!ro!erty that resu#ts fro free arkets" #arge grou!s of citi(ens wi## reain at a subsistence
#e$e# whi#e others grow e$er wea#thier&
'ndi$idua#istic assu!tions and their conf#icts with the ethics of caring+ Locke assues that
!eo!#e are indi$idua#s first" inde!endent of their counities& But huans are born de!endent
on others" and without caring re#ationshi!s" no huan cou#d sur$i$e& The degree of #iberty a
!erson has de!ends on what the !erson can do& The #ess a !erson can do" the #ess he is free to
do& But a !erson,s abi#ities de!end on what he #earns fro those who care for hi as we## as on
what others care to he#! hi to do or a##ow hi to do&
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$ree MarBets an Utility/ %am 'mith
Modifying Locke,s $iews on free arkets" *da ;ith,s arguents rest on uti#itarian
arguents that unregu#ated arkets and !ri$ate !ro!erty wi## !roduce greater benefits than any
other syste& *ccording to ;ith" when !ri$ate indi$idua#s are #eft free to seek their own
interests in free arkets" they wi## ine$itab#y be #ed to further the !ub#ic we#fare by an
Bin$isib#e hand+B
By directing OhisQ industry in such a anner as its !roduce ay be of the greatest
$a#ue" Othe indi$idua#Q intends on#y his own gain" and he is in this" as in any other
cases" #ed by an in$isib#e hand to !roote an end that was no !art of his intention&
By !ursuing his own interest he fre7uent#y !rootes that of society ore effecti$e#y
than when he rea##y intends to !roote it& 4ree arkets" according to ;ith" ensure
that buyers wi## !urchase what they need at the #owest !rices they can find" and
business wi## corres!onding#y atte!t to satisfy these needs at the #owest !rices they
can offer& Co!etition forces se##ers to dro! their !rices as #ow as they can and to
conser$e resources whi#e !roducing what consuers actua##y want&
;u!!#y and deand" according to this $iew" wi## he#! a##ocate resources efficient#y& 9hen the
su!!#y of a certain coodity is not enough to eet the deand" buyers bid the !rice of the
coodity u!ward unti# it rises abo$e what ;ith ca##ed the natural !rice -i&e&" the !rice that
<ust co$ers the costs of !roducing the coodity" inc#uding the going rate of !rofit obtainab#e
in other arkets.& Lroducers of that coodity then rea! !rofits higher than those a$ai#ab#e to
!roducers of other coodities& The higher !rofits induce !roducers of those other !roducts to
switch their resources into the !roduction of the ore !rofitab#e coodity& *s a resu#t" the
shortage of that coodity disa!!ears and its !rice sinks back to its natura# #e$e#& Con$erse#y"
when the su!!#y of a coodity is greater than the 7uantity deanded" its !rice fa##s" inducing
its !roducers to switch their resources into the !roduction of other" ore !rofitab#e
coodities& The f#uctuating !rices of coodities in a syste of co!etiti$e arkets then
forces !roducers to a##ocate their resources to those industries where they are ost in deand
and to withdraw resources fro industries where there is a re#ati$e o$ersu!!#y of coodities&
The arket" in short" a##ocates resources so as to ost efficient#y eet consuer deand"
thereby !rooting socia# uti#ity& The best thing for go$ernent to do is nothingI the arket" on
its own" wi## ad$ance the !ub#ic we#fare" gi$ing !eo!#e what they want for the #owest !ossib#e
cost& 't is i!ortant to note that" a#though *da ;ith did not discuss the notion of !ri$ate
!ro!erty at great #ength" it is a key assu!tion of his $iews& Before indi$idua#s can coe
together in arkets to se## things to each other" they ust ha$e soe agreeent about what
each indi$idua# BownsB and what each indi$idua# has the right to Bse##B to others& Gn#ess a
society has a syste of !ri$ate !ro!erty that a##ocates its resources to indi$idua#s" that society
cannot ha$e a free arket syste&
;ith,s uti#itarian arguent is ost coon#y critici(ed for aking what soe ca## unrea#istic
arguents& 4irst" ;ith assues that no one se##er can contro# the !rice of a good& Though this
ay ha$e been true at one tie" today any industries are ono!o#i(ed to soe e0tent&
;econd" ;ith assues that the anufacturer wi## !ay for a## the resources used to !roduce a
!roduct" but when a anufacturer uses water and !o##utes it without c#eaning it" for e0a!#e"
soeone e#se ust !ay to do so& Third" ;ith assues that huans are oti$ated on#y by a
natura#" se#f%interested desire for !rofit& This" say his critics" is c#ear#y fa#se& Many huans are
concerned for others and act to he#! others" constraining their own se#f%interest& Market
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systes" say ;ith,s critics" ake huans se#fish and ake us think that the !rofit oti$e is
natura#&
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LESSON 17
$REE M%R,ET' %ND UTI&IT#/ %D%M 'MIT"
;ith,s uti#itarian arguent is ost coon#y critici(ed for aking what soe ca## unrea#istic
arguents& 4irst" ;ith assues that no one se##er can contro# the !rice of a good& Though this
ay ha$e been true at one tie" today any industries are ono!o#i(ed to soe e0tent&
;econd" ;ith assues that the anufacturer wi## !ay for a## the resources used to !roduce a
!roduct" but when a anufacturer uses water and !o##utes it without c#eaning it" for e0a!#e"
soeone e#se ust !ay to do so& Third" ;ith assues that huans are oti$ated on#y by a
natura#" se#f%interested desire for !rofit& This" say his critics" is c#ear#y fa#se& Many huans are
concerned for others and act to he#! others" constraining their own se#f%interest& Market
systes" say ;ith,s critics" ake huans se#fish and ake us think that the !rofit oti$e is
natura#&
Ane es!ecia##y inf#uentia# critic of ;ith was =ohn Maynard Eeynes& Eeynes argued that
go$ernent inter$ention was necessary because there is a isatch between aggregate su!!#y
and deand" which ine$itab#y #eads to a contraction of su!!#y& Go$ernent" according to
Eeynes" can inf#uence the !ro!ensity to sa$e" which #owers aggregate deand and creates
une!#oyent& Go$ernent can !re$ent e0cess sa$ings through its inf#uence on interest rates"
and it can inf#uence interest rates by regu#ating the oney su!!#y& The higher the su!!#y of
oney" the #ower the rate at which it is #ent& ;econd" go$ernent can direct#y affect the aount
of oney househo#ds ha$e a$ai#ab#e to the by raising or #owering ta0es& Third" go$ernent
s!ending can c#ose any ga! between aggregate deand and aggregate su!!#y by taking u! the
s#ack in deand fro househo#ds and businesses& Eeynes, arguents becae #ess con$incing
after the stagf#ation of the 1MD0s" though& 't has been re!#aced by a !ost%Eeynesian schoo# of
thought" which argues for e$en ore go$ernenta# inter$ention in the arket&
;ocia# 5arwinists had a different take on the uti#itarian <ustification for free arkets& They
argued that econoic co!etition !roduced huan !rogress& 'f go$ernents were to interfere
in this !rocess" they wou#d a#so unintentiona##y be i!eding huan !rogress& 9eak firs ust
be weeded out by co!etition" they c#ai& The basic !rob#e under#ying the $iews of the
socia# 5arwinist" howe$er" is the fundaenta# norati$e assu!tion that survival of the fittest
eans survival of the best. That is" whate$er resu#ts fro the workings of nature is necessari#y
good& The fa##acy" which odern authors ca## the naturalistic 1allacy, i!#ies" of course" that
whate$er ha!!ens natura##y is a#ways for the best&
$ree Trae an Utility/ Davi Ricaro
*da ;ith,s a<or work" the %ealth of /ations, in fact" was !riari#y aied at showing the
benefits of free trade& There he wrote+
't is the a0i of e$ery !rudent aster of a fai#y ne$er to atte!t to ake at
hoe what it wi## cost hi ore to ake than to buy& The tai#or does not ake his
own shoes but buys the fro the shoeaker&&& 9hat is !rudence in the conduct of
e$ery fai#y can scarce be fo##y in that of a great kingdo& 'f a foreign country can
su!!#y us with a coodity chea!er than we ourse#$es can ake it" better buy it of
the with soe !art of the !roduce of our own industry" e!#oyed in a way in
which we ha$e soe ad$antage&
*da ;ith,s !oint here is si!#e& Like indi$idua#s" countries differ in their abi#ity to !roduce
goods& Ane country can !roduce a good ore chea!#y than another and it is then said to ha$e
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an Ea-solute avanta*eE in !roducing that good& These cost differences ay be based on
differences in #abor costs and ski##s" c#iate" techno#ogy" e7ui!ent" #and" or natura# resources&
;u!!ose that because of these differences" our nation can ake one !roduct for #ess than a
foreign nation can" and su!!ose the foreign nation can ake soe other !roduct for #ess than
we can& Then c#ear#y it wou#d be best for both nations to s!ecia#i(e in aking the !roduct each
has an Babso#ute ad$antageB in !roducing" and to trade it for what the other country has an
Babso#ute ad$antageB in !roducing& 't was 6icardo,s genius to rea#i(e that both countries cou#d
benefit fro s!ecia#i(ation and trade e$en though one can ake e$erything ore chea!#y than
the other& ;!ecia#i(ation increases the tota# out!ut of goods countries !roduce" and through
trade a## countries can share in this added bounty&
6icardo,s ingenious arguent has been hai#ed as the sing#e Bost i!ortantB and Bost
eaningfu#B econoic disco$ery e$er ade& ;oe ha$e said it is the ost Bsur!risingB and
Bcounterintuiti$eB conce!t in econoics& 't is" without a doubt" the ost i!ortant conce!t in
internationa# trade theory today and is at the heart of the ost significant econoic arguents
!eo!#e !ro!ose today when they argue in fa$or of g#oba#i(ation& 6icardo akes a nuber of
si!#ifying assu!tions that c#ear#y do not ho#d in the rea# wor#d" such as that there are on#y
two countries aking on#y two !roducts with on#y a fi0ed nuber of workers& But these are
ere#y si!#ifying assu!tions 6icardo ade to get his !oint across ore easi#y and 6icardo,s
conc#usion cou#d sti## be !ro$ed without these assu!tions&
There are other assu!tions" howe$er" that are not so easy to get around& 4irst" 6icardo
assues that the resources used to !roduce goods -#abor" e7ui!ent" factories" etc&. do not
o$e fro one country to another& Ret today u#tinationa# co!anies can" and easi#y do" o$e
their !roducti$e ca!ita# fro one country to another& ;econd" 6icardo assues that each
country,s !roduction costs are constant and do not dec#ine as countries e0!and their !roduction
or as they ac7uire new techno#ogy&
Third" 6icardo assues that workers can easi#y and unreser$ed#y o$e fro one industry to
another& Ret when a co!any c#oses down because it cannot co!ete with i!orts fro
another country that has a co!arati$e ad$antage in those goods" the co!any,s workers are
#aid off" suffer hea$y costs" need retraining" and often cannot find co!arab#e <obs&
4ina##y" and !erha!s ost i!ortant#y" 6icardo ignores internationa# ru#e setters& 'nternationa#
trade ine$itab#y #eads to disagreeents and conf#icts" and so countries ust agree to abide by
soe set of ru#es and ru#e%setters&
MarC an <ustice/ Critici>in* MarBets an Trae
Ear# Mar0 offers the ost critica# $iew of odern !ri$ate !ro!erty and free arket institutions&
Mar0 c#ais that free%arket ca!ita#is necessari#y !roduces e0trees of ine7ua#ity& ;ince
ca!ita#ist systes offer on#y two sources of incoeowning the eans of !roduction and
se##ing one,s #aborworkers cannot !roduce anything without the owner of the !roducti$e
forces& But owners do not !ay the fu## $a#ue of the workers, #aborI they !ay workers what they
need to subsist" kee!ing the rest for these#$es and gradua##y becoing wea#thier as a resu#t&
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LESSON 18
RIC%RDO + )&OB%&I=%TION
Ricaro.s %ssum!tions
6icardo,s ingenious arguent has been hai#ed as the sing#e Bost i!ortantB and Bost
eaningfu#B econoic disco$ery e$er ade& ;oe ha$e said it is the ost Bsur!risingB and
Bcounterintuiti$eB conce!t in econoics& 't is" without a doubt" the ost i!ortant conce!t in
internationa# trade theory today and is at the heart of the ost significant econoic arguents
!eo!#e !ro!ose today when they argue in fa$or of g#oba#i(ation& 6icardo akes a nuber of
si!#ifying assu!tions that c#ear#y do not ho#d in the rea# wor#d" such as that there are on#y
two countries aking on#y two !roducts with on#y a fi0ed nuber of workers& But these are
ere#y si!#ifying assu!tions 6icardo ade to get his !oint across ore easi#y and 6icardo,s
conc#usion cou#d sti## be !ro$ed without these assu!tions&
There are other assu!tions" howe$er" that are not so easy to get around& 4irst" 6icardo
assues that the resources used to !roduce goods -#abor" e7ui!ent" factories" etc&. do not
o$e fro one country to another& Ret today u#tinationa# co!anies can" and easi#y do" o$e
their !roducti$e ca!ita# fro one country to another& ;econd" 6icardo assues that each
country,s !roduction costs are constant and do not dec#ine as countries e0!and their !roduction
or as they ac7uire new techno#ogy&
Third" 6icardo assues that workers can easi#y and unreser$ed#y o$e fro one industry to
another& Ret when a co!any c#oses down because it cannot co!ete with i!orts fro
another country that has a co!arati$e ad$antage in those goods" the co!any,s workers are
#aid off" suffer hea$y costs" need retraining" and often cannot find co!arab#e <obs&
4ina##y" and !erha!s ost i!ortant#y" 6icardo ignores internationa# ru#e setters& 'nternationa#
trade ine$itab#y #eads to disagreeents and conf#icts" and so countries ust agree to abide by
soe set of ru#es and ru#e%setters&
Marxism and its influence on Markets and Trade
Ear# Mar0 offers the ost critica# $iew of odern !ri$ate !ro!erty and free arket institutions&
Mar0 c#ais that free%arket ca!ita#is necessari#y !roduces e0trees of ine7ua#ity& ;ince
ca!ita#ist systes offer on#y two sources of incoeowning the eans of !roduction and
se##ing one,s #aborworkers cannot !roduce anything without the owner of the !roducti$e
forces& But owners do not !ay the fu## $a#ue of the workers, #aborI they !ay workers what they
need to subsist" kee!ing the rest for these#$es and gradua##y becoing wea#thier as a resu#t&
The resu#t for workers is increased a#ienation& 6ather than rea#i(ing their huan nature and
satisfying their rea# huan needs" they are se!arated fro what is actua##y theirs in four ways+
1& 'n ca!ita#ist societies" the !roducts that the worker !roduces by his or her #abor are
taken away by the ca!ita#ist e!#oyer and used for !ur!oses that are antagonistic to
the worker,s own interests&
3& Ca!ita#is forces !eo!#e into work that they find dissatisfying" unfu#fi##ing" and that is
contro##ed by soeone e#se&
2& Ca!ita#is a#ienates !eo!#e fro these#$es by insti##ing in the fa#se $iews of what
their rea# huan needs and desires are&
J& Ca!ita#ist societies a#ienate huan beings fro each other by se!arating the into
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antagonistic and une7ua# socia# c#asses that break down counity and caring
re#ationshi!s nae#y the Bourgeois and !ro#etariat&
Conclusion
Though uti#itarians c#ai that !eo!#e wou#d be #a(y without !ri$ate !ro!erty" Mar0 counters
that by this arguent the bourgeois owners shou#d #ong ago ha$e wasted away+ they do not
work" whi#e those who do cannot ac7uire any rea# !ro!erty&
The rea# !ur!ose of go$ernent" according to Mar0" is to !rotect the interests of the ru#ing c#ass
of owners& The forces of !roduction of a societyits substructurea#ways ha$e" historica##y"
gi$en society its c#ass and its su!erstructure -or go$ernent and !o!u#ar ideo#ogies.& Those in
!ower !roote the ideo#ogies that <ustify their !osition of !ri$i#ege& This $iew of history is
ca##ed historica# ateria#is&
The resu#t of unrestrained free arkets and !ri$ate ownershi! wi## be a series of disasters for
working !eo!#e" #ea$ing the iiserated& Three genera# tendencies wi## cobine to bring this
about+
4irst" odern ca!ita#ist systes wi## e0hibit an increasing concentration of industria#
!ower in re#ati$e#y few hands&

*s se#f%interested !ri$ate owners strugg#e to increase the
assets they contro#" #itt#e businesses wi## gradua##y be taken o$er by #arger firs that
wi## kee! e0!anding in si(e&
;econd" ca!ita#ist societies wi## e0!erience re!eated cyc#es of econoic downturns or
crises& Because workers are organi(ed into ass asseb#y #ines" the fir of each owner
can !roduce #arge aounts of sur!#us&
Third" Mar0 argues" the !osition of the worker in ca!ita#ist societies wi## gradua##y
worsen&
,
This gradua# dec#ine wi## resu#t fro the se#f%interested desire of ca!ita#ist
owners to increase their assets at the e0!ense of their workers&
Though any of Mar0,s !redictions ha$e turned out to be correct" the iiseration of workers
has not occurred& ;ti##" any c#ai that une!#oyent" inf#ation" a#ienation" and fa#se desires
do characteri(e uch of odern ca!ita#ist society&
5efenders of free arkets counter that Mar0 akes an un%!ro$ab#e assu!tion that <ust eans
e7ua#ity or distribution according to need& They c#ai that <ustice rea##y eans distribution
according to contribution -which re7uires free arkets.& E$en if !ri$ate ownershi! causes
ine7ua#ities" defenders of free arkets sti## aintain that the benefits of the syste are greater
and ore i!ortant than the incidenta# ine7ua#ities&
9hether the free arket arguent is !ersuasi$e de!ends u#tiate#y on the i!ortance one
gi$es to the rights to #iberty and !ro!erty as o!!osed to a <ust distribution of incoe and
wea#th&
Conclusion/ The MiCe Economy
9hich side" free arkets or go$ernent inter$ention" wi## u#tiate#y win: @either the co##a!se
of the ;o$iet Gnion nor the rise of strong co##ecti$ist go$ernents #ike =a!an !ro$es one side or
the other& 'ndeed" it ay be the case that neither side by itse#f !resents a co!#ete !icture of
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how the odern econoy ought to run&
Many econoists now ad$ocate retaining the arket syste and !ri$ate !ro!erty whi#e
odifying their workings through go$ernent regu#ation" a i0ed econoy that atte!ts to
reedy the deficiencies of a free arket syste& ;uch !o#icies can be $ery successfu#" as they
ha$e been in ;weden" =a!an" @orway" and any other countries& E$en though the G&;& is ore
successfu# econoica##y than ost other countries" studies do indicate that i0ed econoies
ha$e soe ad$antages&
@ew techno#ogies are a#so firing the debate o$er the ba#ance between Lockean !ri$ate !ro!erty
and co##ecti$e ownershi!& Modern techno#ogies" es!ecia##y co!uters" create new fors of
inte##ectua# !ro!erty that" un#ike other ty!es of !ro!erty" can be co!ied and consued by a
nuber of different indi$idua#s at once& Locke,s $iew" and the $iew of soe uti#itarians" is that
the enta# #abor that creates the !ro!erty creates the !ro!erty rights o$er that !roduct&
;ocia#ists !oint out that artists" writers" and thinkers ha$e a#ways created works without any
financia# incenti$e&
;hou#d new scientific and engineering disco$eries be !rotected as !ri$ate !ro!erty: ;hou#d
these things be shared by the society that ade their disco$ery !ossib#e: The debate continues&
;ti##" though critics of Mar0 contend that Mar0is is dead" any socia#ist trends and theories
reain inf#uentia#& Locke and ;ith,s for of ca!ita#is has the u!!er hand" but any
ne$erthe#ess aintain that a i0ed econoy coes c#osest to cobining the uti#itarian benefits
of the arket econoy with a !ro!er res!ect for huan rights" caring and <ustice&
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LESSON 19
$REE M%R,ET ECONOM#
MiCe Economy
Econoic syste in which #and" factories" and other econoic resources are ore e7ua##y s!#it
between !ri$ate and go$ernent ownershi!& Go$ernent contro#s econoic sectors i!ortant
to nationa# security and #ong%ter stabi#ity& Generous we#fare syste su!!orts une!#oyed and
!ro$ides hea#th care&
1& Ori*ins o1 the MiCe Economy
a& ;uccessfu# econoy ust be efficient and inno$ati$e" but a#so !rotect society&
Goa#s are #ow une!#oyent" #ow !o$erty" steady econoic growth" and an
e7uitab#e distribution of wea#th&
b& Many i0ed econoies today are oderni(ing to becoe ore co!etiti$e&
3& Decline o1 MiCe Economies
Mi0ed econoies are con$erting to arket%based systes& Go$ernent
ownershi! eans #ess efficiency" inno$ation" res!onsibi#ity and accountabi#ityI
higher costsI s#ower growthI and higher ta0es and !rices&
a& Mo$e Toward Lri$ati(ation
i& ;e##ing go$ernent%owned econoic resources to !ri$ate co!anies and
indi$idua#s&
ii& 'ncreases efficiency" cuts subsidies to state%owned firs" curtai#s a!!ointent
of anagers for !o#itica# reasons&
7. MarBet Economy
Ma<ority of a nations #and" factories" and other econoic resources are !ri$ate#y
owned" either by indi$idua#s or businesses& Lrice echanis deterines+
o 0upply+ The 7uantity of a good or ser$ice that !roducers are wi##ing to !ro$ide
at a s!ecific se##ing !rice&
o !emand+ The 7uantity of a good or ser$ice that buyers are wi##ing to !urchase
at a s!ecific se##ing !rice&
5. Ori*ins o1 the MarBet Economy
'ndi$idua# concerns are abo$e grou! concerns& The grou! benefits when indi$idua#s
recei$e incenti$es and rewards to act in certain ways&
a& 1aisse2-+aire Econoics
4rench+ Ha##ow the to do Owithout interferenceQ&C 'ndi$idua#is fosters
deocracy as we## as a arket econoy&
3& $eatures o1 a MarBet Economy
o +ree choice: individuals have purchase options.
o +ree enterprise: companies can decide what to produce and which mar&ets to
compete in.
o $rice flexibility: prices rise3fall reflecting supply and demand.
o +ocus on China
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Chinas thee is H;ocia#is with Chinese characteristics"C and the nation has undergone great
econoic refor o$er the !ast two decades&
a& Early #ears
i& 1MJM+ counes !#anned a## agricu#tura# and industria# !roduction and
schedu#es& 6ura# fai#ies owned their hoes and #and and !roduced
!articu#ar cro!s&
ii& 1MDM+ go$ernent refors a##owed fai#ies to grow cro!s they chose
and se## !roduce at arket !rices&
iii& Townshi! and $i##age enter!rises -TFEs. obtained ateria#s" #abor" and
ca!ita# on o!en arket and used a !ri$ate distribution syste& Lega#i(ed
in 1M)J" TFEs #aid the groundwork for a arket econoy&
i$& Autside co!anies were a##owed to for <oint $entures with Chinese
!artners in the id%1M)0s&
b& Challen*es %hea
i& Lo#itica# and socia# !rob#es #oo& ;kirishes between secu#ar and
Mus#i Chinese" and deocracy restricted&
ii& Gne!#oyent" s#ow econoic !rogress in rura# areas" and isery of
igrant workers&
iii& Chinas one country" two systes !o#icy ust !reser$e order" as Taiwan
is watching c#ose#y&
Bottom &ine 1or Business
Angoing arket refors in forer#y centra##y !#anned and i0ed econoies ha$e a
!rofound effect on internationa# business& 4reer arkets are s!urring a<or shifts in
anufacturing acti$ity& Lured by #ow wages and growing arkets" internationa#
co!anies are forging ties in new#y industria#i(ed countries and e0!#oring o!!ortunities
in de$e#o!ing nations& G#oba# ca!ita# arkets ake it easier to set u! factories abroad"
and soe new#y industria#i(ed countries !roduce wor#d%c#ass co!etitors of their own&
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LESSON 20
COM(ETITION %ND T"E M%R,ET
Introuction
This cha!ter o$es the consideration of business ethics fro the ora#ity of the econoic
syste in genera# to the ora#ity of s!ecific !ractices within our syste& Gi$en that our syste
genera##y fo##ows the free arket ode#" which is based on co!etitionI it ay be sur!rising to
note that there are so any e0a!#es of antico!etiti$e !ractices in the G&;& today& * re!ort on
@ew Rork ;tock E0change co!anies showed that 10 !ercent of the co!anies had been
in$o#$ed in antitrust suits during the !re$ious fi$e years& * sur$ey of a<or cor!orate
e0ecuti$es indicated that 60 !ercent of those sa!#ed be#ie$ed that any businesses engage in
!rice fi0ing&
6
Ane study found that in a !eriod of two years a#one o$er si0ty a<or firs were
!rosecuted by federa# agencies for antico!etiti$e !ractices& *ctua##y" it is ore than
sur!rising& The ora#ity of the free arket syste itse#f is based on the idea of co!etition
creating a <ust a##ocation of resources and a0ii(ing the uti#ity of society,s ebers& To the
e0tent that the arket is not co!etiti$e" it #oses its ora# <ustification for e0isting&
To understand the nature of arket co!etition and the ethics of antico!etiti$e !ractices" it is
he#!fu# to e0aine three abstract ode#s of the different degrees of co!etition in a arket+
!erfect co!etition" !ure ono!o#y" and o#igo!o#y&
(er1ect Com!etition
'n a !erfect#y free co!etiti$e arket" no buyer or se##er has the !ower to significant#y affect
the !rice of a good& ;e$en features characteri(e such arkets+
1& There are nuerous buyers and se##ers" none of who has a substantia# share of the
arket&
3& *## buyers and se##ers can free#y and iediate#y enter or #ea$e the arket&
2& E$ery buyer and se##er has fu## and !erfect know#edge of what e$ery other buyer and
se##er is doing" inc#uding know#edge of the !rices" 7uantities" and 7ua#ity of a## goods
being bought and so#d&
J& The goods being so#d in the arket are so sii#ar to each other that no one cares fro
who each buys or se##s&
K& The costs and benefits of !roducing or using the goods being e0changed are borne
entire#y by those buying or se##ing the goods and not by any other e0terna# !arties&
6& *## buyers and se##ers are uti#ity a0ii(ers+ Each tries to get as uch as !ossib#e for as
#itt#e as !ossib#e&
D& @o e0terna# !arties -such as the go$ernent. regu#ate the !rice" 7uantity" or 7ua#ity of
any of the goods being bought and so#d in the arket&
'n addition" free co!etiti$e arkets re7uire an enforceab#e !ri$ate !ro!erty syste and a
syste of contracts and !roduction&
'n such arkets" !rices rise when su!!#y fa##s" inducing greater !roduction& Thus" !rices and
7uantities o$e towards the e7ui#ibriu !oint" where the aount !roduced e0act#y e7ua#s the
aount buyers want to !urchase& Thus" !erfect#y free arkets satisfy three of the ora# criteria+
<ustice" uti#ity" and rights& That is" !erfect#y co!etiti$e free arkets achie$e a certain kind of
<ustice" they satisfy a certain $ersion of uti#itarianis" and they res!ect certain kinds of ora#
rights&
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The o$eent towards the e7ui#ibriu !oint can be e0!#ained in ters of two !rinci!#es+ the
!rinci!le o1 iminishin* mar*inal utility and the !rinci!le o1 increasin* mar*inal costs.
9hen a buyer !urchases a good" each additiona# ite of a certain ty!e is #ess satisfying than the
ear#ier ones& Therefore" the ore goods a consuer !urchases" the #ess he wi## be wi##ing to !ay
for the& The ore one buys" the #ess one is wi##ing to !ay& An the su!!#y side" the ore units
of a good" a !roducer akes" the higher the a$erage costs of aking each unit& This is because
a !roducer wi## use the ost !roducti$e resources to ake his or her first few goods& *fter this
!oint" the !roducer ust turn to #ess !roducti$e resources" which eans that his costs wi## rise&
;ince se##ers and buyers eet in the sae arket" their res!ecti$e su!!#y and deand cur$es
wi## eet and cross at the e7ui#ibriu !oint&
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LESSON 21
(ER$ECT COM(ETITION
Though soe agricu#tura# arkets a!!ro0iate the ode# of the !erfect#y co!etiti$e free
arket" in actua#ity there is no rea# e0a!#e of such a arket& Markets that do not ha$e a##
se$en features of the !erfect#y free arket are" therefore" corres!onding#y #ess ora#&
'n the ca!ita#ist sense of the word" <ustice is when the benefits and burdens of society are
distributed such that a !erson recei$es the $a#ue of the contribution he or she akes to an
enter!rise& Lerfect#y co!etiti$e free arkets ebody this sense of <ustice" since the
e7ui#ibriu !oint is the on#y !oint at which both the buyer and se##er recei$e the <ust !rice for a
!roduct& ;uch arkets a#so a0ii(e the uti#ity of buyers and se##ers by #eading the to use
and distribute goods with a0iu efficiency&
Efficiency coes about in !erfect#y co!etiti$e free arkets in three ain ways+
1& They oti$ate firs to in$est resources in industries with a high consuer deand and
o$e away fro industries where deand is #ow&
3& They encourage firs to inii(e the resources they consue to !roduce a coodity
and to use the ost efficient techno#ogies&
2& They distribute coodities aong buyers so that they recei$e the ost satisfying
coodities they can !urchase" gi$en what is a$ai#ab#e to the and the aount they
ha$e to s!end&
4irst" in a !erfect#y co!etiti$e arket" buyers and se##ers are free -by definition. to enter or
#ea$e the arket as they choose& That is" indi$idua#s are neither forced into nor !re$ented fro
engaging in a certain business" !ro$ided they ha$e the e0!ertise and the financia# resources
re7uired&

;econd" in the !erfect#y co!etiti$e free arket" a## e0changes are fu##y $o#untary& That is"
!artici!ants are not forced to buy or se## anything other than what they free#y and knowing#y
consent to buy or se##& Third" no sing#e se##er or buyer wi## so doinate the arket that he is
ab#e to force the others to acce!t his ters or go without& 'n this arket" industria# !ower is
decentra#i(ed aong nuerous firs so that !rices and 7uantities are not de!endent on the
whi of one or a few businesses& 'n short" !erfect#y co!etiti$e free arkets ebody the
negati$e right of freedo fro coercion& Thus" they are !erfect#y ora# in three i!ortant
res!ects+ -a. Each continuous#y estab#ishes a ca!ita#ist for of <usticeI -b. together they
a0ii(e uti#ity in the for of arket efficiencyI and -c. each res!ects certain i!ortant
negati$e rights of buyers and se##ers& @o sing#e se##er or buyer can doinate the arket and
force others to acce!t his ters& Thus" freedo of o!!ortunity" consent" and freedo fro
coercion are a## !reser$ed under this syste&
;e$era# cautions are in order" howe$er" when inter!reting these ora# features of !erfect#y
co!etiti$e free arkets& 4irst" !erfect#y co!etiti$e free arkets do not estab#ish other fors
of <ustice& Because they do not res!ond to the needs of those outside the arket or those who
ha$e #itt#e to e0change" for e0a!#e" they cannot estab#ish a <ustice based on needs& ;econd"
co!etiti$e arkets a0ii(e the uti#ity of those who can !artici!ate in the arket gi$en the
constraints of each !artici!ant,s budget& /owe$er" this does not ean that society,s tota# uti#ity
is necessari#y a0ii(ed& Third" a#though free co!etiti$e arkets estab#ish certain negati$e
rights for those within the arket" they ay actua##y diinish the !ositi$e rights of those
outside those whose !artici!ation is inia#& 4ourth" free co!etiti$e arkets ignore and e$en
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conf#ict with the deands of caring& *s we ha$e seen" an ethic of care i!#ies that !eo!#e e0ist
in a web of interde!endent re#ationshi!s and shou#d care for those who are c#ose#y re#ated to
the& * free arket syste" howe$er" o!erates as if indi$idua#s are co!#ete#y inde!endent of
each other and takes no account of the huan re#ationshi!s that ay e0ist aong the& 4ifth"
free co!etiti$e arkets ay ha$e a !ernicious effect on !eo!#e,s ora# character& The
co!etiti$e !ressures that are !resent in !erfect#y co!etiti$e arkets can #ead !eo!#e to
attend constant#y to econoic efficiency& Lroducers are constant#y !ressured to reduce their
costs and increase their !rofit argins& 4ina##y" and ost i!ortant" we shou#d note that the
three $a#ues of ca!ita#ist <ustice" uti#ity" and negati$e rights are !roduced by free arkets on#y
if they ebody the se$en conditions that define !erfect co!etition& 'f one or ore of these
conditions are not !resent in a gi$en rea# arket" then the c#ai can no #onger be ade that
these three $a#ues are !resent&
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LESSON 22
MONO(O&# COM(ETITION
Af course" the three $a#ues of ca!ita#ist <ustice are on#y !roduced if the arket ebodies the
se$en conditions that define !erfect co!etition& 'f e$en one of the conditions is not !resent"
then the arket cannot c#ai to !roote those $a#ues& This" in fact" is the ost i!ortant
#iitation of free arket ora#ity+ because free arkets are not !erfect#y co!etiti$e" they do
not achie$e the ora# $a#ues&
Mono!oly Com!etition
'n a ono!o#y" two of the se$en conditions are absent+ there is on#y one se##er" and other se##ers
cannot enter the arket& *s the case of *#coa e0e!#ifies" such arkets are far fro the
!erfect#y co!etiti$e ode#& *#though *#coa,s !atents on the anufacturing of a#uinu ran
out in 1M0M" it reained the so#e !roducer of $irgin a#uinu for another thirty years& @o
co!etitor cou#d enter the arket because their startu! costs wou#d ha$e been too great" and
they #acked *#coa,s e0!erience& *#coa and other ono!o#ies #ike 9estern E#ectric" ;tandard
Ai#" and the *erican Tobacco Co!any were thus ab#e to fi0 out!ut at a 7uantity #ess than
e7ui#ibriu" aking deand so high that they rea!ed e0cess !rofits& -/ad entry into these
arkets been o!en" the e0cess !rofits wou#d ha$e drawn others into !roducing these goods
unti# !rices dro!!ed" but this does not ha!!en in a ono!o#y&.
Mono!o#istic arkets and their high !rices and !rofits $io#ate ca!ita#ist <ustice because the
se##er charges ore than the goods are worth& Thus" the !rices the buyer ust !ay are un<ust& 'n
addition" the ono!o#y arket resu#ts in a dec#ine in the efficiency of the syste& 4irst" the
ono!o#y arket a##ows resources to be used in ways that wi## !roduce shortages of those
things buyers want and cause the to be so#d at higher !rices than necessary& ;econd"
ono!o#y arkets do not encourage su!!#iers to use resources in ways that wi## inii(e the
resources consued to !roduce a certain aount of a coodity& * ono!o#y fir is not
encouraged to reduce its costs and is therefore not oti$ated to find #ess cost#y ethods of
!roduction& Third" a ono!o#y arket a##ows the se##er to introduce !rice differentia#s that
b#ock consuers fro !utting together the ost satisfying bund#e of coodities they can
!urchase gi$en the coodities a$ai#ab#e and the oney they can s!end& Because e$eryone
ust buy fro the ono!o#y fir" the fir can set its !rices so that soe buyers are forced to
!ay a higher !rice for the sae goods than others&
'n effect" those who ha$e a greater desire for an ite wi## buy #ess" and those who desire an
ite #ess wi## buy ore" which is a great inefficiency" and eans that consuers are no #onger
ab#e to !urchase the ost satisfying bund#e of goods they can&
Oli*o!olistic Com!etition
Most industries are not entire#y ono!o#isticI in fact" ost are doinated by a few #arge firs&
These arkets #ie soewhere in between the ono!o#y and the !erfect#y co!etiti$e free
arketI the ost i!ortant ty!e of these i!erfect#y co!etiti$e arkets is the oli*o!oly.
'n an o#igo!o#y" two of the se$en conditions are not !resent& 'nstead of any se##ers" there are
on#y a few significant ones& The share each fir ho#ds ay be soewhere between 3K !ercent
and M0 !ercent of the arket" and the firs contro##ing this share ay range fro 3 to K0
de!ending on the industry& ;econd" as with the ono!o#y" other se##ers are not free to enter the
arket& Markets #ike this" which are doinated by four to eight firs" are highly concentrated
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arkets& * #ist of firs in o#igo!o#y arkets in the ost high#y concentrated *erican
industries reads #ike a who,s who of *erican cor!orate !ower&
The ost coon cause of o#igo!o#istic arket structure is the hori(onta# erger or
unification of two co!anies that forer#y co!eted in the sae #ine of business& Because
such arkets are co!rised of a sa## nuber of firs" it is easy for their anagers to <oin
forces to set !rices and restrict their out!ut" acting" in effect" #ike one #arge ono!o#istic fir&
Therefore" #ike ono!o#ies" they can fai# to set <ust !rofits" res!ect basic econoic freedos"
and !rotect socia# uti#ity&
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LESSON 23
O&I)O(O&I'TIC COM(ETITION
Oli*o!olistic Com!etition
A#igo!o#ies can set high !rices through e0!#icit agreeents to restrain co!etition& The ore
high#y concentrated the o#igo!o#y" the easier it is to co##ude against the interests of society"
econoic freedo" and <ustice& The fo##owing #ist identifies !ractices that are c#ear#y unethica#+
1& (rice $iCin* % when co!anies agree to set !rices artificia##y high&
3& Mani!ulation o1 'u!!ly % when a co!any agrees to #iit !roduction&
2& ECclusive Dealin* %rran*ements % when a co!any se##s to a retai#er on#y on
condition that the retai#er wi## not !urchase !roducts fro other co!anies andNor wi##
not se## outside a certain geogra!hica# area&
J& Tyin* %rran*ements % when a co!any se##s a buyer certain goods on#y on condition
that the buyer a#so !urchases other goods fro the fir&
K& Retail (rice Maintenance %*reements % when a co!any se##s to a retai#er on#y on
condition that they agree to charge the sae set retai# !rices&
6& (rice Discrimination % when a co!any charges different !rices to different buyers for
the sae goods or ser$ices&
;e$era# industria# and organi(ationa# factors #ead co!anies to engage in these !ractices+
1& Cro;e an Mature MarBet % 9hen #arge nubers of new entrants or dec#ining
deand create o$erca!acity in a arket" the resu#ting dec#ine in re$enues and !rofits
creates !ressures on idd#e%#e$e# anagers& They ay res!ond by a##owing"
encouraging" and e$en ordering their sa#es teas to engage in !rice fi0ing&
3& <o-3Orer Nature o1 Business % 'f orders are !riced indi$idua##y so that !ricing
decisions are ade fre7uent#y and at #ow #e$e#s of the organi(ation" co##usion aong
#ow%#e$e# sa#es!eo!#e is ore #ike#y&
2& Uni11erentiate (roucts % 9hen the !roduct offered by each co!any in an industry
is so sii#ar to those of other co!anies that they ust co!ete on !rice a#one by
continua##y reducing !rices" sa#es!eo!#e coe to fee# that the on#y way to kee! !rices
fro co##a!sing is by getting together and fi0ing !rices&
J& Culture o1 the Business % 9hen an organi(ation,s sa#es!eo!#e fee# that !rice fi0ing is a
coon !ractice and is desired" condoned" acce!ted" rationa#i(ed" and e$en encouraged
by the organi(ation" !rice fi0ing is ore #ike#y&
K& (ersonnel (ractices % 9hen anagers are e$a#uated and rewarded so#e#y or !riari#y
on the basis of !rofits and $o#ue so that bonuses" coissions" ad$anceent" and
other rewards are de!endent on these ob<ecti$es" they wi## coe to be#ie$e that the
co!any wants the to achie$e these ob<ecti$es regard#ess of the eans&
6& (ricin* Decisions % 9hen organi(ations are decentra#i(ed so that !ricing decisions are
!ushed down into the hands of a #ower !art of the organi(ation" !rice fi0ing is ore
#ike#y to ha!!en& Lrice decisions shou#d be ade at higher organi(ationa# #e$e#s&
D& Trae %ssociations % *##owing sa#es!eo!#e to eet with co!etitors in trade
association eetings wi## encourage the to ta#k about !ricing and to begin to engage in
!rice%setting arrangeents with their counter!arts in co!eting firs&
)& Cor!orate &e*al 'ta11 % 9hen #ega# de!artents fai# to !ro$ide guidance to sa#es staff
unti# after a !rob#e has occurred" !rice%fi0ing !rob#es are ore #ike#y&
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't is difficu#t to #egis#ate against any coon o#igo!o#istic !rice%setting !ractices" howe$er"
because they are acco!#ished by tacit agreeent& 4irs ay" without e$er discussing it
e0!#icit#y" rea#i(e that co!etition is not in their co##ecti$e best interests& Therefore" they ay
recogni(e one fir as the B!rice #eader"B raising their !rices in reaction when the #eader decides
to do so& @o atter how !rices are set" howe$er" c#ear#y socia# uti#ity dec#ines when !rices are
artificia##y raised&
4irs a#so occasiona##y resort to bribery" which a#so resu#ts in a dec#ine in arket co!etition&
Bribes ser$e as a barrier to others entering the arketI the briber becoes" in effect" a
ono!o#y se##er& To deterine whether a !ayent is ethica#" there are three re#e$ant !oints to
consider+
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LESSON 24
O&I)O(O&IE' %ND (UB&IC (O&IC#
1& 's the offer of a !ayent initiated by the !ayer -the one who !ays the oney." or does
the !ayee -the one who recei$es the oney. deand the !ayent by threatening in<ury
to the !ayer,s interests: 'n the #atter case" the !ayent is not a bribe but a for of
e0tortion& 'f the threatened in<ury is #arge enough" the !ayer ay not be ora##y
res!onsib#e for his or her act" or the ora# res!onsibi#ity ay at #east be diinished&
3& 's the !ayent ade to induce the !ayee to act in a anner that $io#ates his or her
officia# sworn duty to act in the best interests of the !ub#ic: Ar is the !ayent ade to
induce the !ayee to !erfor what is a#ready his or her officia# duty: 'f the !ayee is
being induced to $io#ate his or her officia# duty" then the !ayer is coo!erating in an
iora# act because the !ayee has entered an agreeent to fu#fi## these duties&
2& *re the nature and !ur!ose of the !ayent considered ethica##y unob<ectionab#e in the
#oca# cu#ture: 'f a for of !ayent is a #oca##y acce!ted !ub#ic custo and there is a
!ro!ortionate#y serious reason for aking the !ayent" then it wou#d a!!ear to be
ethica##y !erissib#e on uti#itarian grounds&
Oli*o!olies an (u-lic (olicy
9hat shou#d society do in the face of the high degree of arket concentration in o#igo!o#istic
industries: There are three ain !oints of $iew+
4irst" the Do3Nothin* vie; c#ais that the !ower of o#igo!o#ies is not as #arge as it a!!ears&
Though co!etition within industries has dec#ined" they aintain that co!etition between
industries with substitutab#e !roducts has re!#aced it& 'n addition" there are Bcounter$ai#ing
!owersB of other #arge cor!orate grou!s" the go$ernent" and unions that kee! cor!orations in
check& 4ina##y" they argue that bigger is better" es!ecia##y in the current age of g#oba#
co!etition& Econoies of sca#e" !roduced by high concentration" actua##y #ower !rices for
consuers&
;econd" the antitrust vie; argues that !rices and !rofits in high#y concentrated industries are
higher than they shou#d be& By breaking u! #arge cor!orations into sa##er units" they c#ai"
higher #e$e#s of co!etition wi## eerge in those industries& The resu#t wi## be a decrease in
co##usion" greater inno$ation" and #ower !rices& C#ear#y" the antitrust $iew is based on a nuber
of assu!tions& =& 4red 9eston has suari(ed the basic !ro!ositions on which this traditiona#
$iew is based+
1& 'f an industry is not atoistic with any sa## co!etitors" there is #ike#y to be
adinistrati$e discretion o$er !rices&
3& Concentration resu#ts in recogni(ed interde!endence aong co!anies" with no !rice
co!etition in concentrated industries&
2& Concentration is due ost#y to ergers because the ost efficient sca#e of o!eration is
not ore than 2 to K !ercent of the industry& * high degree of concentration is
unnecessary&
J& There is a !ositi$e corre#ation between concentration and !rofitabi#ity that gi$es
e$idence of ono!o#y !ower in concentrated industries?the abi#ity to e#e$ate !rices
and the !ersistence of high !rofits& Entry does not take !#ace to e#iinate e0cessi$e
!rofits&
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K& Concentration is aggra$ated by !roduct differentiation and ad$ertising& *d$ertising is
corre#ated with higher !rofits&
6& There is o#igo!o#istic coordination by signa#ing through !ress re#eases or other eans&
The third $iew is the Re*ulation vie;" which can be seen as a idd#e ground between the
other two& Those who ad$ocate regu#ation do not wish to #ose the econoies of sca#e offered by
#arge cor!orations" but they a#so wish to ensure that #arge firs do not har the consuers&
Therefore" they suggest setting u! regu#atory agencies and #egis#ation to contro# the acti$ities of
#arge cor!orations& ;oe e$en suggest that the go$ernent shou#d take o$er the o!eration of
firs where on#y !ub#ic ownershi! can guarantee that they o!erate in the !ub#ic interest&
9hiche$er $iew we take" c#ear#y the socia# benefits of free arkets cannot be guaranteed" and
the arkets these#$es cannot be ora##y <ustified" un#ess firs reain co!etiti$e&

Ethic + Environment
This cha!ter on ethics and the en$ironent begins with soe rather sobering statistics fro the
9or#d watch 'nstitute& This inc#udes !o!u#ation growth" rising te!erature" fa##ing water
tab#es" shrinking cro!#and !er !erson" co##a!sing fisheries" shrinking forests" and the #oss of
!#ant and ania# s!ecies& Aur en$ironent sees to be stressed near#y to the breaking !oint&
The ethica# and techno#ogica# 7uestions that this state of affairs raises are e0tree#y i!ortant
and co!#e0&
4irst" there are sti## serious disagreeents about the e0tent of the en$ironenta# daage that
industria# techno#ogy has !roduced& 4urtherore" there is no !recise way of knowing <ust how
uch of a threat this en$ironenta# daage wi## ha$e for our future we#fare& *nd whate$er the
#e$e# of daage" we ust sure#y sacrifice soe $a#ues to ha#t or s#ow it&
To e0!#ore these issues" this cha!ter begins with an o$er$iew of the technica# as!ects of
en$ironenta# resource use& Then it o$es to a discussion of the ethica# basis of en$ironenta#
!rotection& 't conc#udes with a consideration of our ob#igation to future generations and the
!ros!ects for continued econoic e0!ansion&
The Dimensions o1 (ollution an Resource De!letion
En$ironenta# daage ine$itab#y threatens the we#fare of huan beings as we## as !#ants and
ania#s& Threats to the en$ironent coe fro two sources" !o##ution and resource de!#etion&
(ollution refers to the undesirab#e and unintended containation of the en$ironent by the
anufacture or use of coodities& Resource e!letion refers to the consu!tion of finite or
scarce resources& 'n a certain sense" !o##ution is rea##y a ty!e of resource de!#etion because
containation of air" water" or #and diinishes their beneficia# 7ua#ities&
%ir !ollution has been with odern society for near#y 300 yearsI its costs are increasing
great#y& 't negati$e#y affects agricu#tura# yie#ds" huan hea#th" and g#oba# te!eratures& The
resu#t is a #arge econoic i!act and a staggering effect on the 7ua#ity of huan #ife&
)lo-al ;armin* itse#f !oses a difficu#t and frightening cha##enge& G#oba# waring greenhouse
gases such as+ carbon dio0ide" nitrous o0ide" ethane" and ch#orof#uorocarbons" are gases that
absorb and ho#d heat fro the sun" !re$enting it fro esca!ing back into s!ace" uch #ike a
greenhouse absorbs and ho#ds the sun,s heat& Most scenarios concerning the effects of g#oba#
waring !redict assi$e f#ooding" increase of disease" #oss of !#ant and ania# s!ecies" and
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e0!ansion of deserts at the e0!ense of agricu#tura# #and& These effects wi## ha$e high huan
and econoic costs& /owe$er" to ha#t the increase of greenhouse gasses" we wou#d ha$e to
reduce eissions by 60P to D0P" a #e$e# that wou#d daage the econoies of countries around
the wor#d& To ha#t g#oba# waring" e0!erts say that we wou#d need to change our #ifesty#es and
$a#ues drastica##y&
O>one e!letion is a#so a serious concern& Caused by the re#ease of C4Cs into the atos!here"
o(one de!#etion ay #ead to se$era# hundred thousand new cases of skin cancer each year and
destroy any $a#uab#e food cro!s& *#so" ocean !#ankton" on which the entire ocean,s food chain
de!ends" ay be se$ere#y daaged& E$en though C4C !roduction has been near#y ha#ted" we
can e0!ect the gasses a#ready re#eased to continue daaging the o(one for the ne0t century&
Burnin* 1ossil 1uels causes aci rain an *lo-al ;armin*& Though not as de$astating as
g#oba# waring" it ne$erthe#ess is haring any fish !o!u#ations and trees" corroding bridges
and bui#dings" and containating drinking water& *irborne to0ins and air 7ua#ity in genera# are
a#so serious concerns for huan hea#th&
%ir-orne ToCics are #ess catastro!hic but high#y worrisoe air !o##ution threatsI 3&J bi##ion
!ounds of airborne to0ic substances re#eased annua##y into the nation,s atos!here" inc#uding
!hosgene" a ner$e gas used in warfare" and ethy# isocyanate&
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6)
Business Ethics MGT610 VU
LESSON 25
0OR&D0%TC" $I)URE'

En$ironenta# ethics is the disci!#ine that studies the ora# re#ationshi! of huan beings to"
and a#so the $a#ue and ora# status of" the en$ironent and its nonhuan contents& This entry
co$ers+ -1. the cha##enge of en$ironenta# ethics to the anthro!ocentris -i&e&" huan%
centeredness. ebedded in traditiona# western ethica# thinkingI -3. the ear#y de$e#o!ent of
the disci!#ine in the 1M60s and 1MD0sI -2. the connection of dee! eco#ogy" feinist
en$ironenta# ethics" and socia# eco#ogy to !o#iticsI -J. the atte!t to a!!#y traditiona# ethica#
theories" inc#uding conse7uentia#is" deonto#ogy" and $irtue ethics" to su!!ort conte!orary
en$ironenta# concernsI and -K. the focus of en$ironenta# #iterature on wi#derness" and
!ossib#e future de$e#o!ents of the disci!#ine&
(o!ulation #ear
0orl !o!ulation reache
1 bi##ion in 1)0J
3 bi##ion in 1M3D -132 years #ater.
2 bi##ion in 1M60 -22 years #ater.
J bi##ion in 1MDJ -1J years #ater.
K bi##ion in 1M)D -12 years #ater.
6 bi##ion in 1MMM -13 years #ater.
0orl !o!ulation may reach
D bi##ion in 3013 -12 years #ater.
) bi##ion in 3036 -1J years #ater.
M bi##ion in 30J2 -1D years #ater.
The i!ortance of energy and raw ateria#s deri$es fro their dua# ro#e of !ro$iding the
under!innings for econoic acti$ity and huan we##%being" whi#e acting as the dri$ing force
behind any en$ironenta# concerns" inc#uding c#iate change" acid rain and !o##ution&
Because energy consu!tion is a function of econoic growth and #e$e# of de$e#o!ent"
energy consu!tion is distributed une7ua##y in the wor#d& *#though their share has been
fa##ing" de$e#o!ed arket econoies" constituting one fifth of the wor#ds !o!u#ation" consue
a#ost 60 !er cent of the wor#ds !riary energy -figure 'F.& *s a conse7uence of de$e#o!ent
and the ra!id re!#aceent of traditiona# energy sources by coercia# -ain#y fossi#. sources"
soe de$e#o!ing countries ha$e consu!tion !atterns sii#ar to those of de$e#o!ed arket
econoies&
@e$erthe#ess" !er ca!ita consu!tion in de$e#o!ing countries as a grou! reains far be#ow that
of de$e#o!ed arket econoies& The use of fossi# fue#s has #ed to substantia# growth in g#oba#
eissions of carbon dio0ide -CA3. and the bui#d%u! of greenhouse effects" contributing to
g#oba# waring& ;ince 1DK1" o$er 36K bi##ion tons of carbon ha$e been re#eased to the
atos!here" one ha#f of these eissions ha$ing been !roduced since the id%1MD0s -Mar#and
and others" 1MMM.&
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Business Ethics MGT610 VU
*nnua# g#oba# eissions of CA3 fro the burning of fossi# fue#s ha$e 7uadru!#ed since 1MK0
-figure F.& The highest !er ca!ita CA3 eissions are in @orth *erica" which is fo##owed by
Euro!e where such eissions are #ess than one ha#f those of @orth *erica -ibid&.&
Continuation of these trends !oses serious risks of g#oba# waring" inducing a !ossib#e rise in
sea #e$e#s" f#ooding of #ow%#ying coasta# areas" s!read of $ectorborne diseases and reductions in
agricu#tura# yie#ds& The agnitude of future carbon eissions de!ends on any factors"
inc#uding g#oba# energy deand" the !ace of econoic de$e#o!ent" the introduction of
energy%sa$ing techno#ogies and the degree of shift away fro fossi# fue#s& Mode#s suggest that
iediate stabi#i(ation of atos!heric CA3 concentrations at !resent #e$e#s can be achie$ed
on#y if eissions are iediate#y s#ashed by at #east K0 !er cent and further reduced thereafter
-Gnited @ations En$ironent Lrogra" 1MMM.& Because of the inertia of c#iate systes" e$en
with stabi#i(ation of eissions" g#oba# waring and the rise of sea #e$e#s cou#d continue for
any years&
%*riculture: $oo an &an Use
The !ersistence of under nutrition and food insecurity in soe areas of the wor#d" and the
increasing scarcity and unsustainab#e uti#i(ation of agricu#tura# and other en$ironenta#
resources" ha$e doinated the g#oba# assessent of food and agricu#ture !ros!ects& 9or#d
agricu#tura# !roduction has out!aced !o!u#ation growth" and the rea# !rice of food has dec#ined&
The green re$o#ution that began in the 1M60s enab#ed soe de$e#o!ing countries to boost food
!roduction draatica##y by introducing odern agricu#tura# techni7ues& A$er the !eriod 1M61%
1MM)" wor#d food for huan consu!tion" !er ca!ita" increased by 3J !er cent& * sufficient
aount of food is being !roduced to nourish the wor#ds !o!u#ation ade7uate#y -4ood and
*gricu#ture Argani(ation of the Gnited @ations" 3000a.& Ret" recent estiates show that soe
DM0 i##ion !ersons were undernourished as of 1MMK%1MMD" owing to !o$erty" !o#itica#
instabi#ity" econoic inefficiency and socia# ine7uity -4ood and *gricu#ture Argani(ation of
the Gnited @ations" 1MMMa.& *#though the nuber of undernourished !eo!#e has decreased by
J0 i##ion since 1M)0" soe countries are e0!eriencing serious dec#ines in food a$ai#abi#ity&
More recent#y" wor#d agricu#tura# growth has been s#owing down& Many attribute this
s#owdown to the dec#ining growth of !o!u#ation and reduced econoic deand for foodI
others discern signs of !roduction constraints which ay u#tiate#y threaten wor#d food
security -4ood and *gricu#ture Argani(ation of the Gnited @ations" 3000aI 9or#d 6esources
'nstitute" 1MM6I 9or#d watch 'nstitute" 3000.& 9hi#e wor#d food !roduction is !ro<ected to eet
consu!tion deands for the ne0t two decades" #ong%ter forecasts indicate !ersistent and
!ossib#y worsening food insecurity in any countries" es!ecia##y in sub%;aharan *frica -Gnited
@ations" 1MMDI 4ood and *gricu#ture Argani(ation of the Gnited @ations" 3000a.& 4or ost of
history" food !roduction has been increased ain#y by e0!anding the area cu#ti$atedI but in the
!ast few decades" rising cro! yie#ds ha$e been the ain factors and this trend is e0!ected to
continue&
Constraints on e0!anding cu#ti$ated #and inc#ude the scarcity of 9*TE6 *n ade7uate and
de!endab#e su!!#y of fresh water is essentia# for hea#th" food !roduction and socio%econoic
de$e#o!ent& Though ore than two thirds of the !#anet is co$ered with water" #ess than 0&01
!er cent is readi#y accessib#e for direct huan use -Gnited @ations" 1MMDb.& Moreo$er" no ore
of this renewab#e fresh water is a$ai#ab#e today than e0isted at the dawn of huan ci$i#i(ation&
*s a resu#t" the si(e of a countrys !o!u#ation and the s!eed at which it grows he#! deterine
the onset and se$erity of water scarcity& *#though recent dec#ines in !o!u#ation growth ha$e
i!ro$ed the out#ook for future water a$ai#abi#ity" the !rob#es associated with water scarcity
wi## continue to ount as the si(e of the wor#ds !o!u#ation increases&
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Business Ethics MGT610 VU
Current#y" huans are using about ha#f the fresh water that is readi#y a$ai#ab#e& 4resh water is
distributed une$en#y o$er the g#obe" and a#ready near#y ha#f a bi##ion !eo!#e are affected by
water stress or serious water scarcity" whi#e any ore are e0!eriencing oderate stress&
Gi$en current trends" as uch as two thirds of wor#d !o!u#ation in 303K ay be sub<ect to
oderate%to%high water stress -Gnited @ations" 1MMDb.& Many countries facing water scarcity
are #ow%incoe countries that ha$e a ra!id#y growing !o!u#ation and are genera##y unab#e to
ake cost#y in$estents in water%sa$ing techno#ogies&
*bout 200 a<or ri$er basins and any groundwater a7uifers cross nationa# boundaries -Gnited
@ations" 1MMDb.& Therefore" the need for coo!erati$e efforts wi## !ersist" !articu#ar#y in areas
facing water shortages" and where$er !o##ution is carried downstrea across nationa#
boundaries& Estiates indicate that o$er 1 bi##ion !eo!#e #ack access to safe drinking water and
two and a ha#f bi##ion #ack ade7uate sanitation" and these factors contribute to the deaths of
ore than K i##ion !eo!#e" of who ore than ha#f are chi#dren -Gnited @ations" 3000a.&
En$ironenta# daage ine$itab#y threatens the we#fare of huan beings as we## as !#ants and
ania#s& Threats to the en$ironent coe fro two sources" !o##ution and resource de!#etion&
Lo##ution refers to the undesirab#e and unintended containation of the en$ironent by the
anufacture or use of coodities& 6esource de!#etion refers to the consu!tion of finite or
scarce resources& 'n a certain sense" !o##ution is rea##y a ty!e of resource de!#etion because
containation of air" water" or #and diinishes their beneficia# 7ua#ities&
*ir !o##ution has been with odern society for near#y 300 yearsI its costs are increasing
great#y& 't negati$e#y affects agricu#tura# yie#ds" huan hea#th" and g#oba# te!eratures& The
resu#t is a #arge econoic i!act and a staggering effect on the 7ua#ity of huan #ife&
G#oba# waring itse#f !oses a difficu#t and frightening cha##enge& G#oba# waring greenhouse
gases such as+ carbon dio0ide" nitrous o0ide" ethane" and ch#orof#uorocarbons" are gases that
absorb and ho#d heat fro the sun" !re$enting it fro esca!ing back into s!ace" uch #ike a
greenhouse absorbs and ho#ds the sun,s heat& Most scenarios concerning the effects of g#oba#
waring !redict assi$e f#ooding" increase of disease" #oss of !#ant and ania# s!ecies" and
e0!ansion of deserts at the e0!ense of agricu#tura# #and& These effects wi## ha$e high huan
and econoic costs& /owe$er" to ha#t the increase of greenhouse gasses" we wou#d ha$e to
reduce eissions by 60P to D0P" a #e$e# that wou#d daage the econoies of countries around
the wor#d& To ha#t g#oba# waring" e0!erts say that we wou#d need to change our #ifesty#es and
$a#ues drastica##y&
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Business Ethics MGT610 VU
LESSON 26
$ORE'T' %ND BIODIVER'IT#
The nuber of !#ant and ania# s!ecies inhabiting the !#anet is not accurate#y known& @ear#y 3
i##ion s!ecies ha$e been identified" but estiates of the nuber yet to be described range
fro 10 i##ion to 20 i##ion -Gnited @ations En$ironent Lrogra" 1MMK.& Ecosystes of a##
kinds are under !ressure wor#dwide& Coasta# and #ow#and areas" wet#ands" nati$e grass#ands"
and any ty!es of forests and wood#ands ha$e been !articu#ar#y affected or destroyed& 9hi#e
forests decreased by about K !er cent between 1M)0 and 1MMK" the rate of deforestation has been
dec#ining s#ight#y -4ood and *gricu#ture Argani(ation of the Gnited @ations" 3000b.&
*dditiona# threats confront fragi#e a7uatic habitats" inc#uding cora# reefs and freshwater
habitats" which face an array of assau#ts fro das to #and%based !o##ution to destructi$e
fishing techni7ues&
A$er the !ast 1K0 years" deforestation has contributed one third of the atos!heric bui#d%u! of
CA
3
" and it is a significant factor in the #oss of s!ecies and critica# ecosyste ser$ices
-'ntergo$ernenta# Lane# on C#iate Change" 3000.& ;ince the beginnings of agricu#ture
10"000 years ago" by soe estiates" a#ost ha#f of the earths forests ha$e been con$erted to
fars" !astures and other uses" and on#y one fifth of origina# forest reains in #arge" re#ati$e#y
natura# ecosystes& 4orested areas" inc#uding forest !#antations as we## as natura# forests"
occu!ied about one fourth of the wor#ds #and area in 1MMK& Tro!ica# rain forests are i!ortant
for the 7uantity and di$ersity of #ife they su!!ort& They co$er on#y D !er cent of the earths #and
area" but contain at #east K0 !er cent of terrestria# s!ecies -4ood and *gricu#ture Argani(ation
of the Gnited @ations" 1MMMb.& The inf#uences of forests and biodi$ersity are g#oba#" reaching
far beyond nationa# borders" in both s!ace and tie& Therefore" internationa# coo!eration is
essentia# in order to integrate en$ironenta# issues better into g#oba#" regiona# and nationa#
decision%aking !rocesses&
The Dimensions o1 (ollution an Resource De!letion
En$ironenta# daage ine$itab#y threatens the we#fare of huan beings as we## as !#ants and
ania#s& Threats to the en$ironent coe fro two sources+ !o##ution and resource de!#etion&
Lo##ution refers to the undesirab#e and unintended containation of the en$ironent by the
anufacture or use of coodities& 6esource de!#etion refers to the consu!tion of finite or
scarce resources& 'n a certain sense" !o##ution is rea##y a ty!e of resource de!#etion because
containation of air" water" or #and diinishes their beneficia# 7ua#ities& But for !ur!ose of
discussion" we kee! the tow issues distinct&
%ir (ollution
*ir !o##ution is not new?it has been with us since the industria# re$o#ution introduced the
wor#d to the be#ching factory sokestack& /owe$er" the costs of air !o##ution increased
e0!onentia##y as industria#i(ation e0!anded& Today" air !o##utants affect $egetation" decreasing
agricu#tura# yie#ds and inf#icting #osses on the tiber industryI they deteriorate e0!osed
construction ateria#s through corrosion" disco#oration" and rotI they are ha(ardous to hea#th
and #ife" raising" edica# costs and #essening the en<oyent of #i$ingI and they threaten
catastro!hic g#oba# daage in the for of g#oba# warning and destruction of the stratos!heric
o(one #ayer&
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Business Ethics MGT610 VU
lo!al warming
Greenhouse gases?carbon dio0ide" nitrous o0ide" ethane" and ch#orof#uorocarbons?are
gases that absorb and ho#d hear fro the sun" !re$enting it fro esca!ing back into s!ace"
uch #ike greenhouse absorbs and ho#ds the suns hear& Greenhouse gases occur natura##y in
the atos!here where they ha$e ke!t the earths te!erature about 22 C warer than it wou#d
otherwise be" enab#ing #ife a we know it to e$o#$e and f#ourish& /owe$er" industria#"
agricu#tura#" and other huan acti$ities during the #ast 1K0 years ha$e re#eased substantia##y
ore greenhouse gases into the atos!here" !articu#ar#y by the burning of fossi# fue#s such as
oi# and coa#&
O"one #epletion
Af e7ua##y serious concern is the gradua# break%down of o(one gas in the stratos!here abo$e us
caused by the re#ease of ch#orof#uorocarbons -C4Cs. into the air& * #ayer of o(one in the #ower
stratos!here screens a## #ife on earth for harfu# u#tra$io#et radiation& This o(one #ayer"
howe$er" is destroyed by C4C gases" which ha$e been used in aeroso# cans" refrigerators" air
conditioners" industria# so#$ents" and industria# foa b#owers& 9hen re#eased into the air" C4C
gases riseI in D to 10 years" they reach the stratos!here" where they destroy o(one o#ecu#es
and reain for DK to 120 years" continuing a## the whi#e to break down additiona# o(one
o#ecu#es& E$en though C4C !roduction has been near#y ha#ted" we can e0!ect the gasses
a#ready re#eased to continue daaging the o(one for the ne0t century&
Acid $ain
't is a cobination of water and air that is !oisoned& *cid rain is a threat to the en$ironent
that" #ike g#oba# waring" is c#ose#y re#ated to the cobustion of fossi#s fue#s -oi# coa#" and
natura# gas." which are hea$i#y used by uti#ities to !roduce e#ectricity& Burning fossi# fue#s"
!articu#ar#y coa# containing high #e$e#s of su#fur" re#eases #arge 7uantities of su#fur o0ides and
nitrogen o0ides into the atos!here&
*cid rain is an internationa# !rob#e& *cid rain that fa##s on one country often has its origins in
su#fur and nitrogen o0ides !roduced in another country and b#own by !re$ai#ing rains& Much of
Canada and the northeastern !ar of the Gnited ;tates" for e0a!#e" are sub<ect to acid rain
whose origins #ie in industria# areas around the Great Lakes" and the @ether#ands ha$e suffered
fro acid rain that has its origins in Gerany&


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Business Ethics MGT610 VU
LESSON 27
ET"IC' %ND T"E ENVIRONMENT
Air!orne To%ic
*irborne To0ics are #ess catastro!hic but high#y worrisoe air !o##ution threatsI 3&J bi##ion
!ounds of airborne to0ic substances re#eased annua##y into the nation,s atos!here" inc#uding
!hosgene" a ner$e gas used in warfare" and ethy# iso%cyanate&
Air &uality
The ost !re$a#ent fors of air !o##ution" howe$er" are the gases and !articu#ars s!ewed out by
autos and industria# !rocesses" which affect the 7ua#ity of the air we breathe& More recent #ong%
range studies ha$e indicated that the deterioration of #ung function in huan beings caused by
their chronic e0!osure to air !o##utants" whether it be auto sog or industria# sokestack
eissions" is #ong #asting and often irre$ersib#e&
0ater (ollution
The containation of water sources is an o#d !rob#e?one that has been with us since
ci$i#i(ation began using water to dis!ose of its wastes and sewage& 9ater !o##utants today"
howe$er" are uch ore di$ers" consisting not on#y of organic wastes but a#so disso#$ed s#ats"
eta#s" radioacti$e ateria#s" as we## as sus!ended ateria#s such as bacteria" $iruses" and
sedients& These can i!air or destroy #ife" threaten huan hea#th" and fou# the water&
*bout J0P of the wor#d,s surface water is too !o##uted to fish or swi in& Lo##ution coes fro
agricu#ture" ines" oi# we##s" huan wastes" anufacturing" detergents" and the food industry"
aong other sources& Today" a#ost 1 bi##ion !eo!#e #ack access to safe water and the wor#ds
!er ca!ita su!!#ies of water are shrinking&
/eat is a#so a water !o##utant& 9ater is used as a coo#ant in $arious industria# anufacturing
!rocesses and by the e#ectrica# !ower industry" a a<or hear !o##uter& Transferring heat into
water raises the waters thera# energy to #e$e#s that decrease its abi#ity to ho#d the disso#$ed
o0ygen that a7uatic organiss re7uire& 'n addition" the a#ternating rise and fa## of te!eratures
!re$ents the water fro being !o!u#ated by fish because ost water organiss are ada!ted
on#y to stab#e water te!eratures&
Ai# s!i##s are a for of water !o##ution whose occurrence becae ore fre7uent as our
de!endence on oi# increased& ;ince 1MD2" the nuber of oi# !o##ution incidents re!orted has
reained fair#y constant" a#though the $o#ue of oi# s!i##ed has been high#y $ariab#e& Ai# s!i##s
resu#t for offshore dri##ing" discharges of s#udge fro oi# tankers" and oi# tanker accidents&
Gnderground water su!!#ies are a#so becoing ore !o##uted& *ccording to a recent
go$ernent re!ort" Hincidents of ground%water containation?by inorganic cheica#s"
inorganic cheica#s" radionuc#ides Oradioacti$e wasteQ" or icroorganiss?are being re!orted
with increasing fre7uency and ha$e now occurredSin e$ery state in the nation&
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Business Ethics MGT610 VU
&an (ollution
To%ic su!stances
/a(ardous or to0ic substances are those that can cause an increase in ora#ity rates or
irre$ersib#e or inca!acitating i##ness or those that ha$e other serious#y ad$erse hea#th or
en$ironenta# effects& To0ic substances re#eased on #and inc#ude acidic cheica#s" inorganic
eta#s" f#aab#e so#$ents" !esticides" herbicides" !heno#s" e0!#osi$es" and so on&
The !o##ution of the #and by to0ic substances a#so causes increased orta#ity and i##ness&
/a(ardous or to0ic substances are those that can cause an increase in orta#ity rates or
irre$ersib#e or inca!acitating i##ness" or those that ha$e other serious#y ad$erse hea#th or
en$ironenta# effects& A$er K)"000 different cheica# co!ounds are current#y being used in
the G&;&" and the nuber is increasing each year& /ow any of these cheica#s affect huans"
no one rea##y knows&
Solid 'astes
*ericans today !roduce ore residentia# garbage then do the citi(ens of any other country in
the wor#d& The sheer $o#ue of so#id waste is staggering+ each G&;& resident !roduces about
se$en !ounds of garbage !er day& Though this 7uantity is assi$e" it is not e$en c#ose to the
7uantity of industria# waste&
Each year !eo!#e #i$ing in *ericas cities !roduce ore than 160 i##ion tons of unici!a#
so#id waste?enough to fi## a 1JK"000%i#e%#ong con$oy of 10%ton garbage trucks" ore than
ha#f the distance to the oon" enough to fi## the *strodoe in /ouston ore than twice dai#y
for a year& Each !erson reading this book !roduces" on a$erage" a#ost J !ounds of garbage a
day& An#y about 10 !ercent of residentia# wastes are reco$ered through recyc#ing?a
disa!!ointing#y #ow !ro!ortion that is due to the #ack of financia# baking for recyc#ing
o!erations" the sa## si(e of arkets for recyc#ed !roducts" and to0ic cheica#s !resent in
recyc#ab#e garbage&
(uclear 'astes
Light%water nuc#ear reactors contain radioacti$e ateria#s" inc#uding known carcinogens such
as strontiu M0" cesiu 12D" bariu 1J0" and iodine 121& E0tree#y high #e$e#s of radiation
fro these e#eents can ki## a !ersonI #ower dosage can cause thyroid" #ung" or bone cancer as
we## as genetic daage that wi## be transitted to future generations&
Each nuc#ear reactor !roduces 36K !ounds of !#utoniu waste a year" a substance so to0ic that
on#y twenty !ounds wou#d be sufficient to cause #ung cancer in e$eryone on Earth& ;o far" no
one rea##y knows how to dis!ose of this and sii#ar wastes safe#y and secure#y&
De!letion o1 '!ecies an "a-itats
't is we## known that huan beings ha$e de!#eted do(ens of !#ant and ania# s!ecies to the
!oint of e0tension& ;ince 1600 *&5&" at #east 62 a<or identifiab#e s!ecies of aa#s and ))
a<or identifiab#e s!ecies of birds are known to ha$e becoe e0tinct& ;e$era# hundred ore
s!ecies" such as wha#es and sa#on" today find these#$es threatened by coercia# !redators&
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Business Ethics MGT610 VU
The #oss of forest habitats cobined with the effects of !o##ution is thought to ha$e #ed to the
e0tinction of a !henoena# nuber of s!ecies& *s recent co!rehensi$e study of 1)"000
s!ecies and subs!ecies around the wor#d found that 11"0J6 of the were in danger of
disa!!earing fore$er& 't is estiated between ha#f a i##ion to two i##ion s!ecies?1K to 30
!ercent of a## s!ecies on earth?were rendered e0tinct by 3000&
De!letion o1 $ossil $uels
Gnti# the ear#y 1M)0s" fossi# fue#s were being de!#eted at an e0!onentia##y rising rate& That is"
the rate at which they were being used had doub#ed with the !assage of a regu#ar fi0ed tie
!eriod& *s any researchers argue" howe$er" our consu!tion of fossi# fue#s caou#d not
continue rising at historica# e0!onentia# rates&
De!letion o1 Minerals
The de!#etion of inera# reser$es" #ike the de!#etion of fossi# fue#s" can a#so be ca#cu#ated either
on the basis of an e0!onentia# growth ode# or on the basis of a !eaked growth ode#& 'f
ear#ier e0!onentia##y rising rates of de!#etion continued" then a#uinu wou#d be schedu#ed for
e0haustion in the year 3002" iron in 303K" anganese in 301) o#ybdenu in 3006" nicke# in
303K" tungsten in 3000" (inc in 1MM0" and co!!er and #ead in 1MM2&
ToCic Chemicals in Te1lon
@ew inforation is coing to #ight about the to0ic effects of a cheica# used in aking non%
stick coatings such as Tef#on& The cheica# goes by the nae L4A* -short for
!erf#uorooctanoic acid." or C)" and is a#so used in the anufacture of food wra! and water% and
stain%resistant fabric coatings&
;tudies !resented at a March 300K nationa# to0ico#ogy eeting show that L4A* e0!osure
during !regnancy causes iscarriage and #ow birth weight in iceI any of the e0!osed
offs!ring went on to e0!erience de#ayed !uberty& The G&;& En$ironenta# Lrotection *gency
-EL*." which conducted these studies" is e$a#uating the !ossib#e huan hea#th risks of L4A*&
*nia# studies ha$e shown that L4A*" in addition to haring de$e#o!ent" is a#so #inked to
hy!othyroidis and cancer&
9ater !o##ution is #ikewise a serious !rob#e& *bout J0P of the wor#d,s surface water is too
!o##uted to fish or swi in& Lo##ution coes fro agricu#ture" ines" oi# we##s" huan wastes"
anufacturing" detergents" and the food industry" aong other sources& Today" a#ost 1 bi##ion
!eo!#e #ack access to safe water and the wor#ds !er ca!ita su!!#ies of water are shrinking&
The !o##ution of the #and by to0ic substances a#so causes increased orta#ity and i##ness&
/a(ardous or to0ic substances are those that can cause an increase in orta#ity rates or
irre$ersib#e or inca!acitating i##ness" or those that ha$e other serious#y ad$erse hea#th or
en$ironenta# effects& A$er K)"000 different cheica# co!ounds are current#y being used in
the G&;&" and the nuber is increasing each year& /ow any of these cheica#s affect huans"
no one rea##y knows& The sheer $o#ue of so#id waste is staggering+ each G&;& resident
!roduces about se$en !ounds of garbage !er day& Though this 7uantity is assi$e" it is not e$en
c#ose to the 7uantity of industria# waste& The EL* estiates that about 1K i##ion tons of to0ic
waste is !roduced in the G&;& each year& This does not inc#ude nuc#ear wastes" which" because
they are so concentrated and !ersistent" !resent s!ecia# !rob#es for storage and dis!osa#& Each
nuc#ear reactor !roduces 36K !ounds of !#utoniu waste a year" a substance so to0ic that on#y
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twenty !ounds wou#d be sufficient to cause #ung cancer in e$eryone on Earth& ;o far" no one
rea##y knows how to dis!ose of this and sii#ar wastes safe#y and secure#y&
*s if !o##ution was not serious enough" we a#so ust consider the de!#etion of s!ecies" habitats"
and natura# resources& The wor#d #oses about 1P of its rain forests each year" and between 1KP
and 30P of s!ecies had becoe e0tinct by 3000& Aur consu!tion of fossi# fue#s has recent#y
been rising at e0!onentia# rates" but this cannot continue uch #onger because we are coing
c#ose to the de!#etion !oint of fossi# fue#s& Minera#s are a#so being de!#eted" so we can e0!ect
the gradua##y to becoe ore scare and e0!ensi$e& This scarcity wi## ha$e a serious i!act
on the wor#d econoy&
)reenness
Being Green as a s#ogan+
*reas of Concern+
Lreser$ation of en$ironent&
*$oidance of !o##ution&
Conser$ation of energy&
5e!#etion of raw ateria#&
*nia# we#fare and s!ecies !reser$ation&
@oise !o##ution&
Lrohibition on soking at work !#ace&
Conce!tuali>ation o1 )reenness
/o#is+ a conce!tion of nature wherein huans and nature together for a ora# counity&
&i&e& to see the earth as a who#e rather than to take decisions which on#y benefit on sing#e !art"
such as ones !ersona# !rofit at the e0!ense of en$ironenta# daage" or huan we## being at
the e0!ense of ania# and !#ant #ife&
Materia#is+ earth is good+ it is worth !reser$ing" and it is crucia##y i!ortant that it be
!reser$ed before irretrie$ab#e daage is done&
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LESSON 28
ET"IC' %ND T"E ENVIRONMENT
Ethics o1 (ollution Control
Businesses ha$e been ignoring their i!act on the natura# en$ironent for centuries" #arge#y
because the econoic costs and harfu# effects of this i!act ha$e been unc#ear& Businesses
ha$e treated air and water as free goods that no one owns& ;ince the carrying ca!acity of both is
so #arge" each indi$idua# fir sees its own contribution to !o##ution as neg#igib#e& Cobined"
howe$er" the effects are enorous& The har coes not on#y fro the direct acti$ity of
businesses&
Af course" !o##ution !rob#es are not rooted on#y in business acti$ities& Lo##ution a#so resu#ts
fro the use hat consuers ake of !roducts and huan waste !roducts& * !riary source of
air !o##ution" for e0a!#e" is autoobi#e use" and a !riary source of water !o##ution is
sewage& E$ery huan being !o##utes" !o##ution !rob#es ha$e increased a sour !o!u#ation has
u#ti!#ied& The wor#ds !o!u#ation grew fro 1 bi##ion in 1)K0 to 3 bi##ion in 1M20 to K&D
bi##ion in 1MMKI it is !ro<ected to grow to between 10 and 13 bi##ion by 30J0& This !o!u#ation
e0!#osion has !ut se$ere strains on the air and water resources into which we du! our share of
!o##utants& Moreo$er" these strains ha$e been aggra$ated by our tendency to concentrate our
!o!u#ations in urban centers& *## o$er the wor#d urban areas are growing ra!id#y" and the high
!o!u#ation densities that urbani(ation has created u#ti!#y the !o##ution burdens !#aces on air
and water resources&
The !rob#es of !o##ution" then" ha$e a $ariety of origins" and their treatent re7uires a
sii#ar#y $ariegated set of so#utions& Aur focus in what fo##ows" howe$er" concentrates on a
sing#e range of !rob#es+ the ethical issues raised by pollution from commercial and industrial
enterprises.
Ecolo*ical Ethics
The !rob#e of !o##ution -and en$ironenta# issues in genera#. is seen by soe researchers as
a !rob#e that can best be fraed in ters of our duty to recogni(e and !reser$e the eco#ogica#
systes within which we #i$e& *nd eco#ogica# syste is an interre#ated an interde!endent set of
organiss and en$ironents" such as a #ake?in which the fist de!end on sa## a7uatic
organiss" which in turn #i$e off decaying !#ant and fist waste !roducts& Because the $arious
!arts of an eco#ogica# syste are interre#ated" the acti$ities of one of its !arts wi## affect a##
other !arts& Because the $arious !arts are interde!endent" the sur$i$a# of each !art de!ends on
the sur$i$a# of the other !ars& Business firs are !arts of a #arger eco#ogica# syste" Hspaceship
earth.)
Business firs de!end on the natura# en$ironent for their energy" ateria# resources" and
waste dis!osa#" and that en$ironent in turn is affected by the coercia# acti$ities of business
firs& 4or e0a!#e" the acti$ities of 1)
th
%centuary Euro!ean anufacturers of bea$er hats #ed to
the who#esa#e destruction of bea$ers in Gnited ;tates" which in turn #ed to the drying u! of the
innuerab#e swa! #ands that had been created by bea$er das& Gn#ess business recogni(e the
interre#ationshi!s and interde!endencies of the eco#ogica# systes within which they o!erate
and un#ess they ensure that their acti$ities wi## not serious#y in<ure these systes" we cannot
ho!e to dea# with the !rob#e of !o##ution&
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Because our en$ironent is so co!#e0 and its !arts are so interwo$en" any theorists be#ie$e
that our duty to !rotect the en$ironent e0tends beyond the we#fare of huans to other
nonhuan !arts of the syste& This idea" ca##ed eco#ogica# ethics or dee! eco#ogy" aintains
that the en$ironent deser$es to be !reser$ed for its own sake" regard#ess of whether or not this
direct#y benefits huanity& Because the $arious !arts of an eco#ogica# syste are interre#ated"
the acti$ities of one of its !arts wi## affect a## the other !arts& Because the $arious !arts are
interde!endent" the sur$i$a# of each !art de!ends on the sur$i$a# of the other !arts& Business
firs -and a## other socia# institutions. are !arts of a #arger eco#ogica# syste" Bs!aceshi!
earth&C
;e$era# su!!orters of this a!!roach ha$e foru#ated their $iews in a !#atfor consisting of the
fo##owing stateents+
i& The we##%being and f#ourishing of huan and nonhuan #ife on earth ha$e $a#ue in
these#$es& These $a#ues are inde!endent of the usefu#ness of the nonhuan wor#d for
huan !ur!oses&
ii& 6ichness and di$ersity of #ife fors contribute to the rea#i(ation of these $a#ues and are
a#so $a#ues in these#$es&
iii& /uans ha$e no right to reduce this richness and di$ersity e0ce!t to satisfy $ita# needs&
i$& The f#ourishing of huan #ife and cu#tures is co!atib#e with a substantia# decrease of
the huan !o!u#ation& The f#ourishing of nonhuan #ife re7uires such a decrease&
$& Lresent huan interference with the nonhuan wor#d is e0cessi$e" and the situation is
ra!id#y worsening&
$i& Lo#icies ust therefore be changed& The changes in !o#icies affect basic econoic"
techno#ogica#" and ideo#ogica# structures& The resu#ting state of affairs wi## be dee!#y
different fro the !resent&
$ii& The ideo#ogica# change is ain#y that of a!!reciating #ife 7ua#ity" rather than adhering
to an increasing#y higher standard of #i$ing&
$iii& Those who subscribe to the foregoing !oints ha$e an ob#igation direct#y or indirect#y to
!artici!ate in the atte!t to i!#eent the necessary changes&
*n eco#ogica# ethic" therefore" c#ais that the we#fare of at #east soe nonhuans is
intrinsica##y $a#uab#e and deser$ing of res!ect and !rotection& Gti#itarian and rights arguents
both su!!ort such a $iew& Gnder either syste" for instance" it wou#d be wrong to raise ania#s
for food in !ainfu# conditions&
There are se$era# $arieties of eco#ogica# ethics" soe ore radica# and far%reaching than others"
!erha!s the ost !o!u#ar $ersion c#ais that" in addition to huan beings" other ania#s ha$e
intrinsic $a#ue and are deser$ing of our res!ect and !rotection& ;oe uti#itarian ha$e c#aied"
for e0a!#e" that !ain is an e$i# where it is inf#icted on huan or on eber of other ania#
s!ecies& The !ain of an ania# ust be considered as e7ua# to the co!arab#e !ain of o huan"
and it s a for of specist !re<udice to think that thy duty to a$oid inf#icting !ain on eber of
other s!ecies is not e7ua# to our duty to a$oid inf#icting co!arab#e !ain on ebers of our
own s!ecies&
Certain non%uti#itarians ha$e reached sii#ar conc#usions by a different route& They ha$e
c#aied that the #ife of e$ery ania# Hitse#f had $a#ueC a!art fro the interests of huan
beings& Because of the intrinsic $a#ue of its #ife" each ania# has certain ora# rights" in
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!articu#ar the right to be treated with res!ect& /uan ha$e a duty to res!ect this right" a#though
in soe cases a huans right ight o$erride an ania#s right&
Both uti#itarian and the rights arguents in su!!ort of huans duties toward ania#s i#y that
it wrong to raise ania#s for food in the crowded and !ainfu# circustances in which
agricu#tura# business enter!rises current#y raise cows" !igs" and chickens& They a#so i!#y that
it is wrong to use ania#s in !ainfu# rest !rocedures as they are current#y used in soe business
-e&g&" to test the to0icity of cosetics.&
Broader $ersions of eco#ogica# ethics wou#d e0tend our duties beyond the ania# wor#d to
inc#ude !#ants& Thus" soe ethicians ha$e c#aied that it is arbitrary and hedonistic to confine
our duties to creatures that can fee# !ain& 'nstead" they urge" we shou#d acknow#edge that a##
#i$ing things inc#uding !#ants ha$e Han interest in reaining a#i$eC and that conse7uent#y they
deser$e ora# consideration for their own sakes&
Though soe of the $iews of dee! eco#ogy are unusua# and contro$ersia#" two traditiona# $iews
of ethics can a#so he#! us to de$e#o! an en$ironenta# ethic+ uti#itarianis and concern for
huan rights&
Environmental Ri*hts an %-solute Bans
9i##ia T& B#ackstone has argued that the !ossession of a #i$ab#e en$ironent is not ere#y a
desirab#e state of affairs" but soething to which each huan being has a right& That is" a
#i$ab#e en$ironent is not ere#y soething that we wou#d a## #ike to ha$e+ it is soething that
others ha$e a duty to a##ow us to ha$e& They ha$e this duty" B#ackstone argued" because we
each ha$e a right to #i$ab#e en$ironent" and our right i!oses on others the corre#ati$e duty
not interfering in our e0ercise of that right& This is a right" oreo$er" that shou#d be
incor!orated into our #ega# syste&
9hy do huan beings ha$e this right: *ccording to B#ackstone" a !erson has a ora# right to a
thing when !ossession of that thing is Hessentia# in !eritting hi to #i$e a huan #ifeC -i&e&" in
!eritting hi to fu#fi## his ca!acities as a rationa# and free being.& *t this tie in our history"
it has becoe c#ear that a #i$ab#e en$ironent is essentia# to the fu#fi##ent of our huan
ca!acities& Conse7uent#y" huan beings ha$e a ora# right to a decent en$ironent" and it
shou#d becoe a #ega# right&
Moreo$er" B#ackstone adds" this ora# and #ega# right shou#d o$erride !eo!#es #ega# !ro!erty
rights& Aur great and increasing abi#ity to ani!u#ate the en$ironent has re$ea#ed that" un#ess
we #iit the #ega# freedo to engage in !ractices that destroy the en$ironent" we sha## #ose the
$ery !ossibi#ity of huan #ife and the !ossibi#ity of e0ercising other rights" such as the right to
#iberty and e7ua#ity&
To a #arger e0tent" soething #ike B#ackstones conce!t of environmental rights is recogni(ed
in federa# #aw" section 101-b. of the @ationa# En$ironenta# Lo#icy *ct of 1M6M&
The ain difficu#ty with B#ackstone,s $iew" howe$er" is that it fai#s to !ro$ide any nuanced
guidance on se$era# !ressing en$ironenta# choices& This #ack of nuance in the abso#ute rights
a!!roach is es!ecia##y !rob#eatic when the costs of reo$ing certain aounts of !o##ution are
high in co!arison to the benefits that wi## be attained&
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Utilitarianism an (artial Controls
Gti#itarianis can answer soe of the difficu#ties with B#ackstone,s theory& Gti#itarians see
en$ironenta# !rob#es as arket defects" arguing that !o##ution shou#d be a$oided because it
hars society,s we#fare& 9hen arkets do not take a## costs into account" ore of a coodity
wi## be !roduced than society wou#d deand if it cou#d easure what it is actua##y !aying for
the coodity& 'n addition" !roducers ignore these costs and do not try to inii(e the&
;ince goods are no #onger efficient#y distributed to consuers" !o##ution $io#ates the uti#itarian
!rinci!#es that under#ie the arket syste&
(rivate Costs an 'ocial Costs
Econoists often distinguish between what it cost a !ri$ate anufacturer to ake a !roduct
and what the anufacture of that !roduct costs society as a who#e& ;u!!ose" for e0a!#e" that
an e#ectric fir consues a certain aount of fue#" #abor" and e7ui!ent to !roduce one
ki#owatt of e#ectricity& The cost of these resources is its !ri$ate cost+ the !rice it ust !ay out of
its own !ocket to anufacture one ki#owatt of e#ectricity& /owe$er" !roducing the ki#owatt of
e#ectricity ay a#so in$o#$e other e0terna# costs for which the fir does not !ay& 9hen the fir
burns fue#" for e0a!#e" it ay generate soke and soot the sett#es on surrounding neighbors"
who ha$e to bear the costs of c#eaning u! the grie and !aying for any edica# !rob#es the
soke creates& 4ro the $iew!oint of society as a who#e" then" the costs of !roducing the
ki#owatt of e#ectricity inc#ude not on#y the interna# costs of c#ean%u! and edica# care that the
neighbors !ay& This su of costs -the !ri$ate interna# costs !#us the neighbors e0terna# costs.
is the socia# costs of !roducing the ki#owatt of e#ectricity+ the tota# !rice society ust !ay to
anufacture one ki#owatt of e#ectricity& Af course" !ri$ate costs and socia# costs do not a#ways
di$erge as in this e0a!#e+ soeties the two coincide& 'f a !roducer !ays foe a## the costs
in$o#$ed in anufacturing a !roduct" for e0a!#e" or if anufacturing a !roduct i!oses no
e0terna# costs" then the !roducers costs and the tota# socia# costs are the sae&
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LESSON 29
T"E ET"IC' O$ (O&&UTION CONTRO&
Remeies/ The uties o1 the $irm
The reedy for e0terna# costs" according to uti#itarians" is to interna#i(e the to ensure that the
!roducer !ays a## of the rea# costs of !roduction and uses these costs to deterine the !rice of
the coodity& To interna#i(e the costs of !o##ution" a fir ay be re7uired to !ay a## those
hared by !o##ution& * !rob#e with this way of interna#i(ing the costs of !o##ution" howe$er"
is that when se$era# !o##uters are in$o#$ed" it is not a#ways c#ear <ust who is being hared and
by who&
* second reedy is for the !o##uter to sto! !o##ution at its source by insta##ing !o##ution%contro#
de$ices& 'n this way" the e0terna# costs of !o##uting the en$ironent are trans#ated into the
interna# costs the for !ays to insta## !o##ution contro#s& Ance the costs are interna#i(ed in this
way" arket echaniss again !ro$ide cost cutting incenti$es and ensure that !rices ref#ect the
true costs of !roducing the coodity& 'n addition" the insta##ation of !o##ution%contro# de$ices
ser$es to e#iinate the #ong%range and !otentia##y disastrous wor#dwide effects of !o##ution&
<ustice
This way of dea#ing with !o##ution -i&e&" by interna#i(ing costs. is consistent with the
re7uireents of distributi$e <ustice& ;ince !o##ution,s e0terna# costs are #arge#y borne by the
!oor" !o##ution !roduces a net f#ow of benefits away fro the !oor and towards the rich&
'nterna#i(ing these costs can re$erse this f#ow& /owe$er" if a fir akes basic goods" such as
food" then interna#i(ing costs ay !#ace a hea$ier burden on !oorer !eo!#e&
'nterna#i(ing e0terna# costs is a#so consistent with retributi$e and co!ensatory <ustice" because
those who are res!onsib#e for !o##ution bear the burden of rectifying it and co!ensating those
who ha$e been hared& Taken together" these re7uireents i!#y that+
1& The costs of !o##ution contro# shou#d be borne by those who cause !o##ution and who
ha$e benefited fro !o##ution acti$ities" whereas+
3& The benefits of !o##ution contro# shou#d f#ow to those who ha$e had to bear the e0terna#
costs of !o##ution& 'nterna#i(ing e0terna# costs sees to eet these two re7uireents+
a. The costs of !o##ution contro# are borne by stockho#ders and custoers" both
of who benefit fro the !o##uting acti$ities of the firI and
b. The benefits of !o##ution contro# f#ow to those neighbors who once had to
!ut u! with the fir,s !o##ution&
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LESSON 30
Costs an Bene1its
Environmental In?ustice
'f a fir !o##utes" its stockho#ders benefit because their fir does not ha$e to absorb the
e0terna# costs of !o##utionI this #ea$es the with greater !rofits" and those custoers who
!urchase the firs !roduct a#so benefit because the fir does not charge the for a## the costs
in$o#$ed in aking the !roduct& Therefore" the beneficiaries of !o##ution tend to be those who
can afford to buy a firs stock and its !roducts& /owe$er" the e0terna# costs of !o##ution are
borne #arge#y by the !oor?a !henoenon soe ha$e ters environmental in4ustice.
Cost an Bene1its
The !rob#es in$o#$ed in getting accurate easureents of the benefits and costs of !o##ution
contro# are a#so i##ustrated by the difficu#ties businesses ha$e encountered in trying to construct
a social auit -a re!ort of the socia# costs and socia# benefits of the fir,s acti$ities.& This can
be difficu#t" howe$er& /ow do we easure the costs and benefits of !o##ution contro# when they
in$o#$e daages to huan #ife or hea#th: Measureent itse#f is a#so difficu#t when the effects
of !o##ution are uncertain and therefore hard to !redict& 'n fact" getting accurate !o##ution
easureents is soeties near#y i!ossib#e" and the !rob#e on#y is u#ti!#ied when there
are a nuber of !o##uters in a sing#e area& Measuring benefits is #ikewise difficu#t" which !oses
significant technica# !rob#es for uti#itarian a!!roaches to !o##ution&
E$en where easureent is not a !rob#e" another !rob#e reains for the uti#itarian
a!!roach& 's it ora##y !erissib#e to i!ose costs on unwi##ing or unknowing citi(ens: Can
soe uni#atera##y i!ose costs on others without their consent: E$en getting consent is tricky"
because any !o##ution !rob#es in$o#$e inforation and risks that are e0tree#y technica#
and difficu#t to understand& 't is !erha!s i!ossib#e in !rinci!#e to get infored consent fro a
segent of the !ub#ic on soe co!#icated issues&
Because of these !rob#es" soe contend that uti#itarianis cannot #ead our !o##ution contro#
!o#icy& Lerha!s abso#ute bans on !o##ution are ore ade7uate& ;oe writers e$en suggest that
when risk cannot be re#iab#y estiated" it is best to steer c#ear of such !ro<ects& Athers aintain
that we shou#d identify those who wi## bear the risks and take ste!s to !rotect the&
't ho#ds that unti# those !atterns of hierarchy and doination are changed" we wi## be unab#e to
dea# with en$ironenta# crises& 'n a syste of hierarchy" one grou! ho#ds !ower o$er another
and ebers of the su!erior grou! are ab#e to doinate those of the inferior grou! and get
the to ser$e their Many thinkers ha$e argued that the en$ironenta# crises we face are rooted
in the socia# systes of hierarchy and doination that characteri(e our society& This $iew" now
referred to as socia# eco#ogy" ends&
Gnti# these systes -such as racis" se0is" and socia# c#asses. are changed" we wi## be unab#e
to dea# ade7uate#y with the en$ironent& Eco%feinists" a re#ated grou! of thinkers" see the key
for of hierarchy connected to the destruction of the en$ironent as the doination of woen
by en& They be#ie$e that there are i!ortant connections between the doination of woen
and the doination of nature!atterns of thinking" which <ustify and !er!etuate the
subordination& This #ogic of doination sets u! dua#iss -artificia# and natura#" a#e and
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fea#e. where one of the !air is seen as stronger and ore i!ortant& To so#$e our eco#ogica#
!rob#es" we ust first change these destructi$e odes of thinking&
*ccording to the ethics of caring" the destruction of nature that has acco!anied a#e
doination ust be re!#aced with caring for and nurturing our re#ationshi!s with nature and
other #i$ing things& @ature ust be seen as an BotherB that ust be cared for" not taed or
doinated& Thought%!ro$oking as these a!!roaches are" they are sti## too new and unde$e#o!ed
to gi$e us s!ecific direction&
Thomas ,leinAs Vie;
Thoas E#ein suari(ed the !rocedure for cost%benefit ana#ysis as fo##ows+
1& 'dentify costs and benefits of the !ro!osed !rogra and the !erson or sectors incurring
or recei$ing the& Trace transfers&
3& E$a#uate the costs and benefits in ters of their $a#ue to beneficiaries and donors& The
standard of easure is the $a#ue of each argina# unit to deanders and su!!#iers
idea##y ca!tured in co!etiti$e !rices& Gsefu# refineents in$o#$e+
a. 'ncor!orating tie $a#ues through the use of discount rate&
b. 6ecogni(ing risk by factoring !ossib#e outcoes according to !robabi#ities and"
where de!endent" !robabi#ity trees&
2& *dd u! costs and benefits to deterine the net socia# benefit of a !ro<ect or !rogra&
'ocial %uit
* socia# audit is a way of easuring" understanding" re!orting and u#tiate#y i!ro$ing an
organi(ations socia# and ethica# !erforance& * socia# audit he#!s to narrow ga!s between
$isionNgoa# and rea#ity" between efficiency and effecti$eness& 't is a techni7ue to understand"
easure" $erify" re!ort on and to i!ro$e the socia# !erforance of the organi(ation&
;ocia# auditing creates an i!act u!on go$ernance& 't $a#ues the $oice of stakeho#ders"
inc#uding argina#i(edN!oor grou!s whose $oices are rare#y heard& ;ocia# auditing is taken u!
for the !ur!ose of enhancing #oca# go$ernance" !articu#ar#y for strengthening accountabi#ity and
trans!arency in #oca# bodies& The key difference between de$e#o!ent and socia# audit is that a
socia# audit focuses on the neg#ected issue of socia# i!acts" whi#e a de$e#o!ent audit has a
broader focus inc#uding en$ironent and econoic issues" such as the efficiency of a !ro<ect or
!rogra&
The !rob#es in$o#$ed in getting accurate easureents of the benefits of !o##ution contro# are
a#so i##ustrated by the difficu#ties businesses ha$e encountered in trying to construct a socia#
audit -a re!ort of the socia# costs and socia# benefits of the firs acti$ities.& Those who
ad$ocate that a cor!oration shou#d easure and re!ort the socia# i!acts of its acti$ities ha$e
been forces to Hrecogni(e that the goa# of easuring a## i!acts of a## actions on a## conditions
and a## !ub#ics" using standard techni7ues and units" considerab#y e0ceeds current ca!abi#ities
and that co!roises and odifications are ine$itab#e& *s a resu#t of this inabi#ity to easure
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benefits" so ca##ed social audits are usua##y nothing ore than 7ua#itati$e descri!tions of what a
fir is doing& 9ithout definite 7uantitati$e easureent of the benefits deri$ing fro its
atte!ts to reduce !o##ution" a fir has no way of knowing whether its efforts are cost effecti$e
fro a socia# !oint of $iew&
Measurement o1 Costs an Bene1its
Measureent is a#so difficu#t when the effects of !o##ution are uncertain and" conse7uent#y"
difficu#t to !redict& 'n fact" !erha!s the a<or !rob#e in$o#$ed in obtaining the easureents
needed to a!!#y cost%benefit ana#ysis to !o##ution !rob#es is the !rob#e of estiating and
e$a#uating risk&
Many new techno#ogies carry with the unknown degrees of risk to !resent and future
generations& The use of nuc#ear techno#ogy" for e0a!#e" in$o#$es soe !robabi#ity of daages
to hea#th and #oss of #ife for !resent and future generations& 4or e0a!#e" we cannot use tria#
and error -a usua# ethod for #earning what the !robabi#ities of an e$ent are. to #earn the risk of
a nuc#ear accident&
These fai#ures of easureent !ose significant technica# !rob#es for uti#itarian a!!roaches to
!o##ution& 'n addition" the use of uti#itarian cost%benefit ana#ysis soeties based on
assu!tions those are inconsistent with !eo!#es ora# rights& *d$ocates of uti#itarian cost%
benefit ana#ysis soeties assue that if the benefits of a certain techno#ogy or anufacturing
!rocess c#ear#y outweigh its costs" then it is ora##y !erissib#e to i!ose the !rocess on
unwi##ing citi(ens"
Conclusion
'n $iew of a## the !rob#es raised by uti#itarian a!!roaches to !o##ution" it ay be that
a#ternati$e a!!roaches are ore ade7uate& 'n !articu#ar" it ay be that the abso#ute bans on
!o##ution that are sti## incor!orated in any federa# #aws" and the rights theory on which those
abso#ute band rest" are" for the !resent at #east" a ore ade7uate a!!roach to !o##ution issues
than uti#itarianis&
4ina##y" others suggest that when risks cannot be easured" the on#y rationa# !rocedure is to
first assue that the worst wi## ha!!en and then choose the o!tion that wi## #ea$e us best off
when the worst ha!!ens -this is the so%ca##ed maximin rule of !robabi#ity theory.& 't is unc#ear
which" if any" of these a#ternati$e a!!roaches shou#d be ado!ted when uti#itarian cost%benefit
ana#ysis fai#s&
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LESSON 31
ET"IC' O$ C%RE
'ocial Ecolo*y
Many thinkers ha$e argued that the en$ironenta# crises we face are rooted in the socia#
systes of hierarchy and doination that characteri(e our society& This $iew" now referred to
as social ecology, ho#ds that" unti# those !atterns of hierarchy and doination are changed" we
wi## be unab#e to dea# with en$ironenta# crises& 'n a syste of hierarchy" one grou! ho#ds
!ower o$er another and ebers of the su!erior grou! are ab#e to doinate those of the
inferior grou! and get the to ser$e their ends& E0a!#e of such systes of hierarchy inc#ude
socia# !ractices such as racis" se0is" and socia# c#asses" as we## as socia# institutions such as
!ro!erty rights" ca!ita#is" bureaucracies" and the echaniss of go$ernent& ;uch systes of
hierarchy and doination go hand in hand with the wides!read en$ironenta# destruction
taking !#ace a## around us and with econoic ways of anaging the en$ironent&
9hat #itera##y defines socia# eco#ogy as Bsocia#B is its recognition of the often o$er#ooked fact
that near#y a## our !resent eco#ogica# !rob#es arise fro dee!%seated socia# !rob#es&
Con$erse#y" !resent eco#ogica# !rob#es cannot be c#ear#y understood" uch #ess reso#$ed"
without reso#ute#y dea#ing with !rob#es within society& To ake this !oint ore concrete+
econoic" ethnic" cu#tura#" and gender conf#icts" aong any others" #ie at the core of the ost
serious eco#ogica# dis#ocations we face today%%a!art" to be sure" fro those that are !roduced by
natura# catastro!hes&
'f this a!!roach sees a bit too Bsocio#ogica#B for those en$ironenta#ists who identify
eco#ogica# !rob#es with the !reser$ation of wi#d#ife" wi#derness" or ore broad#y" with BGaiaB
and !#anetary BAneness"B it ight be sobering to consider certain recent facts& The assi$e oi#
s!i## by an E00on tanker at Lrince 9i##ia ;ound" the e0tensi$e deforestation of redwood trees
by the Ma00a Cor!oration" and the !ro!osed =aes Bay hydroe#ectric !ro<ect that wou#d
f#ood $ast areas of northern 8uebec,s forests" to cite on#y a few !rob#es" shou#d reind us that
the rea# batt#eground on which the eco#ogica# future of the !#anet wi## be decided is c#ear#y a
socia# one&
'ndeed" to se!arate eco#ogica# !rob#es fro socia# !rob#es%%or e$en to !#ay down or gi$e
token recognition to this crucia# re#ationshi!%% wou#d be to gross#y isconstrue the sources of
the growing en$ironenta# crisis& The way huan beings dea# with each other as socia# beings
is crucia# to addressing the eco#ogica# crisis& Gn#ess we c#ear#y recogni(e this" we wi## sure#y
fai# to see that the hierarchica# enta#ity and c#ass re#ationshi!s that so thorough#y !ereate
society gi$e rise to the $ery idea of doinating the natura# wor#d&
Gn#ess we rea#i(e that the !resent arket society" structured around the bruta##y co!etiti$e
i!erati$e of Bgrow or die"B is a thorough#y i!ersona#" se#f%o!erating echanis" we wi##
fa#se#y tend to b#ae techno#ogy as such or !o!u#ation growth as such for en$ironenta#
!rob#es& 9e wi## ignore their root causes" such as trade for !rofit" industria# e0!ansion" and
the identification of B!rogressB with cor!orate se#f%interest& 'n short" we wi## tend to focus on
the sy!tos of a gri socia# !atho#ogy rather than on the !atho#ogy itse#f" and our efforts wi##
be directed toward #iited goa#s whose attainent is ore cosetic than curati$e&
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9hi#e soe ha$e 7uestioned whether socia# eco#ogy has dea#t ade7uate#y with issues of
s!iritua#ity" it was" in fact" aong the ear#iest of conte!orary eco#ogies to ca## for a swee!ing
change in e0isting s!iritua# $a#ues& ;uch a change wou#d ean a far%reaching transforation of
our !re$ai#ing enta#ity of doination into one of co!#eentarity" in which we wou#d see
our ro#e in the natura# wor#d as creati$e" su!!orti$e" and dee!#y a!!reciati$e of the needs of
nonhuan #ife& 'n socia# eco#ogy" a tru#y natura# s!iritua#ity centers on the abi#ity of an
awakened huanity to function as ora# agents in diinishing need#ess suffering" engaging in
eco#ogica# restoration" and fostering an aesthetic a!!reciation of natura# e$o#ution in a## its
fecundity and di$ersity&
Thus socia# eco#ogy has ne$er eschewed the need for a radica##y new s!iritua#ity or enta#ity in
its ca## for a co##ecti$e effort to change society& 'ndeed" as ear#y as 1M6K" the first !ub#ic
stateent to ad$ance the ideas of socia# eco#ogy conc#uded with the in<unction+ BThe cast of
ind that today organi(es differences aong huan and other #ife%fors a#ong hierarchica#
#ines of ,su!reacy, or ,inferiority, wi## gi$e way to an out#ook that dea#s with di$ersity in an
eco#ogica# anner%%that is" according to an ethics of co!#eentarity&B1 'n such an ethics"
huan beings wou#d co!#eent nonhuan beings with their own ca!acities to !roduce a
richer" creati$e" and de$e#o!enta# who#e%not as a BdoinantB s!ecies but as a su!!orti$e one&
*#though this idea" e0!ressed at ties as an a!!ea# for the Bres!iriti(ation of the natura# wor#d"B
recurs throughout the #iterature of socia# eco#ogy" it shou#d not be istaken for a theo#ogy that
raises a deity abo$e the natura# wor#d or that seeks to disco$er one within it& The s!iritua#ity
ad$anced by socia# eco#ogy is definiti$e#y natura#istic -as one wou#d e0!ect" gi$en its re#ation
to eco#ogy itse#f" which stes fro the bio#ogica# sciences." rather than su!ernatura#istic or
!antheistic&
To !rioriti(e any for of s!iritua#ity o$er the socia# factors that actua##y erode a## fors of
s!iritua#ity" raises serious 7uestions about one,s abi#ity to coe to gri!s with rea#ity& *t a tie
when a b#ind socia# echanis" the arket" is turning soi# into sand" co$ering ferti#e #and with
concrete" !oisoning air and water" and !roducing swee!ing c#iatic and atos!heric changes"
we cannot ignore the i!act that a hierarchica# and c#ass society has on the natura# wor#d& 9e
ust earnest#y dea# with the fact that econoic growth" gender o!!ressions" and ethnic
doination%not to s!eak of cor!orate" state" and bureaucratic interests%are uch ore ca!ab#e
of sha!ing the future of the natura# wor#d than are !ri$atistic fors of s!iritua# se#f%
regeneration& These fors of doination ust be confronted by co##ecti$e action and a<or
socia# o$eents that cha##enge the socia# sources of the eco#ogica# crisis" not si!#y by
!ersona#istic fors of consu!tion and in$estent that often go under the rubric of Bgreen
ca!ita#is&B 9e #i$e in a high#y coo!erati$e society that is on#y too eager to find new areas of
coercia# aggrandi(eent and to add eco#ogica# $erbiage to its ad$ertising and custoer
re#ations&
Gnti# these systes -such as racis" se0is" and socia# c#asses. are changed" we wi## be unab#e
to dea# ade7uate#y with the en$ironent& Eco%feinists" a re#ated grou! of thinkers" sees the
key for of hierarchy connected to the destruction of the en$ironent as the doination of
woen by en& They be#ie$e that there are i!ortant connections between the doination of
woen and the doination of nature!atterns of thinking" which <ustify and !er!etuate the
subordination& This #ogic of doination sets u! dua#iss -artificia# and natura#" a#e and
fea#e. where one of the !air is seen as stronger and ore i!ortant& To so#$e our eco#ogica#
!rob#es" we ust first change these destructi$e odes of thinking&
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*ccording to the ethics of caring" the destruction of nature that has acco!anied a#e
doination ust be re!#aced with caring for and nurturing our re#ationshi!s with nature and
other #i$ing things& @ature ust be seen as an BotherB that ust be cared for" not taed or
doinated& Thought%!ro$oking as these a!!roaches are" they are sti## too new and unde$e#o!ed
to gi$e us s!ecific direction&
The Ethics o1 Conservin* De!leta-le Resources
Conser$ation refers to the sa$ing or rationing of natura# resources for #ater use& Conser$ation"
therefore" #ooks !riari#y to the future+ to the need to #iit consu!tion now to ha$e resources
a$ai#ab#e for toorrow&
'n fact" e$en !o##ution contro# can be seen as a for of conser$ation" since !o##ution consues
air and water& /owe$er" there are basic differences between the !rob#es of !o##ution and the
!rob#es of resource de!#etion that akes the ter conservation ore a!!#icab#e to the #atter
!rob#es than to the forer& 9ith soe notab#e e0ce!tion -such as nuc#ear wastes." ost fors
of !o##ution affect !resent generations" and their contro# wi## benefit !resent generations& The
de!#etion of ost scarce resources" howe$er" #ies far in the de!#etion of resources is !riari#y
by !osterity and not by !resent generations& Conse7uent#y" our concern o$er the de!#etion of
resources is !riari#y a concern for future generations and for the benefits that wi## be a$ai#ab#e
to the&
Ri*hts o1 1uture )enerations
't ight a!!ear that we ha$e an ob#igation to conser$e resources for future generations because
they ha$e an e7ua# right to the #iited resources of this !#anet& 'f future generations ha$e an
e7ua# right to the wor#ds resources" then by de!#eting these resources" we are taking what is
actua##y theirs and $io#ating their and $io#ating their e7ua# right to these resources&
5o you think that it is a istake to think that future generations ha$e rights:
'f future generations did ha$e rights" we ight be #ed to the absurd conc#usion that we ust
sacrifice our entire ci$i#i(ation:
Can we say that soeone has a certain right on#y if we know that he or she has a certain interest
which that right !rotects:
Genera##y" conser$ation refers to the sa$ing of finite" de!#etab#e resources& The on#y source of
such resources is what has been #eft o$er fro !re$ious generations&
*s we de!#ete the wor#d,s resources" there is una$oidab#y a sa##er aount of the #eft for
future generations& 'f future generations ha$e an e7ua# right to the wor#d,s resources" then by
de!#eting the we are stea#ing what is actua##y theirs&
* nuber of writers ha$e c#aied that it is a istake to think that future generations ha$e
rights& They ad$ance three ain reasons to show this+
$irst" future generations cannot inte##igent#y be said to ha$e rights because they do not now
e0ist and ay ne$er e0ist& ' ay be ab#e to think about future !eo!#e" but ' cannot hit the"
!unish the" in<ure the" or treat the wrong#y& 4uture !eo!#e e0ist on#y in the iagination"
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and iaginary entities cannot be acted on in any way whatsoe$er e0ce!t in the iagination&
;ii#ar#y" we cannot say that future !eo!#e !ossess things now when they do not yet e0ist to
!ossess or ha$e the& Because there is a !ossibi#ity that future generations ay ne$er e0ist"
they cannot B!ossessB rights&
'econ" if future generations did ha$e rights" we ight be #ed to the absurd conc#usion that we
ust sacrifice our entire ci$i#i(ation for their sake& ;u!!ose that each of the infinite nuber of
future generations had an e7ua# right to the wor#d,s su!!#y of oi#& Then we wou#d ha$e to di$ide
the oi# e7ua##y aong the a##" and our share wou#d be a few 7uarts at the ost& 9e wou#d
then be !ut in the absurd !osition of ha$ing to shut down our entire 9estern ci$i#i(ation so that
each future !erson ight be ab#e to !ossess a few 7uarts of oi#&
Thir" we can say that soeone has a certain right on#y if we know that he or she has a certain
interest that that right !rotects& The !ur!ose of a right" after a##" is to !rotect the interests of the
right ho#der" but we are $irtua##y ignorant of what interests future generations wi## ha$e& 9hat
wants wi## they ha$e:
=ohn 6aw#s" on the other hand" argues that though it is un<ust to i!ose hea$y burdens on
!resent generations for the sake of the future" it is a#so un<ust for !resent generations to #ea$e
nothing for the future& 9e shou#d ask ourse#$es what we can reasonab#y e0!ect they ight
want and" !utting ourse#$es in their !#ace" #ea$e what we wou#d #ike the to ha$e #eft for us&
=ustice" in short" re7uires that we hand o$er to our chi#dren a wor#d in no worse condition than
the one we recei$ed ourse#$es&
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LESSON 32
ET"IC' O$ C%RE3UTI&IT# %ND CON'ERV%TION
<ustice to $uture )enerations
=ohn 6aw#s" on the other hand" argues that though it is un<ust to i!ose hea$y burdens on
!resent generations for the sake of the future" it is a#so un<ust for !resent generations to #ea$e
nothing for the future& 9e shou#d ask ourse#$es what we can reasonab#y e0!ect they ight
want and" !utting ourse#$es in their !#ace" #ea$e what we wou#d #ike the to ha$e #eft for us&
=ustice" in short" re7uires that we hand o$er to our chi#dren a wor#d in no worse condition than
the one we recei$ed ourse#$es&
'n genera#" 6aw#s c#ais that this ethod of ascertaining what ear#ier generations in <ustice
owe to #ater generations wi## #ead to the conc#usion that what <ustice deands of us is ere#y
that we hand to the ne0t generation a situation no worse than we recei$ed fro the generation
before us& =ustice" then" re7uires that we hand o$er to our iediate successors a wor#d that is
not in worse condition than the one we recei$ed fro our ancestors&
6aw#s conc#usion is a#so su!!orted by soe uti#itarian reasoning& 6obin *ttfie#d" a uti#itarian"
for e0a!#e" argued that uti#itarianis fa$ors what he ca##ed 1oc&ean principle that Heach
shou#d #ea$e enough and as good for others&C *ttfie#d inter!reted this to ean that each
generation ust #ea$e for future generations a wor#d whose out!ut ca!acity is no #ess than that
generation recei$ed fro !re$ious generations& That is" each generation ust #ea$e the wor#d
no #ess !roducti$e than it found& *ttfie#d suggested that #ea$ing the wor#d with the sae out!ut
ca!acity does not necessari#y ean #ea$ing the wor#d with the sae resources& 'nstead"
aintaining the sae #e$e# of out!ut can be achie$ed either through conser$ation" recyc#ing" or
techno#ogica# inno$ation&
Ather uti#itarians ha$e reached s#ight#y different but otherwise sii#ar conc#usions by re#ying
on other basic uti#itarian !rinci!#es& Gti#itarian ha$e argued that each generation has a duty to
a0ii(e the future beneficia# conse7uences of its actions and to inii(e their future
conse7uences shou#d be HdiscountedC in !ro!ortion to their uncertainty and to their distance in
the future& Together these uti#itarian !rinci!#es i!#y that we at #east ha$e an ob#igation to
a$oid those !ractices whose harfu# conse7uences for the generation that iediate#y fo##ows
us are certain to outweigh the beneficia# conse7uences our own generation deri$es fro the&
Aur res!onsibi#ity for ore distant future see what effects our !resent actions wi## ha$e on
the because we don not know what needs or techno#ogy they wi## ha$e&
9e cannot re#y on arket echaniss to ensure ade7uate conser$ation for future generations"
howe$er& The needs of future generations are so hea$i#y discounted by arkets that they hard#y
affect !rices at a##&
;i0 reasons cons!ire to bring this about+
1& Multi!le access % 'f se$era# se!arate e0tractors can use a resource" then the shared access
wi## in$ariab#y #ead the resource to be de!#eted too fast& *s with se$era# !eo!#e with straws
in one i#kshake" each owner,s !ri$ate interest is in taking it out as fast as !ossib#e&
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3& Time !re1erences an myo!ia % 4irs often ha$e short tie hori(ons under the stress of
coercia# co!etition& This ay under%re!resent the #egitiate interests of future
generations&
2& Inae@uate 1orecastin* % Lresent users ay si!#y fai# to foresee future de$e#o!ents&
This ay ref#ect a #ack of sufficient research interest and abi#ity to discern future changes&
J& '!ecial in1luences % ;!ecific ta0es and other incenti$e de$ices ay encourage o$er#y ra!id
use of resources&
K& ECternal e11ects % There are i!ortant e0terna#ities in the uses of any resources" so that
!ri$ate users ignore a<or degrees of !o##ution and other e0terna# costs&
6& Distri-ution % 4ina##y" !ri$ate arket decisions are based on the e0isting !attern of
distribution of wea#th and incoe& *s resource users $ote with their do##ars" arket deand
wi## ore strong#y ref#ect the interests and !references of the wea#thy&
Many obser$ers be#ie$e that conser$ation easures are fa##ing short of what is needed& ;oe
e$en aintain that future generations wi## ha$e a 7ua#ity of #ife uch #ower than our own&
'ndustria#i(ed nations wi## need to con$ert fro growth%oriented techno#ogies to ore #abor%
intensi$e ones& 'n fact" our entire econoic syste ay ha$e to abandon the goa# of steadi#y
increasing !roduction+ continua# econoic growth !roises to degrade the 7ua#ity of #ife for
future generations& This is because deand for de!#etab#e resources wi## continue to rise unti#
the resources si!#y run out& Then" #i$ing standards wi## dec#ine shar!#y&
Ane grou!" the C#ub of 6oe" !redicted that a catastro!hic co##a!se of goods and ser$ices wi##
resu#t at soe !oint in the idd#e of this centuryI by 3100 the wor#d,s !o!u#ation ay e$en
dro! be#ow 1M00 #e$e#s& More recent#y" the 9or#d watch 'nstitute has conc#uded that e$en if the
C#ub of 6oe,s tietab#es were off" their conc#usions were substantia##y correct&
*s our su!!#ies of energy diinish" other ora# concerns are raised& Though the G&;& has on#y
6P of the wor#d,s !o!u#ation" we consue 3KP of its energyI K0P of the !eo!#e of the wor#d
get a#ong with on#y )P& ;oe serious#y 7uestion whether high%consuing nations #ike ours can
be <ustified in using for its own sake the nonrenewab#e resources of the wor#d that others are
too weak or fruga# to use these#$es&
'n 1MMM" the !rice of !etro# is the #owest it has been for o$er two decades" with #arge reser$es of
oi# stored by go$ernents and cor!orations& Many other coodity !rices are a#so at $ery #ow
#e$e#s& These !resent%day facts are a## $ery different fro the warnings issued in the ear#y
1MD0s about a wor#d%wide en$ironent crisis and shortages of resources&
Ane of the best known warning $oices was contained in the book BLiits to GrowthB"
!ub#ished in 1MD3& 't so#d twe#$e i##ion co!ies in 2D #anguages& 9hi#st the book did not
!redict what !recise#y wou#d ha!!en" it stated that if the wor#d,s consu!tion !atterns and
!o!u#ation growth continued at the sae high rates of the tie" the earth wou#d strike its #iits
within a century& The essage was that this outcoe was not ine$itab#e& Leo!#e cou#d change
their !o#icies % and the sooner the better&
The book was $ery contro$ersia#& 'ts note of warning <arred with the sense of o!tiis that
e0isted at that tie& The 1MK0s and 1M60s had been a !eriod of iense econoic growth in
both the 9estern and Counist wor#ds" both of which had a $ery #ow rate of une!#oyent&
There was a genera# be#ief in the 9estern wor#d that another 1M20s%ty!e 5e!ression cou#d be
a$oided as a resu#t of go$ernent inter$ention in the econoy& *dditiona##y" it was assued
that there was a standard -9estern. foru#a for econoic growth that cou#d a!!#y throughout
Copyright Virtual University of Pakistan
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Business Ethics MGT610 VU
the Third 9or#d& *## the 9est had to do was to win the Co#d 9ar and the future for the entire
wor#d was assured&
Fery #itt#e attention had been !aid to the en$ironenta# conse7uences of econoic growth&
'ndeed" both ca!ita#ists and counists were con$inced that there cou#d not be uch of an
en$ironenta# crisis& 4or ca!ita#ists" the arket wou#d so#$e any en$ironenta# !rob#e -for
e0a!#e" if resources were used too ra!id#y" then !rices wou#d go u! and so usage wou#d be
forced down." and Mar0ist doga assured Counists that techno#ogy cou#d so#$e a##
!rob#es&
Both !o#itica# systes regarded criticis of their res!ecti$e systes on en$ironenta# grounds
as nonsense& Each said that BLiits to GrowthB was a#arist and the book was branded as
!essiistic and a threat to stab#e go$ernent& *#though BLiits to GrowthB so#d we## around
the wor#d" go$ernent !o#icy%akers ignored uch of the essence of the warning& 't is true that
the first inistries of the en$ironent were estab#ished at this tie and there were tougher
en$ironenta# #aws introduced& But both !o#itica# systes reained coitted to the o$era##
idea that growth was good and that the en$ironenta# conse7uences cou#d be so#$ed by
adinistrati$e" #ega# and techno#ogica# easures&
The Clu- o1 Rome
BLiits to GrowthB was coissioned by The C#ub of 6oe" a think%tank of scientists"
econoists" business!eo!#e" internationa# ci$i# ser$ants" and !o#iticians fro the fi$e
continents& The C#ub began in an infora# way at the behest of *ure#io Leccei" an 'ta#ian
business!erson based in 6oe& 'n 1M6K" Leccei ga$e a s!eech on the draatic changes taking
!#ace in the wor#d" es!ecia##y re#ating to science and techno#ogy& The s!eech attracted
considerab#e attention&
*#e0ander Eing" who had not !re$ious#y known Leccei" recei$ed a co!y of the s!eech& Eing
was a British scientist" who had been a scientific ad$iser to the British Go$ernent" and who
was then at the Laris%based Argani(ation for Econoic Co%o!eration and 5e$e#o!ent
-AEC5." the organi(ation of rich 9estern countries& Eing had sii#ar concerns to Leccei about
the coon#y%he#d $eneration for growth that a##owed #itt#e thought for any #ong%ter
conse7uences" and decided to eet Leccei to see how these ideas cou#d be fo##owed u!&
Leccei and Eing were not confident that either the arket or techno#ogy cou#d function as a
way of so#$ing en$ironenta# !rob#es& *fter ca##ing together grou!s of econoists and
scientists to discuss !rob#es facing the wor#d" they asked a grou! of co!uter e0!erts at M'T
in the G; to e0aine what wou#d ha!!en if !eo!#e continued to consue such a high aount
of resources& This study becae the basis of the BLiits to GrowthB book&
The study had soe ob$ious #iitations" ost of which steed fro the use of co!uter
ode#ing& This was the first tie that co!uter ode#ing had been used for such an abitious
e0ercise& The success of such ode#ing de!ends on both the 7ua#ity of data and the ca!abi#ities
of the co!uter& 'n 1MD0" ethods of data co##ection were sti## rudientary& Many countries"
for e0a!#e" did not know the true si(e of their !o!u#ations& There ha$e been any
i!ro$eents in nationa# data co##ection but" e$en today" we are sti## far fro getting a## the
data we need to !roduce accurate ode#s& 4or e0a!#e" there is debate in any countries on
how to work out the e0act nubers of une!#oyed !eo!#e" with officia# statistics usua##y being
#ower than those of non%go$ernenta# organi(ations that work with une!#oyed !eo!#e&
Copyright Virtual University of Pakistan
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Business Ethics MGT610 VU
'n addition" the 7ua#ity of the ode# used was #iited by the a$ai#ab#e co!uter techno#ogy and
cou#d on#y use a #ow nuber of e7uations in its construction& Co!uter ode#ing has now
becoe ore so!histicated with the far greater co!uter !ower that is a$ai#ab#e eaning that
ode#s ha$e becoe ore co!#e0& /owe$er" co!uter ode#ing sti## #ea$es a great dea# to
be desired" as is e$ident with the fai#ure of go$ernent finance de!artents to !redict the si(e
of econoic growth in the coing years&
Lea$ing aside the detai#s of the !ro<ections" there is the 7uestion of the essence of the warning+
is the earth a!!roaching its BLiits to GrowthB:
Copyright Virtual University of Pakistan
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Business Ethics MGT610 VU
LESSON 33
T"E ET"IC' O$ CON'UMER (RODUCTION %ND M%R,ETIN)
)as EC!losions on a construction site
Gas e0!#osions are caused by an ignition source coing into contact with a gas #eak&
Construction workers ust a#ways reain a#ert to the !resence of gas #eaks& Gas can be a si#ent
ki##er" fi##ing an area with f#aab#e to0ins whi#e going unnoticed by ost !eo!#e& 9hen a
f#ae or other source of ignition is introduced to a gaseous en$ironent" the resu#ting gas
e0!#osion can be catastro!hic&
'n 1M2D" a natura# gas #eak was res!onsib#e for the @ew London ;choo# e0!#osion in Te0as&
This disaster ki##ed three hundred students and teachers& ;ii#ar e0!#osions occur regu#ar#y
throughout the wor#d" a#though ty!ica##y with a #ess draatic #oss of #ife&
Gas e0!#osions are !re$entab#e throughout effecti$e safety !rocedures and res!onsib#e
#eadershi!& 'f you are a $icti of a gas e0!#osion" you deser$e <ustice and co!ensation for
your suffering& Contact an attorney who wi## fight for what you are entit#ed to& 5o not hesitate
to o$e forward with your #ife and s!eak with a #awyer today&
Multi3Country (er Ca!ita $atality Data 1or 6FF7
Last u!dated on =anuary 30" 300K -re G;* and 6e!ub#ic of 're#and. and on =anuary 3M
-=aaica.

OECD
a
(osAn
Per Capita
b
Death Rate
Country
Num-er o1
c
Deaths in
6FF7
Lo!u#ation
d
-i##ions.
Num-er o1

Deaths in 6FF8
1 %%%% 7.6G Brunei 13
g
0&2D
3 %%%% 8.FF Ma#ta 16 0&J
2 %%%% 9.H6 4 R 6 Macedonia 11) 3&1
J 1 9.I5 Gnited Eingdo 2"K0)
ae
60&2 2"331
ae

K 3 9.II ;weden K3M M&0
6 2 H.F5 @orway 3)0 J&6
D J H.75 @ether#ands 1"03) 16&2
) K H.GJ =a!an )")DD
t
13D&2
M 6 J.F6 4in#and 2DM K&3 2D0N2DD
aaNac

10T DT J.77 ;wit(er#and KJ6 D&JK
10T DT J.77 'ce#and 33 0&2
13 J.98 *#bania 36J 2&K
12 J.JJ 'srae# J)3 6&3
1J J.G8
;erbia and
Montenegro
)K) 10&)
1K M I.FF 5enark J23 K&J
Copyright Virtual University of Pakistan
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Business Ethics MGT610 VU
16 10 I.F7 Gerany 6"612 )3&J
1D 11 I.65 *ustra#ia 1"62J
$
1M&M
1) 13 I.87 're#and 22D J&0
1M I.8H 're#and %% 6e!ub#ic of 226
k
2&MD
30 12 I.99 Canada 3"DD)
0
23&K
31 G.FG *(erbai<an D1) D&M
33 1J G.8G 4rance K"D21 60&J
32 G.HH Mo#do$a J3K J&J
3J G.GI 6oania 3"32K 33&J
3K K5F Bahrain
36 1K 55.7H *ustria M21 )&3
3D 16 55.8I @ew Uea#and JKM
y
J&0 J2K
y
3) 1D 55.96 Lu0ebourg K2 0&J6
3M 1) 55.J
s
'ta#y
s
K)&0
20 1M 56.FG ;#o$ak 6e!ub#ic 6K2 K&J
21 30 56.5F ;#o$enia 3J3 3&0
23 56.5J Georgia KD3 J&D
22 56.H6 Estonia 16J 1&2
2J 56.IF Bu#garia M60 D&K
2K 31 56.G5 Lortuga# 1"2K6 10&K
26 33 33333 Turkey 2"M66
f
6)&M
2D 32 57.6H /ungary 1"236 10&0
2) 3J 57.8F ;!ain K"2MM J0&2
2M 3K 58.5G C(ech 6e!ub#ic 1"JJD 10&3
J0 36 58.9
r
Be#giu
r
10&2
J1 3D 58.H5 Lo#and K"6J0 2)&6
J3 58.J =aaica 2MM
#
3&D1
J2 3) 58.J9
ag
G&;&*& J3"))J
ag
3M0&)
<
J3"626
af
JJ 3M 58.G
u
6e!ub& of Eorea
u
J)&6
JK 20 59.68 Greece 1"61K 10&6
J6 59.9I Croatia D01 J&K
JD 5H.HJ Liechtenstein K 0&02
J) 5J.56 Be#arus 1"D62 10&2
JM 5I.7J China 32)"K)J
(
13M)&)
K0 5G.HG Lithuania D0M 2&6
K1 65.87 Lat$ia JM2 3&2
K3 68.JJ 6ussian 4ederation 2K"600 1J2&D V2J"000
7

K2 69.7
ab
;outh *frica 13"2K2 JJ&2
ab

KJ 6H.J9 Ma#aysia 6"3)6
h
32&K 6"332
!

Copyright Virtual University of Pakistan
MK
Business Ethics MGT610 VU
Cy!rus 0&D) 11D
n

Ghana 30&) 6JM
o


Multi3Country Data 1or 6FF8
;ee a 1K%year history of !er ca!ita death rates for the -now. 20 eber countries of the AEC5"
inc#uding the G;*& 9e a#so ha$e a tab#e showing the 3002 !er ca!ita data for a## K0 *erican
states" here
D'% Comments
't ust be reebered that there are three !riary easures for co!aring u#ti%nationa#
crash and fata#ity data+ the deaths !er 100"000 !o!u#ation or !er ca!ita rate" as shown here"
deaths in re#ation to o$era## distance tra$e#ed -known in the G;* as the FMT rate." and deaths
in re#ation to the nuber of registered otor $ehic#es in the country& *## three easures shou#d
be considered when co!aring dis!arate countries but using <ust one of these ethods is
genera##y acce!tab#e when co!aring countries of sii#ar status -e&g& Bhigh#y otori(ed
countriesB O/MCsQ" de$e#o!ed nations" third wor#d countries" etc&.&
*s a resu#t" soe countries in the abo$e tab#e ay a!!ear to !resent bi(arre resu#ts" either
because %% #ike China" for e0a!#e %% they ha$e a $ery high death to## but it is offset by a huge
!o!u#ation" or they si!#y ha$e" say" a $ery #ow !ro!ortion of otor $ehic#es !er head of
!o!u#ation %% such as Brunei" that is current#y at the head of the !er ca!ita tab#e" or Ghana&
There is a#so the 7uestion of how" e0act#y" a traffic fata#ity is defined in any !articu#ar country&
;oe ay on#y inc#ude deaths at the scene" whereas others wi## sti!u#ate deaths within 3J
hours" and soe ay a##ow a fu## week or e$en 20 days&
'n soe cases" therefore" the data for the nuber of deaths si!#y cannot be re#ied u!on as
being accurate& 'n Turkey" for e0a!#e" the nationa# !ress state that o$er M"000 !eo!#e are ki##ed
in road crashes each year" and yet each year data is !ub#ished by that country gi$ing a uch
#ower body count& 4or that reason we ha$e e#ected to !osition Turkey in the tab#e to a##ow for
an a!!ro0iate !er ca!ita rate of 12&06 -based on the aforeentioned M"000 estiate. but ha$e
not shown the rate in the re#e$ant co#un&
The Ethics o1 Consumer (rouction an MarBetin*
*s the e0a!#es of BridgestoneN4irestone and Metabo#ife 'nternationa# c#ear#y deonstrate"
consuers are e0!osed dai#y to high #e$e#s of risk si!#y by using consuer !roducts& The risk
trans#ates into in<ury" death" and astonishing#y high costs as a resu#t& *s if !roduct in<uries were
not enough" consuers ust a#so bear the costs of dece!ti$e sa#es !ractices" shoddy
erchandise" and un%honored warranties& This cha!ter e0aines the ethica# issues raised by
!roduct 7ua#ity and ad$ertising&
MarBets an Consumer (rotection
Copyright Virtual University of Pakistan
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Business Ethics MGT610 VU
Consuer ad$ocates !oint out that" in 1MM3 a#one" there were ore than K)K"000 in<uries
re7uired hos!ita# treatent inf#icted on youngsters and adu#ts using toys" nursery e7ui!ent"
and !#ayground e7ui!entI 3"0KK"000 !eo!#e needed eergency treatent for in<uries
in$o#$ing hoe furnishingsI and 2"J6D"000 !eo!#e re7uired treatent for in<uries in$o#$ing
hoe construction ateria#s& 'n<uries fro auto%re#ated accidents in 1MMK a$eraged JJ"300 each
week whi#e deaths a$eraged 130 !er dayI financia# #osses were estiated at 1JDM i##ion !er
day&
Many !eo!#e be#ie$e that consuers autoatica##y wi## be !rotected fro in<ury by the
o!erations of free and co!etiti$e arkets and that neither go$ernents nor business!eo!#e
ha$e to take s!ecia# ste!s to dea# with these issues& *s we ha$e seen in ear#ier cha!ters
-!articu#ar#y in Cha!ter J." free arkets !roote and a##ocation" use" and distribution of goods
that are" in a certain sense" <ust" res!ectfu# of rights" and efficient#y !roducti$e of a0iu
uti#ity for those who !artici!ate in the arket& Moreo$er" in such arkets" the consuer is said
to be Hso$ereign&C 9hen consuers want and wi## wi##ing#y !ay for soething" se##ers ha$e an
incenti$e to cater to their wishes& 'f se##ers do not !ro$ide what consuers want" then se##ers
wi## suffer #osses& /owe$er" when se##ers !ro$ide what consuers want" they wi## !rofit& *s
the author of a #eading te0tbook on econoics wrote" HConsuers direct by their innate or
#earned tastes" as e0!ressed in their do##ar $otes" the u#tiate uses to which societys resources
are channe#ed&C
'n the HarketC a!!roach to consuer !rotection" consuer safety is seen as a good that is
ost efficient#y !ro$ided through the echanis of the free arket whereby se##ers ust
res!ond to consuer deands& 'f consuers want !roducts to be safer" they wi## indicate this
!reference in arkets by wi##ing#y !aying ore for safer !roducts and showing a !reference for
anufacturers of safe !roducts whi#e turning down the goods of anufacturers of unsafe
!roducts& Lroducers wi## ha$e to res!ond to this deand by bui#ding ore safety into their
!roducts or they risk #osing custoers to co!etitors who cater to the !references of
consuers& Thus" the arket ensures that !roducers res!ond ade7uate#y to consuers desires
for safety& /owe$er" if consuers do not !#ace a high $a#ue on safety and deonstrate neither a
wi##ingness to !ay ore for safety nor a !reference for safer !roducts" then it is wrong to !ush
increased #e$e#s of safety down their throats through go$ernent regu#ations that force
!roducers to bui#d ore safety into their !roducts than consuers deand& ;uch go$ernent
interference" as we saw ear#ier" distorts arkets" aking the un<ust" disres!ectfu# of rights"
and inefficient" it is <ust as wrong for business!eo!#e to decide on their own that consuers
shou#d ha$e ore !rotection than they are deanding" as to force on the%cost#y safety de$ices
that they wou#d not buy on their own& An#y consuers can say what $a#ue they !#ace on safety"
and they shou#d be a##owed to register their !references through their free choices in arkets
and not be coerced by businesses or go$ernents into !aying for safety #e$e#s they ay not
want&
4or e0a!#e" an a!!#iance se##ing for 1100 ay indicate that it wi## o$erheat if it is used for
ore than an hour and a ha#f" whereas one se##ing for 1J00 ay indicate that it can be run
safe#y a## day and night continuous#y& ;oe buyers wi## !refer the chea!er ode#" wi##ing#y
trading the soewhat higher risk for the 1200 cut in !rice" whereas others wi## !refer the ore
e0!ensi$e one& 'f go$ernent regu#ations forced a## a!!#iance akers to ake on#y the safer
ode# or if anufacturers $o#untari#y decided to ake on#y the safer ode#" then consuers
who do not fee# that the increase in safety is worth 1200 e0tra to the wi## be out of #uck& 'f
they cannot do without the a!!#iance" they wi## be forced to !ay the e0tra 1200 e$en if they
wou#d ha$e !referred s!ending it on soething e#se that is ore $a#uab#e to the& Thus" they
Copyright Virtual University of Pakistan
MD
Business Ethics MGT610 VU
are un<ust#y forced to !ay oney for soething they do not want" and their resources are
inefficient#y wasted on soething that !roduces #itt#e uti#ity for the&
Critics to the arket a!!roach res!ond that the benefits of free arkets are obtained on#y when
the arkets ha$e a## of the se$en defining characteristics+ -a. There are nuerous buyers and
se##ers" -b. e$eryone can free#y enter and e0it the arket" -c. e$eryone has fu## and !erfect
inforation" -d. a## goods in the arket are e0act#y sii#ar" -e. there are no e0terna# costs" -f.
a## buyers and se##ers are rationa# uti#ity a0ii(ers" and -g. the arket is unregu#ated& Critics
of the arket a!!roach to consuer issues argue that these characteristics are absent in
consuer arkets&
Most i!ortant#y" arkets are efficient on#y if !artici!ants ha$e fu## and !erfect inforation
about the goods they are buying& This is ob$ious#y not a#ways the case" howe$erI soe
!roducts are si!#y too co!#e0 for anyone but an e0!ert to understand the& Gathering
inforation is a#so tie consuing and e0!ensi$e" so any consuers ay not ha$e the
resources to ac7uire the necessary inforation on their own&
'n theory" of course" if consuers rea##y wanted this inforation" then a arket wou#d be
created for consuer inforation& 't is difficu#t" howe$er" for such organi(ations to co$er their
costs& Ance cost#y inforation is re#eased" it is easi#y #eaked to others who do not !ay& Because
!eo!#e know they can becoe free riders" the nuber of !eo!#e who !ay for the inforation is
too sa## to co$er the costs of gathering it& ;econd" consuers are unwi##ing to !ay for
inforation because they do not know what its $a#ue is unti# after they get it" and then they
a#ready ha$e it and don,t need to !ay for it& 9hen we buy inforation" we cannot know in
ad$ance what we are !urchasing unti# we ha$e it& Markets a#one" then" cannot !ro$ide
consuers with the inforation they need&
*nother criticis of the free arket a!!roach to consuer issues refers to the si0th
characteristic of !erfect#y co!etiti$e free arkets that of the consuer is a Brationa# uti#ity
a0ii(er&B The consuers defined by the theory think ahead" consider" and watch e$ery
!enny they s!end" knowing how their choices wi## affect their !references& This does not rea##y
characteri(e consuer choice" howe$er& Most consuer choices are based on !robabi#ity
estiates that we ake concerning the chances that the !roducts we buy wi## function as we
e0!ect& 6esearch shows" unfortunate#y" that we becoe ine!t and irrationa# when we ake such
choices&
4irst" ost of us are not good at estiating !robabi#ities& 9e ty!ica##y underestiate risks and
o$erestiate the !robabi#ities of un#ike#y but eorab#e things& Aur !robabi#ity <udgents go
astray for fi$e reasons+
1& 9e ignore !rior !robabi#ities when we get new inforation" e$en if the new inforation is
irre#e$ant&
3& 9e e!hasi(e Bcausation"B but underweight e$idence that is re#e$ant but not seen as
Bcausa#&B
2& 9e genera#i(e based on sa## sa!#e findings&
J& 9e be#ie$e in the none0istent B#aw of a$erages&B
K& 9e be#ie$e that we contro# !ure#y chance e$ents&
LESSON 34
Copyright Virtual University of Pakistan
M)
Business Ethics MGT610 VU
CON'UMER %ND IN$ORM%TION
;econd" as a nuber of researchers ha$e shown" !eo!#e are irrationa# and inconsistent when
weighing choices based on !robabi#ity estiates of future costs and !ayoffs& 6esearch shows
that !eo!#e inconsistent#y rank one !ayoff as being both better and worse than another& 4ina##y"
arkets often fai# to ha$e nuerous buyers and se##ers& ;ince ost consuer arkets are
ono!o#ies or o#igo!o#ies" the se##ers are ab#e to e0tract abnora##y high !rofits by ensuring
that deand a#ways e0ceeds su!!#y&
*s a who#e" then" arket forces by these#$es are not ab#e to dea# with consuer concerns for
safety" freedo fro risk" and $a#ue& 'nstead" consuers ust be !rotected by go$ernenta#
action and the $o#untary initiati$es of businesses& Af course" !art of the res!onsibi#ity for
consuer in<uries does rest on consuers& Leo!#e often use ites that they ha$e neither the
ski## nor e0!erience to hand#e&
'n<uries a#so occur because of f#aws in design" ateria#s" or anufacturing" howe$er& 'n these
cases" it is the anufacturer,s duty to inii(e in<uries& Their e0!ertise akes the ost
know#edgeab#e about the safest ateria#s and ethods of aking their !roducts&
9here does the consuer,s duty end and the anufacturer,s duty begin: Three different
theories address this 7uestion+ the contract" Bdue care"B and the socia# costs $iews&
0ho 'houl (ay4 The (rouct &ia-ility De-ate
E$ery year" 2J i##ion !eo!#e are in<ured or ki##ed as a resu#t of !roduct re#ated accidents& ;uch
in<uries are the a<or cause of death for !eo!#e between the ages of 1 and 26" outnubering
deaths fro cancer or heart disease& The estiated cost of these in<uries is 113 bi##ion annua##y&
Tens of thousands of !roduct in<ury #awsuits are fi#ed each year& *s the nuber of c#ais has
risen" so too ha$e the nuber of co!anies forced to fi#e bankru!tcy because of assi$e suits&
Moreo$er" an increasing nuber of co!anies are c#aiing that they ha$e !u##ed estab#ished
!roducts off the arket and ha#ted research on !roising !roducts for fear of #iabi#ity&
Manufacturers c#ai that they are $ictis of a syste gone haywire& *ccording to strict
#iabi#ity #aws" a anufacturer can be he#d #iab#e for in<uries e$en when he or she had no way of
!re$enting those in<uries& /o#ding anufacturers res!onsib#e for in<uries caused by !roducts
known to be defecti$e or !otentia##y dangerous is one thing" but today anufacturers face
#awsuits%%often bordering on the outrageous%%for in<uries they cou#d not ha$e !re$ented&
Consuer acti$ists" on the other hand" c#ai that the threat of !roduct #iabi#ity suits forces
anufacturers to ake !roduct safety a !riority and that those who suffer in<uries caused by
!roducts shou#d be co!ensated for their in<uries by the anufacturers of those !roducts&
Lroduct in<uries re!resent a a<or cost of introducing !roducts into a society& ;ince $irtua##y
e$ery new !roduct carries soe unknown risk" a !ossibi#ity a#ways e0ists that the !roduct ay
cause in<uries or i!oses other costs on users& This raises an i!ortant ora# 7uestion+ /ow
shou#d these costs is distributed aong the ebers of our society:
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'houl Consumers Bear More Res!onsi-ility4
Manufacturers contend that consuers shou#d bear ore res!onsibi#ity for !roduct in<uries
because the costs of !#acing fu## #iabi#ity onto co!anies far outweigh the benefits& ;ince the
1M60s" there has been a steady increase of !roduct #iabi#ity cases& *ccording to one study"
12"K00 !roduct #iabi#ity suits were fi#ed in federa# court in 1M)6" co!ared to on#y 1"K00 in
1MDJ& 5ue to this barrage of #itigation" the cost of doing business has risen draatica##y&
'nsurance !reius ha$e skyrocketed" where insurance is a$ai#ab#e at a##& Manufacturers, #ega#
costs ha$e a#so soared+ about 60P of the a$erage cor!oration,s #itigation e0!enses today are
!roduct #iabi#ity cases& The rising cost of !roduct #iabi#ity insurance and #awsuits has #ed" in
turn" to great increases in consuer !rices&
The econoy a#so has suffered fro the boo in !roduct #iabi#ity c#ais& 9hen co!anies
facing assi$e #awsuits ha$e been forced to sca#e down their o!erations" the resu#t is a #oss of
<obs& 'n a recent re!ort by the Conference Board" 1KP of cor!orations sur$eyed had #aid off
workers because of !roduct #iabi#ity costs" whi#e )P had been forced to c#ose !#ants a#together&
'n addition" the threat of #iabi#ity has affected *erican businesses, abi#ity to co!ete
internationa##y& 'n other countries" there are se$ere #iits on what anufacturers can be he#d
res!onsib#e for and there are fewer tendencies to sue& By not ha$ing to contend with a orass
of #awsuits" these co!anies can offer chea!er !roducts" and !ut *erican anufacturers at a
co!etiti$e disad$antage&
't is a#so argued that the fear of being hit with a #iabi#ity c#ai kee!s any #ifesa$ing drugs and
de$ices off the arket" and stif#es creati$ity and inno$ation& E$en the ost rigorous confority
to safety regu#ations doesn,t !re$ent #iabi#ity& Ane re!ort found that 2MP of the co!anies
sur$eyed de#ayed introducing new !roducts or had discontinued !roducts because of !roduct
#iabi#ity suits& The !haraceutica# industry has been hit the hardest& An#y one co!any in the
G&;& now anufactures $accines" a !roduct often targeted in #awsuits& Faccines for *'5; wi##
certain#y not reach the arket without !rotection against #awsuits& ;aid one s!okes!erson fro
the drug industry" B5ecisions OareQ a#ready being ade on O*'5;Q research !riorities for
#iabi#ity reasons&B
The costs to anufacturers and to society wi## on#y increase as techno#ogies grow ore
co!#e0 and their a!!#ications ore $aried& Testing !roducts for safety under e$ery !ossib#e
condition of use wi## not on#y i!ose great testing costs on anufacturers but wi## resu#t in
enorous de#ays in the introduction of new !roducts that cou#d benefit society&
Manufacturers a#so aintain that it is ora##y un<ust to ho#d soeone #iab#e for in<uries that he
or she cou#d not ha$e !re$ented& Through e0tensi$e research and re!eated testing" co!anies
do a## that they !ossib#y can" to ensure !roduct safety& *nd" to !re$ent har" warnings and
instructions are !#astered o$er each !iece of erchandise&
4ina##y" soe anufacturers !oint out that in a free arket syste" businesses ha$e the right to
ake and se## whate$er !roducts they choose and consuers ha$e the right to choose what they
buy& But rights carry with the res!onsibi#ities& 9hen consuers choose to buy risky !roducts
rather than safe ones -both of which businesses ay offer in a free arket. or when they
choose not to infor these#$es about !roducts" they ust acce!t the conse7uences" inc#uding
the res!onsibi#ity for any in<uries resu#ting fro those choices&
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'houl Manu1acturers Bear More Res!onsi-ility4
Those who ho#d that anufacturers shou#d bear ore of the res!onsibi#ity for !roduct in<uries
argue that the benefits of ho#ding co!anies #iab#e for these in<uries outweigh the costs& 'n a
recent year" ore than 300"000 infants were hos!ita#i(ed for in<uries resu#ting fro the use of
toys" or nursery or recreationa# e7ui!ent& *bout 1"DDD"000 !eo!#e re7uired eergency
treatent because of in<uries in$o#$ing hoe furnishingsI ore than 1"300 of these in<uries
were fata#& *n additiona# 1"D)3"000 indi$idua#s re7uired treatent for in<uries in$o#$ing hoe
construction ateria#sI 1"200 of the died fro the in<uries& ;ociety has an ob#igation to
inii(e such tragedy and suffering& 9ithout the threat of #iabi#ity" anufacturers wou#d ha$e
#itt#e incenti$e to ensure !roduct safety" and the nuber of !roduct%re#ated in<uries wou#d
esca#ate&
The costs of ho#ding anufacturers res!onsib#e for !roduct in<uries are not as great as co!any
re!resentati$es wou#d ha$e us be#ie$e& 4or e0a!#e" the so%ca##ed Be0!#osionB in !roduct
#iabi#ity suits" Bcri!!#ing *erican business"B is a yth& * recent study by the 6*@5
Cor!oration found that a#though the nuber of !roduct #iabi#ity #awsuits had increased near#y
eight%fo#d during the #ast decade" ore that ha#f of these #awsuits in$o#$ed on#y a handfu# of
co!anies" ref#ecting ass #itigation against a few asbestos and !haraceutica# co!anies& *
re!ort by the Go$ernent *ccounting Affice a#so conc#uded that" e0ce!t for cases in$o#$ing a
few drug or asbestos co!anies" !roduct #iabi#ity suits Bdo not a!!ear to ha$e been ra!id#y
acce#erating or e0!#osi$e&B 4urtherore" it cannot be c#aied that !roduct #itigation akes
doestic co!anies any #ess co!etiti$e internationa##y& 4oreign co!anies that se## in the
G&;& ha$e to abide by the sae !roduct #iabi#ity #aws that *erican co!anies face& *nd when
*erican co!anies co!ete abroad" they ha$e the sae ad$antages that foreign co!anies
ha$e&
Those who ho#d anufacturers #iab#e for !roduct%re#ated in<uries a#so c#ai that <ustice is on
their side& ;ince the defecti$e !roduct that caused the in<ury was !roduced by the anufacturer"
it is fair that the anufacturer bear the costs of that in<ury& Moreo$er" they argue" <ustice
re7uires that the !arty that is ost ab#e to !ay for an in<ury be the !arty that bears ost of the
financia# burden& Manufacturers know in ad$ance that there is a#ways a risk of #iabi#ity in
introducing new !roducts" and can therefore bui#d the cost of !otentia# #awsuits into the !rice of
those !roducts& Manufacturers a#so ha$e the research e0!ertise and #aboratories" the engineering
and technica# know#edge" and the budgets to assess the risks of !roduct use and to ensure that
these !roducts are safe& Consuers #ack these& 't is <ust to !#ace greater burdens on those who
are better ab#e to bear these burdens&
Consuer acti$ists a#so cha##enge the cor!orate c#ai that consuers Bfree#yB choose to buy
unsafe !roducts& Consuers" they argue" are woefu##y uninfored about the !roducts they buy
because they don,t ha$e access to inforation about the !roducts& Athers #ack a co!rehensi$e
understanding of the seriousness of the !rinted warning& ;ti## others ay be functiona##y
i##iterate or too young to ake infored choices& 't is anufacturers" not consuers" who ake
the BfreeB choices to co!roise !roduct safety and it is anufacturers who ust therefore
acce!t the conse7uences&
*s #ong as !roducts are !roduced" !roduct in<uries wi## occur& 9ho shou#d bear the costs of
those in<uries: Aur answer re7uires that we weigh the c#ais of consuers against those of
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anufacturers%%c#ais which a!!ea#" in different ways" to our desire to inii(e har" our
idea# of <ustice" and our coitent to taking res!onsibi#ity for the choices we ake&
LESSON 35
T"E CONTR%CT VIE0 O$ BU'INE''A DUTIE' TO CON'UMER'
*ccording to the contract $iew of the business firs duties to its custoers" the re#ationshi!
between a business fir and its custoers is essentia##y a contractua# re#ationshi!" and the
firs ora# duties to the custoer are those created by this contractua# re#ationshi!& 9hen a
consuer buys a !roduct" this $iew ho#ds" the consuer $o#untari#y enters into a Hsa#es
contractC with the business fir& The fir free#y and knowing#y agrees to gi$e the consuer a
!roduct with certain characteristics" and the consuer in turn free#y and knowing#y agrees to
!ay a certain su of oney to the fir for the !roduct& 'n $irtue of ha$ing $o#untari#y entered
this agreeent" the fir then has a duty to !ro$ide a !roduct with those characteristics" and the
consuer has a corre#ati$e right to get a !roduct with those characteristics&
The contract theory of the business firs duties to its custoers rests on the $iew that a
contract is a free agreeent that i!oses on the !arties the basic duty of co!#ying with the
ters of the agreeent& 9e e0ained this $iew ear#ier -cha!ter 3. and noted the two
<ustifications Eant !ro$ided for the $iew+ * !erson has a duty to do what he or she contracts to
do because fai#ure to adhere to the ters of a contract is a !ractice that -a. cannot be
uni$ersa#i(ed" and -b. treats the other !erson as a eans and not as an end& 6aw#s theory a#so
!ro$ides a <ustification for the $iew" but one that is based on the idea that our freedo is
e0!anded by the recognition of contractua# rights and dutiesI an enforced syste of socia# ru#es
that re7uires !eo!#e to do what they contract to do wi## !ro$ide the with the assurance that
contracts wi## be ke!t& An#y if they ha$e such assurance wi## !eo!#e fee# ab#e to trust each
others word and" on that basis" to secure the benefits of the institution of contracts&
9e a#so noted in Cha!ter 3 that traditiona# ora#ist ha$e argued that the act of entering into a
contract is sub<ect to se$era# secondary ora# constraints+
1& Both of the !arties to the contract ust ha$e fu## know#edge of the nature of the
agreeent they are entering&
3& @either !arty to a contract ust intentiona##y isre!resent the facts of the contractua#
situation to the other !arty&
2& @either !arty to a contract ust be forced to enter the contract under duress or undue
inf#uence&
These secondary constraints can be <ustified by the sae sorts of arguents that Eant and
6aw#s use to <ustify the basic duty to !erfor ones contracts& Eant" for e0a!#e" easi#y shows
that isre!resentation in the aking of a contract cannot be uni$ersa#i(ed" and 6aw#s argues
that if isre!resentation were not !rohibited" fear fo dece!tion wou#d ake ebers of a
society fee# #ess free to enter contracts& /owe$er" these secondary constraints can a#so be
<ustified on the grounds that a contract cannot e0ist un#ess these constraints are fu#fi##ed& *
contract is essentia##y a free agreeent struck between two !arties& Because an agreeent
cannot e0ist un#ess both !arties know what they are agreeing to" contracts re7uired fu##
know#edge and the absence of isre!resentation& Because freedo i!#ies the absence of
coercion" contracts ust be ade without duress or undue inf#uence&
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/ence" the contractua# theory of business duties to consuers c#as that a business has four
ain ora# duties+ the basic duty of -a. co!#ying with the ters of the sa#es contract" and the
secondary duties of -b. disc#osing the nature of the !roduct" -c. a$oiding isre!resentation" and
-d. a$oiding the use of duress and undue inf#uence& By acting in accordance with these duties" a
business res!ects the right of consuers to be treated as free and e7ua# !ersons that is" in
accordance with their right to be treated on#y as they ha$e free#y consented to be treated&
The uty to com!ly/
The ost basic ora# duty that a business fir owes its custoers" according to the contract
$iew" is the duty to !ro$ide consuers with a !roduct that #i$es u! to those c#ais that the fir
e0!ress#y ade about the !roduct" which #ed the custoer to enter the contract free#y and
which fored the custoers understanding concerning what he or she was agreeing to buy& 'n
the ear#y 1MD0s" for e0a!#e" 9inthro! Laboratories arketed a !ainki##er that the fir
ad$ertised as nonaddicti$e& ;ubse7uent#y" a !atient using the !ainki##er becae addicted to it
and short#y died fro an o$erdose& * court found 9inthro! Laboratories #iab#e for the !atients
death because" a#though it had e0!ress#y sated that the drug was nonaddicti$e" 9inthro!
Laboratories had fai#ed to #i$e u! to its duty to co!#y with this e0!ress contractua# c#ai&
'n addition to the duties that resu#t fro the e0!ress c#ai a se##er akes about the !roduct" the
contract $iew a#so ho#ds that the se##er has a duty to carry through on any i!#ied c#ais he or
she knowing#y akes about the !roduct& 4or e0a!#e" the se##er has the ora# duty to !ro$ide a
!roduct that can be used safe#y for the ordinary and s!ecia# !ur!oses for which the custoer"
re#ying on the se##ers <udgent" has been #ed to be#ie$e it can be used& The se##er is ora##y
bound to do whate$er he or she knows the buyer understood the se##er was !roising because
at the !oint of sa#e se##ers shou#d ha$e corrected any isunderstandings of which they were
aware&
The uty not to misre!resent/
Misre!resentation" e$en ore than the fai#ure to disc#ose inforation" renders freedo of
choice i!ossib#e& That is" isre!resentation is coerci$e+ the !erson who is intentiona##y is#ed
acts as the decei$er wants the !erson to act and not as the !erson wou#d free#y ha$e chosen to
act if he or she had known the truth& Because free choice is an essentia# ingredient of a binding
contract" intentiona##y isre!resenting the nature of a coodity is wrong&
* se##er isre!resents a coodity when he or she re!resents it in a way de#iberate#y intended
to decei$e the buyer into thinking soething about the !roduct that the se##er knows is fa#se&
The dece!tion ay be created by a $erba# #ie" as when a used ode# is described as new" or it
ay be created by a gesture" as when an unarked used ode# is dis!#ayed together with
se$era# new ode#s& That is" the de#iberate intent to isre!resent by fa#se i!#ication is as
wrong as the e0!#icit #ie&
The uty not to coerce/
Leo!#e often act irrationa##y when under the inf#uence of fear or eotiona# stress& 9hen a se##er
takes ad$antage of a buyers fear of eotiona# stress to e0tract consent to an agreeent that the
buyer wou#d not ake if the buyer were thinking rationa##y" the se##er is using duress or undue
inf#uence to coerce& *n unscru!u#ous funera# director" for e0a!#e" ay ski##fu##y induce gui#t%
ridden and grief stricken sur$i$ors to in$est in funera# ser$ices they cannot afford& Because
entry into a contract re7uires free#y gi$en consent" the se##er has a duty to refrain fro
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e0!#oiting eotiona# states that ay induce the buyer to act irrationa##y against his or her own
best interests& 4or sii#ar reasons" the se##er a#so has the duty not to take ad$antage of
gu##ibi#ity" iaturity" ignorance" or any other factors that reduce or e#iinate the buyers
abi#ity to ake free rationa# choices&
(ro-lems ;ith the Contractual Theory
The ain ob<ecti$es to the contract theory focus on the unrea#ity of the assu!tion on
which the theory is based&
4irst" critics argue" the theory unrea#istica##y assues that anufacturers ake direct
agreeents with consuers& @oting cou#d be further fro the truth& @ora##y" a series of
who#esa#ers and retai#ers stand between the anufacturer and the u#tiate consuer& The
anufacturer se##s the !roduct to the who#esa#er" who se##s it to the retai#er" who fina##y
se##s it to the consuer& The anufacturer ne$er enters into any direct contract with the
consuer& /ow then can one say that anufacturers ha$e contractua# duties to the
consuer:
;econd ob<ection to the contract theory focuses on the fact that a contact is two%edged
sword& 'f a consuer can free#y agree to buy a !roduct with certain 7ua#ities" the consuer
can a#so free#y agree to buy a !roduct without those 7ua#ities& That is" freedo of contact
a##ows a anufacturer to be re#eased fro his or her contractua# ob#igations by e0!#icit#y
disc#aiing that the !roduct is re#iab#e" ser$iceab#e" safe" and so&
The third ob<ection to the contract theory critici(es the assu!tion that buyer and se##er
eet each other as e7ua#s in the sa#e agreeent& The contractua# theory assues that buyers
and se##ers are e7ua##y ski##ed at e$a#uating the 7ua#ity of a !roduct and that buyers are ab#e
to ade7uate#y !rotect their interests against the se##er& This is the assu!tion bui#t into the
re7uireent that contracts ust be free#y and knowing#y entered into+ Both !arties ust
know what they are doing and neither ust be coerced into doing it& This e7ua#ity between
buyer and se##er that the contractua# theory assues deri$es fro the #aisse(%faire ideo#ogy
that acco!anied the historica# de$e#o!ent of contract theory&
4ina##y" critics of this theory !oint out that the assu!tion that buyer and se##er eet on
e7ua# ground is fa#se& Buyers and se##ers are not e7ua##y ski##edI the se##er is in a uch
stronger !osition than the buyer& ;e##ers on#y ha$e to know their own !roducts" whi#e
buyers need to know about e$ery se##ers !roducts for e$ery coodity they !urchase&
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LESSON 36
The Due Care Theory
The Hdue careC theory of the anufacturers duties to consuers is based on the idea that
consuers and se##ers do not eet as e7ua#s and that the consuers interests are !articu#ar#y
$u#nerab#e to being hared by the anufacturer who has a know#edge and an e0!ertise that the
consuer #acks& Because anufactures are in a ore ad$antaged !osition" they ha$e a duty to
take s!ecia# care to ensure that consuers interests are not hared by the !roducts that they
offer the& The doctrine of ca$eat e!tor is here re!#aced with a weak $ersion of the doctrine
of ca$eat $endor+ #et the se##er take care&
The Hdue careC $iew ho#ds then that" because consuers ust de!end on the greater e0!ertise
of the anufacturer" the anufacturer not on#y has a duty to de#i$er a !roduct that #i$es u! to
the e0!ress and i!#ied c#ais about it" but a#so has a duty to e0ercise due care to !re$ent
others fro being in<ured by the !roduct e$en if the anufacturer $io#ates this duty and is
neg#igent when there is a fai#ure to e0ercise the care that a reasonab#e !erson cou#d ha$e
foreseen wou#d be necessary to !re$ent others fro being hared by use of the !roduct& 5ue
care ust enter into the design of the !roduct" the choice of re#iab#e ateria#s for constructing
the !roduct" the anufacturing !rocesses in$o#$ed in !utting the !roduct together" the 7ua#ity
contro# used to test and onitor !roduction" and the warnings" #abe#s" and instructions attached
to the !roduct& 'n each of these areas" according to the due care $iew" the anufacturer" in
$irtue of a greater e0!ertise and know#edge" has a !ositi$e duty to take whate$er as !ossib#e"
and the custoers has a right to such assurance& 4ai#ure to take such ste!s is a breach of the
ora# duty to e0ercise due care and a $io#ation of the in<ured !ersons right to e0!ect such care
a right that rests on the consuers need to re#y on the anufacturers e0!ertise&
The Duty to ECercise Due Care
*ccording to the due care theory" anufacturers e0ercise sufficient care on#y when they take
ade7uate ste!s to !re$ent whate$er in<urious effects they can foresee that the use to their
!roduct ay ha$e on consuers after ha$ing atte!ted to antici!ate any !ossib#e isuses of
the !roduct& * anufacturer then is not ora##y neg#igent when others are hared by a !roduct
and the har was not one that the anufacturer cou#d ha$e !ossib#e foreseen or !re$ented& @or
is a anufacturer ora##y neg#igent after ha$ing taken a## reasonab#e ste!s to !rotect the
consuer and ensure that the consuer is infored of any irreo$ab#e risks that ight sti##
attend the use of the !roduct& 4or e0a!#e" a car anufacturer" cannot be said to be neg#igent
fro a ora# !oint of new when !eo!#e care#ess#y isuse the cars the anufacturer !roducts& *
car anufacturer wou#d be ora##y neg#igent on#y if it had a##owed unreasonab#e dangers to
reain in the design of the car that consuers cannot be e0!ected to know about or cannot
guard against by taking their own !recautionary easures&
Manufacturers, res!onsibi#ities to e0ercise due care e0tends to the fo##owing three areas+
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1& Desi*n % * !roduct,s design shou#d not concea# any dangers" shou#d incor!orate a##
feasib#e safety de$ices" and use ade7uate ateria#s& The design shou#d additiona##y be
we## tested to ensure that consuers wi## use the !roduct !ro!er#y&
3& (rouction % The anufacturing !rocess ust be contro##ed to e#iinate any defecti$e
ites" identify weaknesses" and ensure that unsafe econoi(ing easures are not taken&
2& In1ormation % The fir shou#d fi0 #abe#s" notices" and instructions on the !roduct
warning of a## !otentia# dangers in$o#$ed in using or isusing the ite&
Manufacturers ust a#so take into consideration the ca!acities of the !ersons who they
e0!ect wi## use the !roduct& 'f the !ossib#e harfu# effects of using a !roduct are serious or
if they cannot be ade7uate#y understood without e0!ert o!inion" then sa#e of the !roduct
shou#d be carefu##y contro##ed&
(ro-lems ;ith LDue CareM
The -asic i11iculty raised by the Hdue careC theory is that there is no c#ear ethod for
deterining when one has e0ercised enough Hdue careC& That is" there is no hard and fast
ru#e for deterining how far a fir ust go to ensure the safety of its !roduct&
* secon difficu#ty raised by the Hdue careC theory is that it assues that the anufacturer
can disco$er the risks that attend the use of a !roduct before the consuer buys and uses it&
Thir" the due care $iew a!!ears to soe to be !aterna#istic+ it assues that the
anufacturer shou#d be the one who akes the i!ortant decisions for the consuer" at
#east with res!ect to the #e$e#s of risks that are !ro!er for consuers to bear& Ane ay
wonder whether such decisions shou#d not be #eft u! to the free choice of consuers who
can decide for these#$es whether they want to !ay for additiona# risk reduction&
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LESSON 37
T"E 'OCI%& CO'T' VIE0 O$ T"E M%NU$%CTURER.' DUTIE'
* third theory on the duties of the anufacturer wou#d e0tend the anufacturers duties
beyond those i!osed by contractua# re#ationshi!s and beyond those i!osed by the duty to
e0ercise due care in !re$enting in<ury or har& This third theory ho#ds that a anufacturer
shou#d !ay the costs of nay in<uries sustained through any defects in the !roduct" e$en when the
anufacturer e0ercised a## due care in the design and anufacture of the !roduct and has taken
a## reasonab#e !recautions to warn users of e$ery foreseen danger& *ccording to this third
theory a anufacturer has a duty to assue the risks of e$en those in<uries that arise out of
defects in the !roduct that no one cou#d reasonab#y ha$e foreseen or e#iinated& The theory is a
strong $ersion of the doctrine of ca$eat $endor+ #et the se##er take care&
This third theory" which has fored the basis of the #ega# doctrine of strict #iabi#ity" is founded
on uti#itarian arguents& The uti#itarian arguents for this third theory ho#d that the He0terna#C
costs of in<uries resu#ting fro una$oidab#e defects in the design of an artifact constitute !art of
the cost society ust !ay for !roducing and using an artifact& By ha$ing the anufacturer bear
the e0terna# cost that resu#t fro these in<uries as we## as the ordinary interna# cost that resu#t
for these in<uries as we## as the ordinary interna# costs of design and anufacture" a## costs
are interna#i(ed and added on as !art of the !rice of the !roduct& 'nterna#i(ing a## costs in this
way" according to !ro!onents of this theory wi## #ead to a ore efficient use of societys
resources&
4irst" because the !rice wi## ref#ect a## the costs of !roducing and using the artifact" arket
forces wi## ensure that the !roduct is not o$er!roduced and resources are not wasted on it&
-9hereas if soe costs were not inc#uded in the !rice" then anufacturers wou#d tend to
!roduce ore than is needed&.
;econd" because anufacturers ha$e to !ay the costs of in<uries" they wi## be oti$ated to
e0ercise greater care and thereby reduce the nuber of accidents& Therefore" anufacturers wi##
stri$e to cut down the socia# cots of in<uries" and this eans a ore efficient care for our huan
resources& To !roduce the a0iu benefits !ossib#e fro our #iited resources" therefore" the
socia# costs of in<uries fro defecti$e !roducts shou#d be interna#i(ed by !assing the on to the
anufacturer e$en when the anufacturer has done a## that cou#d be done to e#iinate such
defects&
Third" interna#i(ing the costs of in<ury in this way enab#es the anufacturer to distribute #osses
aong a## the users of a !roduct instead of a##owing #osses to fa## on indi$idua#s who ay not
be ab#e to sustain the #oss by these#$es&
Gnder#ying this third theory on the duties of the anufacturer are the standard uti#itarian
assu!tions about the $a#ues of efficiency& The theory assues that an efficient use of
resources is so i!ortant for society that socia# costs shou#d be a##ocated in whate$er way wi##
#ead to a ore efficient use and care of our resources& An this basis" the theory argues that a
anufacturer shou#d bear the socia# costs for in<uries caused by defects in a !roduct e$en when
no neg#igence was in$o#$ed and no contractua# re#ationshi! e0isted between the anufacturer
and user&
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(ro-lems ;ith the 'ocial Costs Vie;
The a<or criticis of the socia# costs $iew of the anufacturers duties is that is unfair& 't is
unfair" the critics charge" because it $io#ates the basic cannons of co!ensatory <ustice&
Co!ensatory <ustice i!#ies that a !erson shou#d be forced to co!ensate
;ocia# cost theorists counter by !ointing out that" in rea#ity" the costs of consuer #iabi#ity suits
are not #arge& Less than 1P of !roduct%re#ated in<uries resu#t in suits" and successfu# suits
a$erage on#y a few thousand do##ars in any case& Moreo$er" the insurance industry has
reained 7uite !rofitab#e" des!ite the warnings of the critics&
* third arguent against the socia# the socia# costs theory focuses on the financia# burdens the
theory i!oses on anufacturers and insurance carriers& Critics c#ai that a growing nuber of
consuers successfu##y sue anufacturers for co!ensation any in<uries sustained whi#e using
a !roduct e$en when the anufacturer took a## due care to ensure that the !roduct was fase& @ot
on#y ha$e the nuber of Hstrict #iabi#ityC suits increased" critics c#ai" but the aount awarded
to in<ured consuers ha$e a#so esca#ated&
%vertisin* Ethics
*d$ertising is a huge industry" which i!oses great e0!ense on anufacturers and ser$ice
!ro$iders& Coercia# ad$ertising is soeties defined as a for of BinforationB and an
ad$ertiser as Bone who gi$es inforation&B The i!#ication is that the defining function of
ad$ertising is to !ro$ide inforation to consuers& 'n the end" consuers ust co$er the costs
of ad$ertising" but what do they get for this e0tra e0!enditure: Most consuers say that they
get $ery #itt#e& ;o is ad$ertising a waste" or a benefit: 5oes it he#! or har consuers
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LESSON 38
%DVERTI'IN) ET"IC'
Coercia# ad$ertising is soeties defined as a fro of HinforationC and an ad$ertiser as
Hone who gi$es inforation&C The i!#ication is that the definition of ad$ertising is to !ro$ide
inforation to consuers& This definition of ad$erting" howe$er" fai#s to distinguish
ad$ertiseents fro" say" artic#es in !ub#ications #ike Consumer "eports, which co!are" test"
and ob<ecti$e#y e$a#uate the durabi#ity" safety" defects" and usefu#ness of $arious !roducts& Ane
study found that ore than ha#f of a## te#e$ision ads contained no consuer inforation
whatsoe$er about the ad$ertised !roduct" and they on#y ha#f of a## aga(ine ads contained ore
than one inforation cue& Consider how uch inforation is con$eyed by the fo##owing
ad$ertiseents+
56ot 7il&) -*ericas dairy farers and i#k !rocessors.
5Be late) ,@eian Marcus watches-
5Embrace you demons) -Cinnaon 4#a$ored *#toids.
5+or the way it*s made) -Eitchen*id hoe a!!#iances.
5Connect with style) -@okia ce## !hone.
58nside every woman is a glow 4ust waiting to come out) - 5o$e soa!.
58t is, in the end, the simple idea that one plus one can, and must, eual more than two)
-Chrys#er cars.
*d$ertiseents often do not inc#ude uch ob<ecti$e inforation for the si!#e reason that
their !riary function is not that of !ro$iding unbiased inforation& The !riary function of
coercia# ad$ertiseents" rather" is to se## a !roduct to !ros!ecti$e buyers" and whate$er
inforation they ha!!en to carry is subsidiary to this basic function and usua##y deterined by
it&
*d$ertising,s critics !oint out that it has se$era# harfu# effects on society& 4irst" its
!sycho#ogica# effects are daaging in that it debases the tastes of consuers by incu#cating
ateria#istic $a#ues about how to achie$e ha!!iness& 9hether or not ad$ertising has such
effects is sti## uncertain& 'ndeed" the success of ad$ertising ay de!end on consuers a#ready
ha$ing the $a#ues that the ad$ertiseents focus u!on&
*nother a<or criticis of ad$ertising is that it is wastefu#& Those who ake this ty!e of
ob<ection !oint to the distinction between !roduction costs and se##ing costs& (rouction costs
are the costs of the resources consued in !roducing a !roduct& 'ellin* costs are the additiona#
costs of resources that do not go into the !roduct itse#f" but rather are incurred as a resu#t of
!ersuading consuers to !urchase it& The resources consued by ad$ertising" according to this
theory" add nothing to the uti#ity of the !roduct&
*d$ertisers counter that ad$ertiseents do add inforation to the !roduct" but of course" the
inforation cou#d be su!!#ied ore direct#y and ine0!ensi$e#y& They a#so say" howe$er" that
ad$ertising creates desire and thus is res!onsib#e for a gradua##y e0!anding econoy&
There is considerab#e contro$ersy o$er whether ad$ertising is res!onsib#e for the growing
econoy" howe$er& *d$ertising a!!ears to be ost successfu# at shifting consu!tion fro
one !roducer to another" not at e0!anding consu!tion genera##y& E$en if it cou#d e0!and
consu!tion" theorists do not agree that this wou#d be good+ increased consu!tion #eads"
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aong other things" to increased !o##ution and de!#etion of resources& Though soe critics
ha$e a#so b#aed ad$ertising for ono!o#ies" there is no conc#usi$e e$idence that ad$ertising
and ono!o#istic arkets are connected&
=ohn Eenneth Ga#braith and other critics ha$e #ong argued that ad$ertising ere#y ani!u#ates
consuers" creating desires so#e#y to absorb industria# out!ut& Lhysica# desires" such as the
desire for food and she#ter" are !erfect#y nora#& But the !sycho#ogica# desires that are ins!ired
by ad$ertising are not under the consuer,s contro# in the sae way that !hysica# desires are"
which !uts the fir -instead of the indi$idua#. in contro#& 'f Ga#braiths $iew is correct" then
ad$ertising $io#ates the indi$idua#,s right to choose free#y for hi or herse#f& 't is not c#ear"
howe$er" that this $iew is correct" and theorists such as 4& *& $on /ayek ha$e !ointed out that
!sychic wants ha$e been around #onger than ad$ertising in any case&
The ost coon criticis of ad$ertising concerns is its effect on the consuer,s be#iefs&
Because ad$ertising is a for of counication" it can be as truthfu# or dece!ti$e as any other
for of counication& Most criticiss of ad$ertising focus on the dece!ti$e as!ects of
odern ad$ertising& @e$erthe#ess" e$en if ad$ertising as a who#e is not ani!u#ati$e" there are
c#ear#y soe ad$ertiseents that are intended to ani!u#ate& ;uch ad$ertiseents do c#ear#y
$io#ate the consuer,s right to be treated as a free and e7ua# rationa# being&
5ece!ti$e ad$ertising takes any fors+ the Bbait and switch"B untrue !aid testionia#s" or
siu#ating brand naes are a## fors of dece!tion& There is no contro$ersy o$er whether or not
dece!ti$e ad$ertising is iora#+ it c#ear#y is& The !rob#e is to understand how ad$ertising
becoes dece!ti$e&
*## counication in$o#$es three things+ the author or originator of the essage" the ediu
that carries the essage" and the audience who recei$es it& 5ece!tion in$o#$es three necessary
conditions in the author+
1& The author ust intend to ha$e the audience be#ie$e soething fa#se&
3& The author ust know it to be fa#se&
2& The author ust knowing#y do soething to bring about this fa#se be#ief&
Thus" an ad$ertiser cannot be he#d res!onsib#e for an audience ha$ing isinter!reted a essage
when the isinter!retation is unintended" unforeseen" or the resu#t of care#essness on the !art of
the audience&
The edia carrying the essage a#so has a res!onsibi#ity to ensure the truth of what it carries to
the audience& Both the author and the edia ust take into account the inter!reti$e ski##s of the
audience as we##& To deterine the ethica# nature of an ad$ertiseent" the fo##owing !oints are
re#e$ant+ the intended and actua# socia# effects of the ad$ertiseentI the inforing or
!ersuasi$e character of the ad$ertiseent" and whether it creates irrationa# or in<urious desiresI
and the whether the ad$ertiseent,s content is truthfu# or tends to is#ead&
The Bene1its o1 %vertisin*
Enorous huan and ateria# resources are de$oted to ad$ertising& *d$ertising is e$erywhere
in today,s wor#d" so that" as Lo!e Lau# F' rearked" B@o one now can esca!e the inf#uence of
ad$ertising&B6 E$en !eo!#e who are not these#$es e0!osed to !articu#ar fors of ad$ertising
confront a society" a cu#ture ? other !eo!#e ? affected for good or i## by ad$ertising essages
and techni7ues of e$ery sort&
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;oe critics $iew this state of affairs in un%re#ie$ed#y negati$e ters& They conden
ad$ertising as a waste of tie" ta#ent and oney ? an essentia##y !arasitic acti$ity& 'n this
$iew" not on#y does ad$ertising ha$e no $a#ue of its own" but its inf#uence is entire#y harfu#
and corru!ting for indi$idua#s and society&
9e do not agree& There is truth to the criticiss" and we sha## ake criticiss of our own& But
ad$ertising a#so has significant !otentia# for good" and soeties it is rea#i(ed& /ere are soe
of the ways that ha!!ens&
%) Economic Bene1its o1 %vertisin*
K& *d$ertising can !#ay an i!ortant ro#e in the !rocess by which an econoic syste guided
by ora# nors and res!onsi$e to the coon good contributes to huan de$e#o!ent& 't is a
necessary !art of the functioning of odern arket econoies" which today either e0ist or are
eerging in any !arts of the wor#d and which ? !ro$ided they confor to ora# standards
based u!on integra# huan de$e#o!ent and the coon good ? current#y see to be Bthe
ost efficient instruent for uti#i(ing resources and effecti$e#y res!onding to needsB of a
socio%econoic kind&D
'n such a syste" ad$ertising can be a usefu# too# for sustaining honest and ethica##y res!onsib#e
co!etition that contributes to econoic growth in the ser$ice of authentic huan
de$e#o!ent& BThe Church #ooks with fa$or on the growth of an,s !roducti$e ca!acity" and
a#so on the e$er widening network of re#ationshi!s and e0changes between !ersons and socia#
grou!s&&&&O4Qro this !oint of $iew she encourages ad$ertising" which can becoe a who#esoe
and efficacious instruent for reci!roca# he#! aong en&B)
*d$ertising does this" aong other ways" by inforing !eo!#e about the a$ai#abi#ity of
rationa##y desirab#e new !roducts and ser$ices and i!ro$eents in e0isting ones" he#!ing
the to ake infored" !rudent consuer decisions" contributing to efficiency and the
#owering of !rices" and stiu#ating econoic !rogress through the e0!ansion of business and
trade& *## of this can contribute to the creation of new <obs" higher incoes and a ore decent
and huane way of #ife for a##& 't a#so he#!s !ay for !ub#ications" !rograing and !roductions
? inc#uding those of the Church ? that bring inforation" entertainent and ins!iration to
!eo!#e around the wor#d&
B) Bene1its o1 (olitical %vertisin*
BThe Church $a#ues the deocratic syste inasuch as it ensures the !artici!ation of citi(ens
in aking !o#itica# choices" guarantees to the go$erned the !ossibi#ity both of e#ecting and
ho#ding accountab#e those who go$ern the" and of re!#acing the through !eacefu# eans
when a!!ro!riate&B
Lo#itica# ad$ertising can ake a contribution to deocracy ana#ogous to its contribution to
econoic we## being in a arket syste guided by ora# nors& *s free and res!onsib#e edia
in a deocratic syste he#! to counteract tendencies toward the ono!o#i(ation of !ower on
the !art of o#igarchies and s!ecia# interests" so !o#itica# ad$ertising can ake its contribution by
inforing !eo!#e about the ideas and !o#icy !ro!osa#s of !arties and candidates" inc#uding new
candidates not !re$ious#y known to the !ub#ic&
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C) Cultural Bene1its o1 %vertisin*
Because of the i!act ad$ertising has on edia that de!end on it for re$enueI ad$ertisers ha$e
an o!!ortunity to e0ert a !ositi$e inf#uence on decisions about edia content& This they do by
su!!orting ateria# of e0ce##ent inte##ectua#" aesthetic and ora# 7ua#ity !resented with the
!ub#ic interest in $iew" and !articu#ar#y by encouraging and aking !ossib#e edia
!resentations which are oriented to inorities whose needs ight otherwise go un%ser$ed&
Moreo$er" ad$ertising can itse#f contribute to the betterent of society by u!#ifting and
ins!iring !eo!#e and oti$ating the to act in ways that benefit these#$es and others&
*d$ertising can brighten #i$es si!#y by being witty" tastefu# and entertaining& ;oe
ad$ertiseents are instances of !o!u#ar art" with a $i$acity and e#an a## their own&
D) Moral an Reli*ious Bene1its o1 %vertisin*
'n any cases" too" bene$o#ent socia# institutions" inc#uding those of a re#igious nature" use
ad$ertising to counicate their essages ? essages of faith" of !atriotis" of to#erance"
co!assion and neighbor#y ser$ice" of charity toward the needy" essages concerning hea#th
and education" constructi$e and he#!fu# essages that educate and oti$ate !eo!#e in a $ariety
of beneficia# ways&
4or the Church" in$o#$eent in edia%re#ated acti$ities" inc#uding ad$ertising" is today a
necessary !art of a co!rehensi$e !astora# strategy& This inc#udes both the Church,s own edia
? Catho#ic !ress and !ub#ishing" te#e$ision and radio broadcasting" fi# and audio$isua#
!roduction" and the rest ? and a#so her !artici!ation in secu#ar edia& The edia Bcan and
shou#d be instruents in the Church,s !rogra of re%e$ange#i(ation and new e$ange#i(ation in
the conte!orary wor#d&B11 9hi#e uch reains to be done" any !ositi$e efforts of this kind
a#ready are underway& 9ith reference to ad$ertising itse#f" Lo!e Lau# F' once said that it is
desirab#e that Catho#ic institutions Bfo##ow with constant attention the de$e#o!ent of the
odern techni7ues of ad$ertising and&&& know how to ake o!!ortune use of the in order to
s!read the Gos!e# essage in a anner which answers the e0!ectations and needs of
conte!orary an&B
The harm one -y avertisin*
There is nothing intrinsica##y good or intrinsica##y e$i# about ad$ertising& 't is a too#" an
instruent+ it can be used we##" and it can be used bad#y& 'f it can ha$e" and soeties does
ha$e" beneficia# resu#ts such as those <ust described" it a#so can" and often does" ha$e a negati$e"
harfu# i!act on indi$idua#s and society&
Communio et $rogressio contains this suary stateent of the !rob#e+ B'f harfu# or
utter#y use#ess goods are touted to the !ub#ic" if fa#se assertions are ade about goods for sa#e"
if #ess than adirab#e huan tendencies are e0!#oited" those res!onsib#e for such ad$ertising
har society and forfeit their good nae and credibi#ity& More than this" unreitting !ressure
to buy artic#es of #u0ury can arouse fa#se wants that hurt both indi$idua#s and fai#ies by
aking the ignore what they rea##y need& *nd those fors of ad$ertising which" without
shae" e0!#oit the se0ua# instincts si!#y to ake oney or which seek to !enetrate into the
subconscious recesses of the ind in a way that threatens the freedo of the indi$idua# &&& ust
be shunned&B
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%) Economic "arms o1 %vertisin*
*d$ertising can betray its ro#e as a source of inforation by isre!resentation and by
withho#ding re#e$ant facts& ;oeties" too" the inforation function of edia can be sub$erted
by ad$ertisers, !ressure u!on !ub#ications or !rogras not to treat of 7uestions that ight !ro$e
ebarrassing or incon$enient& More often" though" ad$ertising is used not si!#y to infor but
to !ersuade and oti$ate ? to con$ince !eo!#e to act in certain ways+ buy certain !roducts or
ser$ices" !atroni(e certain institutions" and the #ike& This is where !articu#ar abuses can occur&
The !ractice of BbrandB%re#ated ad$ertising can raise serious !rob#es& Aften there are on#y
neg#igib#e differences aong sii#ar !roducts of different brands" and ad$ertising ay atte!t
to o$e !eo!#e to act on the basis of irrationa# oti$es -Bbrand #oya#ty"B status" fashion" Bse0
a!!ea#"B etc&. instead of !resenting differences in !roduct 7ua#ity and !rice as bases for rationa#
choice&
*d$ertising a#so can be" and often is" a too# of the B!henoenon of consueris"B as Lo!e
=ohn Lau# '' de#ineated it when he said+ B't is not wrong to want to #i$e betterI what is wrong is
a sty#e of #ife which is !resued to be better when it is directed toward :ha$ing, rather than :
being," and which wants to ha$e ore" not in order to be ore but in order to s!end #ife in
en<oyent as an end in itse#f& B;oeties ad$ertisers s!eak of it as !art of their task to BcreateB
needs for !roducts and ser$ices ? that is" to cause !eo!#e to fee# and act u!on cra$ings for
ites and ser$ices they do not need& B'f &&& a direct a!!ea# is ade to his instincts ? whi#e
ignoring in $arious ways the rea#ity of the !erson as inte##igent and free ? then consuer
attitudes and #ife%sty#es can be created which are ob<ecti$e#y i!ro!er and often daaging to
his !hysica# and s!iritua# hea#th&B
This is a serious abuse" an affront to huan dignity and the coon good when it occurs in
aff#uent societies& But the abuse is sti## ore gra$e when consuerist attitudes and $a#ues are
transitted by counications edia and ad$ertising to de$e#o!ing countries" where they
e0acerbate socio%econoic !rob#es and har the !oor& B't is true that a <udicious use of
ad$ertising can stiu#ate de$e#o!ing countries to i!ro$e their standard of #i$ing& But serious
har can be done the if ad$ertising and coercia# !ressure becoe so irres!onsib#e that
counities seeking to rise fro !o$erty to a reasonab#e standard of #i$ing are !ersuaded to
seek this !rogress by satisfying wants that ha$e been artificia##y created& The resu#t of this is
that they waste their resources and neg#ect their rea# needs" and genuine de$e#o!ent fa##s
behind&B
;ii#ar#y" the task of countries atte!ting to de$e#o! ty!es of arket econoies that ser$e
huan needs and interests after decades under centra#i(ed" state%contro##ed systes is ade
ore difficu#t by ad$ertising that !rootes consuerist attitudes and $a#ues offensi$e to huan
dignity and the coon good& The !rob#e is !articu#ar#y acute when" as often ha!!ens" the
dignity and we#fare of society,s !oorer and weaker ebers are at stake& 't is necessary a#ways
to bear in ind that there are Bgoods which by their $ery nature cannot and ust not be bought
or so#dB and to a$oid Ban: 'do#atry, of the arketB that" aided and abetted by ad$ertising"
ignores this crucia# fact&
B) "arms o1 (olitical %vertisin*
Lo#itica# ad$ertising can su!!ort and assist the working of the deocratic !rocess" but it a#so
can obstruct it& This ha!!ens when" for e0a!#e" the costs of ad$ertising #iit !o#itica#
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co!etition to wea#thy candidates or grou!s" or re7uire that office%seekers co!roise their
integrity and inde!endence by o$er%de!endence on s!ecia# interests for funds&
;uch obstruction of the deocratic !rocess a#so ha!!ens when" instead of being a $ehic#e for
honest e0!ositions of candidates, $iews and records" !o#itica# ad$ertising seeks to distort the
$iews and records of o!!onents and un<ust#y attacks their re!utations& 't ha!!ens when
ad$ertising a!!ea#s ore to !eo!#e,s eotions and base instincts ? to se#fishness" bias and
hosti#ity toward others" to racia# and ethnic !re<udice and the #ike ? rather than to a reasoned
sense of <ustice and the good of a##&
C) Cultural "arms o1 %vertisin*
*d$ertising a#so can ha$e a corru!ting inf#uence u!on cu#ture and cu#tura# $a#ues& 9e ha$e
s!oken of the econoic har that can be done to de$e#o!ing nations by ad$ertising that fosters
consueris and destructi$e !atterns of consu!tion& Consider a#so the cu#tura# in<ury done to
these nations and their !eo!#es by ad$ertising whose content and ethods" ref#ecting those
!re$a#ent in the first wor#d" are at war with sound traditiona# $a#ues in indigenous cu#tures&
Today this kind of Bdoination and ani!u#ationB $ia edia right#y is Ba concern of
de$e#o!ing nations in re#ation to de$e#o!ed ones"B as we## as a Bconcern of inorities within
!articu#ar nations&B
The indirect but !owerfu# inf#uence e0erted by ad$ertising u!on the edia of socia#
counications that de!end on re$enues fro this source !oints to another sort of cu#tura#
concern& 'n the co!etition to attract e$er #arger audiences and de#i$er the to ad$ertisers"
counicators can find these#$es te!ted ? in fact !ressured" subt#y or not so subt#y ? to
set aside high artistic and ora# standards and #a!se into su!erficia#ity" tawdriness and ora#
s7ua#or&
Counicators a#so can find these#$es te!ted to ignore the educationa# and socia# needs of
certain segents of the audience ? the $ery young" the $ery o#d" the !oor ? who do not atch
the deogra!hic !atterns -age" education" incoe" habits of buying and consuing" etc&. of the
kinds of audiences ad$ertisers want to reach& 'n this way the tone and indeed the #e$e# of ora#
res!onsibi#ity of the counications edia in genera# are #owered&
*## too often" ad$ertising contributes to the in$idious stereoty!ing of !articu#ar grou!s that
!#aces the at a disad$antage in re#ation to others& This often is true of the way ad$ertising
treats woenI and the e0!#oitation of woen" both in and by ad$ertising" is a fre7uent"
de!#orab#e abuse& B/ow often are they treated not as !ersons with an in$io#ab#e dignity but as
ob<ects whose !ur!ose is to satisfy others, a!!etite for !#easure or for !ower: /ow often the
ro#e of woan as wife and other is under$a#ued or e$en ridicu#ed: /ow often is the ro#e of
woen in business or !rofessiona# #ife de!icted as a ascu#ine caricature" a denia# of the
s!ecific gifts of feinine insight" co!assion" and understanding" which so great#y contribute
to the :ci$i#i(ation of #o$e,:B
D) Moral an Reli*ious "arms o1 %vertisin*
*d$ertising can be tastefu# and in confority with high ora# standards" and occasiona##y e$en
ora##y u!#ifting" but it a#so can be $u#gar and ora##y degrading& 4re7uent#y it de#iberate#y
a!!ea#s to such oti$es as en$y" status seeking and #ust& Today" too" soe ad$ertisers
conscious#y seek to shock and titi##ate by e0!#oiting content of a orbid" !er$erse"
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!ornogra!hic nature& 9hat this Lontifica# Counci# said se$era# years ago about !ornogra!hy
and $io#ence in the edia is no #ess true of certain fors of ad$ertising+
B*s ref#ections of the dark side of huan nature arred by sin" !ornogra!hy and the e0a#tation
of $io#ence are age%o#d rea#ities of the huan condition& 'n the !ast 7uarter century" howe$er"
they ha$e taken on new diensions and ha$e becoe serious socia# !rob#es& *t a tie of
wides!read and unfortunate confusion about ora# nors" the counications edia ha$e
ade !ornogra!hy and $io#ence accessib#e to a $ast#y e0!anded audience" inc#uding young
!eo!#e and e$en chi#dren" and a !rob#e which at one tie was confined ain#y to wea#thy
countries has now begun" $ia the counications edia" to corru!t ora# $a#ues in de$e#o!ing
nations&B 9e note" too" certain s!ecia# !rob#es re#ating to ad$ertising that treats of re#igion or
!ertains to s!ecific issues with a ora# diension&
'n cases of the first sort" coercia# ad$ertisers soeties inc#ude re#igious thees or use
re#igious iages or !ersonages to se## !roducts& 't is !ossib#e to do this in tastefu#" acce!tab#e
ways" but the !ractice is obno0ious and offensi$e when it in$o#$es e0!#oiting re#igion or
treating it f#i!!ant#y&
'n cases of the second sort" ad$ertising soeties is used to !roote !roducts and incu#cate
attitudes and fors of beha$ior contrary to ora# nors& That is the case" for instance" with the
ad$ertising of contrace!ti$es" abortifacients and !roducts harfu# to hea#th" and with
go$ernent%s!onsored ad$ertising ca!aigns for artificia# birth contro#" so%ca##ed Bsafe se0B"
and sii#ar !ractices&
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LESSON 39
%DVERTI'IN) ET"IC'
Dece!tive %vertisin*
The ost coon criticis of ad$ertising concerns its effect on the consuers be#iefs&
Because ad$ertising is a for of counication" it can be as truthfu# or dece!ti$e as any other
for of counication& Most criticiss of ad$ertising focus on the dece!ti$e as!ects of
odern ad$ertising&
5ece!ti$e ad$ertising can take se$era# fors& *n ad$ertiseent can isre!resent the nature of
the !roduct by using dece!ti$e ock%u!s" using untrue !aid testionia#s" inserting the word
guarantee where nothing is guaranteed" and 7uoting is#eading !rices" fai#ing to disc#ose
defects in a !roduct" is#eading#y dis!araging a co!etitors goods" or siu#ating we##%known
brand naes& ;oe fraudu#ent fors of ad$ertising in$o#$e ore co!#e0 schees& 4or
e0a!#e" bait ad$ertiseents announce the sa#e of goods that #ater !ro$e not to be a$ai#ab#e or
to be dece!ti$e& Ance the consuer is #ured into the store" he or she is !ressured to !urchase
another ore e0!ensi$e ite&
* #ong ethica# tradition has consistent#y condened dece!ti$e in ad$erting on the grounds that
it $io#ates consuers rights to choose for these#$es -a Eantian arguent. and on the grounds
that it generates a !ub#ic distrust of ad$ertising that diinishes the uti#ity of this for and e$en
of this for and e$en of other fors of counication -a uti#itarian arguent.& The centra#
!rob#e then is not understanding why dece!ti$e ad$ertising is wrong" but understanding how
it becoes dece!ti$e and" therefore" unethica#&
The 4edera# Trade Coission -4TC. is the !riary regu#ator of dece!ti$e ad$ertising in the
G&;& 't was created by the 4TC *ct in 1M1J&
;ection K of the *ct ga$e the Coission the authority to regu#ate Bunfair ethods of
co!etition&B The *ct was #ater changed" by the 9hee#er%Lea *endent" to gi$e the 4TC
authority o$er both Bunfair ethods of co!etitionB and Bunfair or dece!ti$e acts or !ractices&B
't is through this #atter !ower that the 4TC regu#ates dece!ti$e ad$ertising&
Coissioners of the 4TC act #ike <udges" hearing cases when arketers are charged with
$io#ating the 4TC *ct& The Coission a#so !ub#ishes ad$ertising guide#ines for arketers"
which are not #aw but ere#y ad$isory" and ado!ts trade regu#ation ru#es" which are #aw&
Basic (rinci!les
*ccording to its 1MM2 Lo#icy ;tateent on 5ece!tion" the 4TC considers a arketing effort to
be dece!ti$e if+ -1. there is a re!resentation" oission" act or !ractice" that -3. is #ike#y to
is#ead consuers acting reasonab#y under the circustances" and -2. that re!resentation"
oission" or !ractice is Bateria#&B The ter Bateria#B refers to the fact that soe dece!ti$e
c#ais are tri$ia#" and that the 4TC wi## on#y regu#ate dece!tions that are i!ortant to
consuers" i&e&" those that affect consuers, Bchoice of" or conduct regarding" a !roduct&B
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Evience
To !ro$e that an ad c#ai is" in fact" dece!ti$e" the 4TC is not genera##y concerned with what
the c#ai says" but what it con$eys to consuers& 'f that con$eyed essage differs fro the
rea#ity of the !roduct attribute being ad$ertised" the c#ai is considered dece!ti$e& This re7uires
the Coission to #ook at two ty!es of e$idence+ -1. e$idence concerning what essage is
con$eyed to consuers" and -3. e$idence concerning the !roduct attribute,s true 7ua#ities&
The forer re7uires #ooking into the heads of consuers& The 4TC considers sur$eys the best
for of e$idence to disco$er what essage is con$eyed by an ad" though soeties the
Coission re#ies on other e$idence& The 7uestion of how best to unearth the inner thoughts of
consuers has been an issue of significant research efforts and theoretica# discussion& The
second for of e$idence can re7uire a $ariety of different ethods of assessing a !roduct,s
attributes& 'f" for e0a!#e" the c#ai refers to the fue# i#eage of an autoobi#e" #aboratory
testing of the $ehic#e,s fue# efficiency wou#d nora##y be re7uired& /owe$er" the 4TC re7uires
that ad$ertisers conduct such testing prior to aking the ad c#ai& 'f a c#ai is ade without
e$idence in hand that the !roduct wi## !erfor as ad$ertised" the c#ai wi## be considered
dece!ti$e& This is known as Bsubstantiation"B and the Coission,s re7uireents are detai#ed in
the 1M)J 4TC ;ubstantiation Lo#icy&&
Remeies
Most cases started by the 4TC ne$er re7uire the Coission to ake a fina# decision about the
dece!ti$eness of an ad$ertiser,s c#ai& Those cases end" instead" in a Bconsent order"B whereby
the ad$ertiser si!#y agrees to do what the 4TC staff asks& @o hearing is re7uired&
'n those cases that do end in a fina# 4TC decision" if the c#ai is found dece!ti$e" the ad$ertiser
wi## face one of three !ossib#e reedies+ -1. a Cease and 5esist Arder" which re7uires the
ad$ertiser to sto! aking the c#ai" -3. an *ffirati$e 5isc#osure Arder" which forces the
ad$ertiser to !ro$ide consuers with ore inforation" or -2. Correcti$e *d$ertising" which is
a for of affirati$e disc#osure that is intended to correct #ingering dece!tion that resu#ts fro
a #ong history of decei$ing the consuer&
(u11ery
/istorica##y" c#ais that were Bere e0aggerationsB or Bhy!erbo#eB were considered to be
!uffery" and therefore not dece!ti$e& Ters #ike Bthe bestB or Bthe greatestB were sa#es ta#k" and
the 4TC wou#d not regu#ate the& *fter a##" e$eryone knows that B9onder BreadB is not rea##y
a wonder" and BThe Greatest ;how on EarthB is not what e$eryone considers the greatest&
Luffery" therefore" was a for of o!inion stateent" and considered un%regu#ab#e&
;oe obser$ers ha$e e0!ressed concern that the B!uffery defenseB was a #oo!ho#e through
which any dece!ti$e c#ais fe##& The Coission has been critici(ed for a##owing dece!ti$e
c#ais to s#i! through under the guise of !uffery&
An the other hand" the 4TC has defined !uffery as c#ais that -1. reasonab#e !eo!#e do not
be#ie$e to be true !roduct 7ua#ities" and -3. are inca!ab#e of being !ro$ed either true or fa#se&
Conse7uent#y" if dece!tion is the creation of a Bfa#se be#iefB about the !roduct in the ind of a
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consuer" c#ais that fa## into the 4TC definition of !uffery cannot be dece!ti$e& By definition"
such c#ais can be neither fa#se nor can they create be#ief& This eans that if dece!ti$e c#ais
ha$e s#i!!ed through regu#ation as !uffs" it is because the 4TC has fai#ed to fo##ow its own
definition& ;ee our bib#iogra!hy on !uffery and !uffery 7uotes&
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LESSON 40
ADVERTISIN IN T!DA"#S S!$IET"
*d$ertising is a huge g#oba# business& @o business can succeed without it" no nae !roducts
a!!ear on the arket without being backed by ad$ertising& 4ood" c#othing" furniture"
accessories" cosetics" books" toys" e$erything dis!#ayed in the store is a resu#t of intensi$e
co!etition and e0!ensi$e !rootion on the !art of each anufacturer to induce the stores to
stock and stack his !roduct& Each year bi##ions of do##ars are s!ent in atte!ts to inf#uence our
decisions and to !ersuade us to s!end ore&
An the high street" on !ub#ic trans!ort" in news!a!ers and aga(ines and on te#e$ision we are
bobarded with iages and s#ogans -between four%hundred and three%thousand ad$ertising
essages !er dayW. designed to ake us !art with our cash& But for the ost !art we #o$e it"
secret#y at #east& 9e ay resent the hideous sign that in$ades the beauty s!ot" #oathe the
coercia# that interru!ts a TF show" but we reach for our news!a!er or fa$orite aga(ine
not on#y for an u!date on the news but to scan the ads for bargains or to en<oy #ooking at the&
Because of the enorous aount of ad$ertising there is around" the ad$ertising industry is
constant#y trying to coe u! with new ways of getting our attention -B;e0 se##sWB"S.&
%vertisin* a*encies an the maBin* o1 an a
'n $ery genera# ters" the function of an agency this usua##y consists of e0ecuti$e" creati$e"
research" edia" technica#" and adinistrati$e de!artents is to !resent to its c#ient a new"
catchy" and !ractica# idea for a ca!aign" furnish an out#ine with ocku!s and estiates" and
after fina# a!!ro$a# see the !ro<ect in the end& 'n the area of gra!hics" the art director" working
in c#ose coo!eration with the co!ywriter and c#ient" decides on the kind of i##ustration or s!ot
best suited to the se##ing thee" the !roduct" and kind of iage the ad$ertiser wishes to !ro<ect&
'n the wor#d of ad$ertising" e$eryones thinking is focused on now or on the future" ne$er on
the !ast&
The In1luence o1 %vertisements on the Customers 'ho!!in* Behavior
*## ad$erts need to use s!ecific stiu#i -for e0a!#e+ co#orfu# !ictures" erotic !oses"S." so that
the custoer becoes aware of the ad$ert and can store the gi$en inforation o$er a #onger
!eriod of tie& 4or effecti$e ad$ertising" basic conditioning !sycho#ogy has to be brought into
effect" whereby the !roduct is cou!#ed with !#easant 1eelin*s an emotions -Coca-Cola in
con<unction with fun and <oy % 9En4oy the taste:en4oy the fun :always Coca-Cola9
(sycholo*ical tricBs
Lackaging+ The design of the !ackage decides whether the !roduct wi## be acce!ted by the
custoer or not& *n e0tra$agant !ackaging and attracti$e co#ors are i!ortant factors" which
inf#uence his decision& Lositioning and arrangeent of the she#$es+ Lu0ury goods and goods the
ost !rofits are ain#y to be found on the right hand she#$es& This is due to an inborn tendency
to #ook and reach to the right& 'n addition" these things are to be found at eye or ar #e$e#
because at this height the !roducts are easy to reach& *rtic#es of e$eryday use are usua##y found
at the back of the store" farthest away fro the entrance& This is to force the custoer to !ass as
any ites as !ossib#e and to force hi to ake a !urchase&
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BMu(acB" soft background usic" is !#ayed" as it has a re#a0ing effect and !roduces a !#easant
atos!here& 'n order to gi$e the custoer the fee#ing that tie is no !rob#e" there are no
c#ocks to be found& ;weets and toys are often to be found <ust before the cash desk" in a bid to
gi$e chi#dren a BrewardB for waiting& 4u##y fi##ed she#$es are a#ways an induceent to buy" so
she#$es are re!eated#y fi##ed& ;tands are a#ways we## decorated because they bring an increase
in sa#es&
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LESSON 41
)%&BR%IT" vs. VON "%#E,
<ohn ,enneth )al-raith -Actober 1K" 1M0)*!ri# 3M" 3006. was an inf#uentia# Canadian%
*erican econoist& /e was a Eeynesian and an institutiona#ist" a #eading !ro!onent of 30th%
century *erican #ibera#is and !rogressi$is& /is books on econoic to!ics were bestse##ers
in the 1MK0s and 1M60s&
Ga#braith was a !ro#ific author who !roduced four do(en books and o$er a thousand artic#es on
$arious sub<ects& *ong his ost faous works was a !o!u#ar tri#ogy on econoics" ;merican
Capitalism -1MK3." <he ;ffluent 0ociety -1MK)." and <he /ew 8ndustrial 0tate -1M6D.& /e taught
at /ar$ard Gni$ersity for any years& Ga#braith was acti$e in !o#itics" ser$ing in the
adinistrations of 4rank#in 5& 6oose$e#t" /arry ;& Truan" =ohn 4& Eennedy and Lyndon B&
=ohnsonI and aong other ro#es ser$ed as G&;& abassador to 'ndia under Eennedy&
/e was one of a few two%tie reci!ients of the Lresidentia# Meda# of 4reedo& /e recei$ed
one fro Lresident Truan in 1MJ6 and another fro Lresident Bi## C#inton in 3000 O1Q & /e was
a#so awarded the Lada Fibhushan" 'ndia,s second highest ci$i#ian award" for his contributions
to strengthening ties between 'ndia and the Gnited ;tates& ;oe of Ga#braith,s 'deas
'n The *ff#uent ;ociety Ga#braith asserts that c#assica# econoic theory was true for the eras
before the !resent" which were ties of B!o$ertyBI now" howe$er" we ha$e o$ed fro a state
of !o$erty into an age of Baff#uence"B and for such an age" a co!#ete#y new econoic theory is
needed&
Ga#braith,s ain arguent is that as society becoes re#ati$e#y ore aff#uent" so !ri$ate
business ust BcreateB consuer wants through ad$ertising" and whi#e it generates artificia#
aff#uence through the !roduction of coercia# goods and ser$ices" the B!ub#ic sectorB
becoes neg#ected as a resu#t& /e !ointed out that whi#e any *ericans were ab#e to
!urchase #u0ury ites" their !arks were !o##uted and their chi#dren attended !oor#y aintained
schoo#s& /e argues that arkets a#one wi## under !ro$ide -or fai# to !ro$ide at a##. for any
!ub#ic goods" whereas !ri$ate goods are ty!ica##y ,o$er!ro$ided, due to the !rocess of
ad$ertising creating artificia# deand abo$e indi$idua#,s basic needs&
/e !ro!osed curbing the consu!tion of certain !roducts through greater use of consu!tion
ta0es" arguing this cou#d be ore efficient than other fors of ta0es such as #abor or #and ta0es&
Ga#braith,s a<or !ro!osa# was a !rogra he ca##ed Bin$estent in enB % a #arge%sca#e
!ub#ic#y%funded education !rogra aied at e!owering ordinary citi(ens& Ga#braith wished
to entrust citi(ens with the future of the *erican re!ub#ic&
%vertisin* an the Creation o1 Consumer Desires
=ohn E& Ga#braith and other ha$e #ong argued that ad$ertising is ani!u#ation #ati$e+ it is the
creation of desires in consuers for the so#e !ur!ose of absorbing industria# out!ut& Ga#braith
distinguished two kinds of desires+ those that ha$e a H!hysica#C basis" such as desires for food
and she#terI and those that are H!sycho#ogica# in origin"C such as the indi$idua#s desires for
goods that Hgi$e hi a sense of !ersona# achie$eent" accord hi a fee#ing of e7ua#ity with
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this neighbors" direct his ind for thought" ser$e se0ua# as!iration" !roise socia#
acce!tabi#ity" enhance his sub<ecti$e fee#ing of hea#th" contribute by con$entiona# cannons to
!ersona# beauty" or are otherwise !sycho#ogica##y rewarding&
The !hysica##y based desires originate in the buyer and are re#ati$e#y iune to being changed
by !ersuasion& The !sychic desires" howe$er" are ca!ab#e of being anaged" contro##ed" and
e0!anded by ad$ertising& Because the deand created !hysica# needs is finite" !roducers soon
!roduce enough to eet these needs& 'f !roduction is to e0!and" therefore" !roducers ust
create new deand by ani!u#ating the !#iab#e !sychic desires through ad$ertising&
*d$ertising is therefore used to create !sychic desires for the so#e !ur!ose of Hensuring that
!eo!#e buy what is !roducedC?that is" to absorb the out!ut of an e0!anding industria# syste&
The effect of this anageent of deand through ad$ertising is to shift the focus of decision in
the !urchase of goods fro the consuer where it is beyond contro# to the fir where it is
sub<ect to contro#& Lroduction is not o#ded to ser$e huan desiresI rather" huan desires ar
o#ded to ser$e the needs of !roduction&
'f this $iew of Ga#braiths is correct" then ad$ertising $io#ates the indi$idua#s right to choose
for hi or herse#f+ ad$ertising ani!u#ates the consuer& The consuer is used ere#y as a
eans for ad$ancing the ends and !ur!oses of !roducers" and this diinishes the consuers
ca!acity to free#y choose for hi or herse#f&
't is not c#ear that Ga#braith arguent is correct& *s we ha$e a#ready seen" the !sycho#ogica#
effects of ad$ertising are sti## unc#ear& Conse7uent#y" it is unc#ear whether !sychic desires can
be ani!u#ated by ad$ertising in the who#e sa#e way that Ga#braiths arguent assues&
Moreo$er" as $.% "ayeB and others ha$e !ointed out" the HcreationC of !sychic wants did not
originate with odern ad$ertising& @ew wants ha$e a#ways been HcreatedC by the in$ention of
no$e# and attracti$e !roducts -such as the first bow and arrow" the first !ainting" the first
!erfue." and such a creation of wants sees har#ess enough&
/owe$er" a#though it is unc#ear whether ad$ertising as a who#e has the assi$e ani!u#ati$e
effects that Ga#braith attributes to it&" it is c#ear that soe !articu#ar ad$ertiseents are at #east
intended to ani!u#ate& They are intended" to arouse in the consuer a !sycho#ogica# desire for
the !roduct without the consuers know#edge and without the consuer being ab#e to
rationa##y weigh whether the !roduct is in his or her own best interests& *d$ertiseents that
intentiona##y re#y on Hsub#iina# suggestion"C or that atte!t to ake consuers associate
unrea# se0ua# or socia# fu#fi##ent with a !roduct" fa## into this c#ass" as do ad$ertiseents that
are aied at chi#dren&
Criticism o1 )al-raithAs 0orB
Ga#braith,s work and <he ;ffluent 0ociety in !articu#ar drew shar! criticis fro free%arket
su!!orters at the tie of its !ub#ication&
Mi#ton 4riedan in B4riedan on Ga#braith" and on curing the British diseaseB $iews Ga#braith
as a 30th%century $ersion of the ear#y 1Mth%century Tory radica# of Great Britain& /e asserts that
Ga#braith be#ie$es in the su!eriority of aristocracy and in its !aterna#istic authority" that
consuers shou#d not be a##owed choice and that a## shou#d be deterined by those with
Bhigher indsB+
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97any reformers -- 6albraith is not alone in this -- have as their basic ob4ection to a free
mar&et that it frustrates them in achieving their reforms, because it enables people to have
what they want, not what the reformers want. #ence every reformer has a strong tendency to
be averse to a free mar&et.9
)al-raith versus "ayeB
Two of the great econoists of the 30th century were =ohn Eenneth Ga#braith and 4riedrich
/ayek& They he#d $ery different $iews about ad$ertising" which to a #arge e0tent ref#ected their
$iews about the ca!ita#ist syste ore broad#y&
=ohn Eenneth Ga#braiths ost faous book was <he ;ffluent 0ociety" which was !ub#ished in
1MK)& 'n it" he argued that cor!orations use ad$ertising to create deand for !roducts that
!eo!#e otherwise do not want or need& The arket syste shou#d not be a!!#auded" he
be#ie$ed" for satisfying desires that it has itse#f created& Ga#braith was ske!tica# that econoic
growth was #eading to higher #e$e#s of we##%being" because !eo!#es as!irations were being
ade to kee! !ace with their increased ateria# !ros!erity& /e worried that as ad$ertising and
sa#esanshi! artificia##y enhanced the desire for !ri$ate goods" !ub#ic s!ending on such ites
as better schoo#s and better !arks suffered& The end resu#t" according to Ga#braith" was H!ri$ate
o!u#ence and !ub#ic s7ua#or&C Ga#braith !o#icy recoendation was c#ear+ 'ncrease the si(e of
go$ernent&
4riedrich /ayeks ost faous book was <he "oad to 0erfdom" !ub#ished in 1MJJ& 't argued
that an e0tensi$e go$ernent ro#e in the econoy ine$itab#y eans a sacrifice of !ersona#
freedos& /ayek a#so wrote a we##%known criti7ue of Ga#braith in 1M61" addressing in
!articu#ar Ga#braiths $iew of ad$ertising& /ayek obser$ed that ad$ertising was ere#y one
e0a!#e of a broader !henoenon+ Many !references are created by the socia# en$ironent&
Literature" art" and usic are a## ac7uired tastes& * !ersons deand for hearing a Mo(art
concerto ay ha$e been created in a usic a!!reciation c#ass" but this fact does not ake the
desire #ess #egitiate or the usic !rofessor a sinister inf#uence& /ayek conc#uded" H't is
because each indi$idua# !roducer thinks that the consuers can be !ersuaded to #ike his
!roducts that he endea$ors to inf#uence the& But though this effort is !art of the inf#uences
which sha!e consuers taste" no !roducer can in any rea# sense Xdeterine the&C
*#though these two econoists disagreed about the ro#es of ad$ertising" arkets" and
go$ernent" they did ha$e one thing in coon+ great acc#ai& 'n 1MDJ" /ayek won the @obe#
!ri(e in econoics& 'n 3000" Lresident C#inton awarded Ga#braith the @ationa# Meda# of
4reedo& *nd e$en though their ost faous works were written any decades ago" they are
sti## we## worth reading today&
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LESSON 42
)%&BR%IT" vs. VON "%#E,
This is a !retty good easure of how far we ha$e coe in *erica in our understanding of
freedo fro that of the founders+ Bi## C#inton awarded the BMeda# of 4reedoB to =ohn
Eenneth Ga#braith on *ugust M" 3000" des!ite the fact that Ga#braith has been a sta#wart
cha!ion of the $ery o!!osite idea of freedo fro that #aid out by those founders&
Ga#braith" a !rofessor eeritus at the de!artent of econoics at /ar$ard Gni$ersity" a#though
a fine writer and charing huan being%% so uch so that 9i##ia 4& Buck#ey" =r&" has been his
#ong tie friend des!ite their !o#itica# differences%%has been a socia#ist for near#y a## of his
career& /e has been a re#ent#ess critic of ca!ita#is and the arket syste" based on his
essentia##y e#itist and !aterna#istic idea of what go$ernents ust do for the !eo!#e they ser$e&
This was to ake the a## abide by tenets of BfairnessB or" at #east" his socia#ist $ersion of that
idea#&
Ga#braith" though an a$owed statist%%not of the Mar0ist%Leninist but ore of the deocratic
socia#ist $ariety%%has been one of the ost fer$ent bashers of the BrichB in conte!orary
*erican cu#ture& 9hi#e not an e0!#icit Mar0ist" he acce!ted the Mar0ian idea that ca!ita#ists
create nothing and take a great dea# that they shou#d not be a##owed to ha$e& 'n his ost !o!u#ar
book" <he ;ffluent 0ociety" he #aid out a case for a !owerfu# we#fare state& /e has written in
soe of the ost !restigious !ub#ications of our society" inc#uding <he /ew =or& "eview of
Boo&s" <he /ew =or& <imes" ;merican $rospect" !issent" <he /ation and so on&
Ane of his ost we## known and wide#y studied #egacies was created fro a section of his book
dea#ing with ad$ertising& Ga#braith asserted that ad$ertising is a de$ice by which business
creates desires in consuers which ust be acted on and thus !roduce what he ca##ed Bthe
de!endency effect&B 'n other words" consuers becoe de!endent on cor!orations because the
#atter create desires in the for the goods and ser$ices they offer for sa#e& By this eans"
cor!orations becoe wea#thy" ake huge !rofits" whi#e resources are taken away fro far ore
i!ortant !ro<ects" you guessed it" those the go$ernent wants to !ro$ide for us& The !ub#ic
sector is diinished and the !ri$ate sector unfair#y benefits&
This faous section of <he ;ffluent 0ociety is re!rinted in near#y a## business ethics readers
ser$ing as te0t books for business schoo# students across the wor#d& 4ar fewer of these $o#ues
offer the decisi$e rebutta# to Ga#braith,s !osition" !enned by the great econoists" the #ate 4& *&
/ayek& /ayek noted that Ga#braith,s c#ai is true but not <ust for business and ad$ertisers but
a#so of a## huan creati$e endea$ors&
The difference is that un#ike Ga#braith" /ayek did not be#ie$e that the desires that !eo!#e ight
cu#ti$ate for what is !resented to the ust be acted on& 'nstead" we ha$e the freedo to
choose whether to try to fu#fi## our desires" howe$er they ight be created& *d$ertising a!!ea#s
to us but cannot ake us do anything& 't is a !rootiona# !ro<ect by which !roducers ca## out to
us ho!ing we wou#d consider what they ha$e to offer and to !urchase it& But there is no
guarantee at a## that we wi## act as the ad$ertisers wishes we wou#d&
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'n what sense does Ga#braith deser$e a eda# of freedo: An#y in the sense that a certain
conce!tion of freedo does under#ie his thinking& This is what is ca##ed B!ositi$eB freedo& 't
eans a condition whereby !eo!#e are !ro$ided by go$ernent" and at the e0!ense of other
!eo!#e" with what they cou#d use to ad$ance their #ot& ;uch !ro$isions wou#d BfreeB the to
o$e forward&
The freedo of the *erican founders is 7uite different" ain#y backed by a different idea of
huan nature& 't is that !eo!#e in counities re7uire first and foreost not to be thwarted in
their efforts to ake headway in #ife&
Athers ay not be conscri!ted into in$o#untary ser$itude to !ro$ide the with what they ight
need because if they are not thwarted by the" they wi## be ab#e to do this on their own& @ot
e7ua##y ra!id#y" not to the sae e0tent" !erha!s" but if they on#y a!!#y these#$es" they wi##
f#ourish without coercing others&
Ga#braith has ne$er cha!ioned this kind of Bnegati$eB freedo& ;o his $iews are a#ien to the
*erican !o#itica# tradition& 't is not sur!rising" then" that he recei$es the eda# of freedo
fro Lresident Bi## C#inton" soeone who has done nothing at a## to further freedo in this
tru#y *erican sense&
To Ga#braith,s inor credit" howe$er" he did" a few years ago" fina##y adit that ca!ita#is is a
far better econoic syste than socia#is& /e did this on#y in the wake of the co##a!se of the
;o$iet E!ire& *nd e$en then with great reser$ations and regret&
/e was asked" in an inter$iew !ub#ished in *#ita#ia,s Actober 1MM6 Bin f#ightB aga(ine+ BRou
s!oke of the fai#ure of socia#is& 5o you see this as a tota# fai#ure" a counter!roducti$e
a#ternati$e:B /e re!#ies this way+ B',d ake a distinction here& 9hat fai#ed was the
entre!reneuria# state" but it had soe beneficia# effect& ' do not be#ie$e that there are any radica#
a#ternati$es" but there are correcti$es& The on#y a#ternati$e socia#is" that is the a#ternati$e to
the arket econoy" has fai#ed& The arket syste is here to stay&B
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LESSON 43
%DVERTI'IN) %ND 'E&$3RE)U&%TION
The se#f%regu#atory syste co!rises three bodies+ the *d$ertising ;tandards *uthority -*;*."
the *d$ertising ;tandards Board of 4inance -*;BA4. and the Coittee of *d$ertising
Lractice -C*L.& Their work is described be#ow&
60&3 The strength of the syste de!ends on the #ong%ter coitent of a## those in$o#$ed in
ad$ertising" sa#es !rootions and direct arketing -arketing.&
Lractitioners in e$ery s!here share an interest in seeing that arketing counications are
we#coed and trusted by their audienceI un#ess they are acce!ted and be#ie$ed they cannot
succeed& 'f they are offensi$e or is#eading they discredit e$eryone associated with the and
the industry as a who#e&
60&2 The Code and a## *;* ru#ings together with *;* and C*L guidance on a wide range of
to!ics are a$ai#ab#e on www&asa&org&uk and www&ca!&org&uk& The
*;* and C*L u!date their websites regu#ar#y&
'n the GE" the British Code of *d$ertising" ;a#es Lrootion and 5irect Marketing -the Code.
is the ru#e book for non%broadcast ad$ertiseents" sa#es !rootions and direct arketing
counications -arketing counications.& The Code is !riari#y concerned with the
content of arketing counications and not with ters of business or !roducts these#$es&
;oe ru#es" howe$er" go beyond content" for e0a!#e those that co$er the adinistration of
sa#es !rootions" the suitabi#ity of !rootiona# ites" the de#i$ery of !roducts ordered through
an ad$ertiseent and the use of !ersona# inforation in direct arketing& Editoria# content is
s!ecifica##y e0c#uded fro the Code" though it ight be a factor in deterining the conte0t in
which arketing counications are <udged&
The Coittee of *d$ertising Lractice -C*L. is the se#f%regu#atory body that creates" re$ises
and enforces the Code& C*Ls ebers inc#ude organi(ations that re!resent the ad$ertising"
sa#es !rootion" direct arketing and edia businesses& Through their ebershi! of C*L
eber organi(ations" or through contractua# agreeents with edia !ub#ishers and carriers"
those businesses agree to co!#y with the Code so that arketing counications are #ega#"
decent" honest and truthfu# and consuer confidence is aintained&
;oe C*L eber organi(ations" for e0a!#e the 5irect Marketing *ssociation and the
Lro!rietary *ssociation of Great Britain" a#so re7uire their ebers to obser$e their own codes
of !ractice& Those codes ay co$er soe !ractices that are not co$ered in this Code& The Code
su!!#eents the #aw" fi##s ga!s where the #aw does not reach and often !ro$ides an easier way
of reso#$ing dis!utes than by ci$i# #itigation or criina# !rosecution& 'n any cases" se#f%
regu#ation ensures that #egis#ation is not necessary& *#though ad$ertisers" !rooters and direct
arketers -arketers." agencies and edia ay sti## wish to consu#t #awyers" co!#iance with
the Code shou#d go a #ong way to ensuring co!#iance with the #aw in areas co$ered by both
the Code and the #aw& By creating and fo##owing se#f%i!osed ru#es" the arketing counity
!roduces arketing counications that are we#coed and trusted& By !racticing se#f%
regu#ation" it ensures the integrity of ad$ertising" !rootions and direct arketing&
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The $a#ue of se#f%regu#ation as an a#ternati$e to statutory contro# is recogni(ed in EC
5irecti$es" inc#uding those on is#eading and co!arati$e ad$ertising -5irecti$es )JNJK0 and
MDNKK EC." and se#f%regu#ation is acce!ted by the 5e!artent of Trade and 'ndustry and the
Affice of 4air Trading as a first #ine of contro# in !rotecting consuers&
The *d$ertising ;tandards *uthority -*;*. is the inde!endent body that endorses and
adinisters the Code" ensuring that the se#f%regu#atory syste works in the !ub#ic interest& The
*;*s acti$ities inc#ude in$estigating and ad<udicating on co!#aints and conducting research&
* #eaf#et describing the *;*s co!#aints !rocedure is a$ai#ab#e on re7uest and fu##
inforation
is a$ai#ab#e on www&asa&org&uk&
The $ast a<ority of ad$ertisers" !rooters and direct arketers co!#y with the Code& Those
that do not ay be sub<ect to sanctions& *d$erse !ub#icity ay resu#t fro the ru#ings
!ub#ished by the *;* week#y on its website& The edia" contractors and ser$ice !ro$iders ay
withho#d their ser$ices or deny access to s!ace& Trading !ri$i#eges -inc#uding direct ai#
discounts. and recognition ay be re$oked" withdrawn or te!orari#y withhe#d& Lre%$etting
ay be i!osed and" in soe cases" non%co!#ying !arties can be referred to the Affice of 4air
Trading for action" where a!!ro!riate" under the Contro# of Mis#eading *d$ertiseents
6egu#ations& The syste is structured so that it does not o!erate in an unfair or anti%co!etiti$e
anner or restrict free s!eech un<ustifiab#y& *;* decisions are sub<ect to inde!endent re$iew"
inc#uding in e0ce!tiona# cases by the *dinistrati$e 5i$ision of the /igh Court& The fu## te0t
of the Code is a$ai#ab#e on www&ca!&org&uk& Co!yright The Coittee of *d$ertising Lractice
300K&
MEMBER' O$ T"E COMMITTEE O$ %DVERTI'IN) (R%CTICE
*d$ertising *ssociation
Broadcast *d$ertising C#earance Centre
Cinea *d$ertising *ssociation
5irect Marketing *ssociation
5irect ;e##ing *ssociation
'ncor!orated ;ociety of British *d$ertisers
'nstitute of Lractitioners in *d$ertising
'nstitute of ;a#es Lrootion
'nteracti$e *d$ertising Bureau
Mai# Arder Traders *ssociation
@ews!a!er Lub#ishers *ssociation
@ews!a!er ;ociety
Autdoor *d$ertising *ssociation
Leriodica# Lub#ishers *ssociation
Lro!rietary *ssociation of Great Britain
6adio *d$ertising C#earance Centre
6oya# Mai#
;cottish 5ai#y @ews!a!er ;ociety
;cottish @ews!a!er Lub#ishers *ssociation
INTRODUCTION
This e#e$enth edition of the Code coes into force on J March 3002& 't re!#aces a## !re$ious
editions&
The Coe a!!lies to/
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*d$ertiseents in news!a!ers" aga(ines" brochures" #eaf#ets" circu#ars" ai#ings" e%ai#s" te0t
transissions" fa0 transissions" cata#ogues" fo##ow%u! #iterature and other e#ectronic and
!rinted ateria# !osters and other !rootiona# edia in !ub#ic !#aces" inc#uding o$ing
iages
% Cinea and $ideo coercia#s
% *d$ertiseents in non%broadcast e#ectronic edia" inc#uding on#ine ad$ertiseents in
!aid%for s!ace -e&g& banner and !o!%u! ad$ertiseents.
% Fiew data ser$ices
% Marketing databases containing consuers !ersona# inforation
% ;a#es !rootions
% *d$ertiseent !rootions
The Coe oes not a!!ly to/
a& Broadcast coercia#s& -The BC*L *d$ertising ;tandards Codes set out the ru#es that
go$ern broadcast ad$ertiseents on any te#e$ision channe# and radio station #icensed by
Afco&.
b& The contents of !reiu rate ser$ices" which are the res!onsibi#ity of the 'nde!endent
Coittee for the ;u!er$ision of ;tandards of Te#e!hone 'nforation ;er$ices -'C;T';.I
arketing counications that !roote these ser$ices are sub<ect to 'C;T'; regu#ation
and to the Code
c& Marketing counications in foreign edia& 5irect arketing that originates outside the
GE but is targeted at GE consuers wi## be sub<ect to the <urisdiction of the re#e$ant
authority in the country where it originates so #ong as that authority o!erates a suitab#e
cross%border co!#aint syste& 'f it does not" the *;* wi## take what action it can& *##
ebers of the Euro!ean Gnion" and any non%Euro!ean countries" ha$e se#f%regu#atory
organi(ations that are ebers of the Euro!ean *d$ertising ;tandards *##iance -E*;*.&
E*;* co%ordinates the cross%border co!#aints syste for its ebers -which inc#ude the
*;*.&
d& /ea#th%re#ated c#ais in arketing counications addressed on#y to the edica#" denta#"
$eterinary and a##ied !rofessions
e& C#assified !ri$ate ad$ertiseents" inc#uding those a!!earing on#ine
f& ;tatutory" !ub#ic" !o#ice and other officia# noticesNinforation" as o!!osed to arketing
counications" !roduced by !ub#ic authorities and the #ike
g& 9orks of art e0hibited in !ub#ic or !ri$ate
h& Lri$ate corres!ondence" inc#uding corres!ondence between co!anies and their custoers
about e0isting re#ationshi!s or !ast !urchases
i& Li$e ora# counications" inc#uding te#e!hone ca##s
<& Lress re#eases and other !ub#ic re#ations ateria#" so #ong as they do not fa## under 1&1
abo$e
k& Editoria# content" for e0a!#e of the edia and of books
#& 6egu#ar co!etitions such as crosswords
& 4#y !osting -ost of which is i##ega#.
n& Lackages" wra!!ers" #abe#s" tickets" tietab#es and !rice #ists un#ess they ad$ertise another
!roduct" a sa#es !rootion or are $isib#e in a arketing counication
o& Loint of sa#e dis!#ays" e0ce!t those co$ered by the sa#es !rootion ru#es and the ro##ing
!a!er and fi#ter ru#es
!& E#ection ad$ertiseents as defined in c#ause 13&1
7& 9ebsite content" e0ce!t sa#es !rootions and ad$ertiseents in !aid%for s!ace
r& ;!onsorshi!I arketing counications that refer to s!onsorshi! are co$ered by the Code
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s& Custoer charters and codes of !ractice&
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These e1initions a!!ly to the Coe/
a& * product enco!asses goods" ser$ices" ideas" causes" o!!ortunities" !ri(es or gifts
b& * consumer is anyone who is #ike#y to see a gi$en arketing counication" whether in
the course of business or not
c& The 'nited (ingdom ru#es co$er the 's#e of Man and the Channe# 's#ands
d& * claim can be i!#ied or direct" written" s!oken or $isua#
e& The Code is di$ided into nubered clauses
f& * mar&eting communication inc#udes a## fors of counication #isted in 1&1
g& * mar&eter inc#udes an ad$ertiser" !rooter or direct arketer
h& * supplier is anyone who su!!#ies !roducts that are so#d by distance se##ing
i& arketing counications -and ay a#so be the arketer.
<& * child is anyone under 16&
k& * corporate subscriber inc#udes cor!orate bodies such as #iited co!anies in the GE"
#iited #iabi#ity !artnershi!s in Eng#and" 9a#es and @& 're#and or any !artnershi!s in
;cot#and& 't a#so inc#udes schoo#s" hos!ita#s" Go$ernent de!artents or agencies and other
!ub#ic bodies& 't does not inc#ude so#e traders or non%#iited #iabi#ity !artnershi!s in
Eng#and" 9a#es and @& 're#and&
These criteria a!!ly to the Coe/
a& The *;* Counci#s inter!retation of the Code is fina#
b& Confority with the Code is assessed according to the arketing counications
!robab#e i!act when taken as a who#e and in conte0t& This wi## de!end on the ediu in
which the arketing counication a!!eared" the audience and its #ike#y res!onse" the
nature of the !roduct and any additiona# ateria# distributed to consuers
c& The Code is indi$isib#eI arketers ust confor with a## a!!ro!riate ru#es
d& The Code does not ha$e the force of #aw and its inter!retation wi## ref#ect its f#e0ibi#ity& The
Code o!erates a#ongside the #awI the Courts ay a#so ake ru#ings on atters co$ered by
the Code
e& *n indication of the statutory ru#es go$erning arketing is gi$en on www&ca!&org&ukI
!rofessiona# ad$ice shou#d be taken if there is any doubt about their a!!#ication
f& @o s!oken or written counications with the *;* or C*L shou#d be understood as
containing #ega# ad$ice
g& The Code is !riari#y concerned with the content of ad$ertiseents" !rootions and direct
arketing counications and not with ters of business or !roducts these#$es& ;oe
ru#es" howe$er" go beyond the content" for e0a!#e those that co$er the adinistration of
sa#es !rootions" the suitabi#ity of !rootiona# ites" the de#i$ery of !roducts ordered
through an ad$ertiseent and the use of !ersona# inforation in direct arketing& Editoria#
content is s!ecifica##y e0c#uded fro the reit of the Code -see 1&3k." a#though it ight be
a factor in deterining the conte0t in which arketing counications are <udged&
h& The ru#es ake due a##owance for !ub#ic sensiti$ities but wi## not be used by the *;* to
diinish freedo of s!eech un<ustifiab#y
i& The *;* does not arbitrate between conf#icting ideo#ogies&
)ENER%& RU&E'
(rinci!les
*## arketing counications shou#d be #ega#" decent" honest and truthfu#&
*## arketing counications shou#d be !re!ared with a sense of res!onsibi#ity to consuers
and to society&
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3&2*## arketing counications shou#d res!ect the !rinci!#es of fair co!etition genera##y
acce!ted in business&
3&J @o arketing counication shou#d bring ad$ertising into disre!ute&
3&K Marketing counications ust confor with the Code& Lriary res!onsibi#ity for
obser$ing the Code fa##s on arketers& Athers in$o#$ed in !re!aring and !ub#ishing arketing
counications such as agencies" !ub#ishers and other ser$ice su!!#iers a#so acce!t an
ob#igation to abide by the Code&
3&6 *ny unreasonab#e de#ay in res!onding to the *;*s en7uiries ay be considered a breach
of the Code&
3&D The *;* and C*L wi## on re7uest treat in confidence any genuine#y !ri$ate or secret
ateria# su!!#ied un#ess the Courts or officia#s acting within their statutory !owers co!e# its
disc#osure&
3&) The Code is a!!#ied in the s!irit as we## as in the #etter&
'u-stantiation
Before distributing or subitting a arketing counication for !ub#ication" arketers ust
ho#d docuentary e$idence to !ro$e a## c#ais" whether direct or i!#ied" that are ca!ab#e of
ob<ecti$e substantiation& 6e#e$ant e$idence shou#d be sent without de#ay if re7uested by the
*;* or C*L& The ade7uacy of e$idence wi## be <udged on whether it su!!orts both the detai#ed
c#ais and the o$era## i!ression created by the arketing counication& The fu## nae and
geogra!hica# business address of arketers shou#d be !ro$ided without de#ay if re7uested by
the *;* or C*L&
'f there is a significant di$ision of infored o!inion about any c#ais ade in a
arketing counication they shou#d not be !ortrayed as genera##y agreed&
C#ais for the content of non%fiction books" ta!es" $ideos and the #ike that ha$e not
been inde!endent#y substantiated shou#d not e0aggerate the $a#ue" accuracy" scientific
$a#idity or !ractica# usefu#ness of the !roduct&
Ab$ious untruths or e0aggerations that are un#ike#y to is#ead and incidenta# inor
errors and unorthodo0 s!e##ings are a## a##owed !ro$ided they do not affect the accuracy
or !erce!tion of the arketing counication in any ateria# way&
&e*ality
Marketers ha$e !riary res!onsibi#ity for ensuring that their arketing counications are
#ega#& Marketing counications shou#d co!#y with the #aw and shou#d not incite anyone to
break it&
Decency (i.e. avoiin* serious or ;ies!rea o11ence)
Marketing counications shou#d contain nothing that is #ike#y to cause serious or wides!read
offence& Larticu#ar care shou#d be taken to a$oid causing offence on the grounds of race"
re#igion" se0" se0ua# orientation or disabi#ity& Co!#iance with the Code wi## be <udged on the
conte0t" ediu" audience" !roduct and !re$ai#ing standards of decency&
Marketing counications ay be distastefu# without necessari#y conf#icting with K&1 abo$e&
Marketers are urged to consider !ub#ic sensiti$ities before using !otentia##y offensi$e ateria#&
The fact that a !articu#ar !roduct is offensi$e to soe !eo!#e is not sufficient grounds for
ob<ecting to a arketing counication for it&
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"onesty
Marketers shou#d not e0!#oit the credu#ity" #ack of know#edge or ine0!erience of consuers&
Truth1ulness
@o arketing counication shou#d is#ead" or be #ike#y to is#ead" by inaccuracy"
abiguity" e0aggeration" oission or otherwise&
Matters o1 o!inion
Marketers ay gi$e a $iew about any atter" inc#uding the 7ua#ities or desirabi#ity of their
!roducts" !ro$ided it is c#ear that they are e0!ressing their own o!inion rather than stating a
fact& *ssertions that go beyond sub<ecti$e o!inions&
$ear an istress
@o arketing counication shou#d cause fear or distress without good reason&
Marketers shou#d not use shocking c#ais or iages ere#y to attract attention&
Marketers ay use an a!!ea# to fear to encourage !rudent beha$ior or to discourage
dangerous or i##%ad$ised actionsI the fear #ike#y to be aroused shou#d not be
dis!ro!ortionate to the risk&
'a1ety
Marketing counications shou#d not condone or encourage unsafe !ractices&
Larticu#ar care shou#d be taken with arketing counications addressed to or
de!icting chi#dren&
Consuers shou#d not be encouraged to drink and dri$e& Marketing counications
shou#d" where a!!ro!riate" inc#ude a !roinent warning on the dangers of drinking and
dri$ing and shou#d not suggest that the effects of drinking a#coho# can be asked&
Violence an anti3social -ehavior
Marketing counications shou#d contain nothing that condones or is #ike#y to !ro$oke
$io#ence or anti%socia# beha$ior&
(olitical avertisin*
*ny ad$ertiseent or direct arketing counication" whene$er !ub#ished or
distributed" whose !rinci!a# function is to inf#uence $oters in #oca#" regiona#" nationa# or
internationa# e#ections or referendus is e0e!t fro the Code&
There is a fora# distinction between Go$ernent !o#icy and that of !o#itica# !arties&
Marketing counications by centra# or #oca# go$ernent" as distinct fro those
concerning !arty !o#icy" are sub<ect to the Code&
(rotection o1 !rivacy
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Marketers shou#d not unfair#y !ortray or refer to !eo!#e in an ad$erse or offensi$e way&
Marketers are urged to obtain written !erission before+
a& 6eferring to or !ortraying ebers of the !ub#ic or their identifiab#e !ossessionsI the
use of crowd scenes or genera# !ub#ic #ocations ay be acce!tab#e without !erission
b& 6eferring to !eo!#e with a !ub#ic !rofi#eI references that accurate#y ref#ect the contents
of books" artic#es or fi#s ay be acce!tab#e without !erission
c& '!#ying any !ersona# a!!ro$a# of the ad$ertised !roductI arketers shou#d recogni(e
that those who do not wish to be associated with the !roduct ay ha$e a #ega# c#ai&
Lrior !erission ay not be needed when the arketing counication
contains nothing that is inconsistent with the !osition or $iews of the !erson
featured&
6eferences to anyone who is deceased shou#d be hand#ed with !articu#ar care to
a$oid causing offence or distress&
Mebers of the 6oya# 4ai#y shou#d not nora##y be shown or entioned in
arketing counications without their !rior !erission& 'ncidenta# references
unconnected with the ad$ertised !roduct" or references to ateria# such as
books" artic#es or fi#s about ebers of the 6oya# 4ai#y" ay be acce!tab#e&
The 6oya# *rs and Eb#es shou#d be used on#y with the !rior !erission of
the Lord Chaber#ains office& 6eferences to 6oya# 9arrants shou#d be checked
with the 6oya# 9arrant /o#ders *ssociation&
Testimonials an enorsements
Marketers shou#d ho#d signed and dated !roof" inc#uding a contact address" for any
testionia# they use& Gn#ess they are genuine o!inions taken fro a !ub#ished source"
testionia#s shou#d be used on#y with the written !erission of those gi$ing the&
Testionia#s shou#d re#ate to the !roduct being ad$ertised&
Testionia#s a#one do not constitute substantiation and the o!inions e0!ressed in the
ust be su!!orted" where necessary" with inde!endent e$idence of their accuracy& *ny
c#ais based on a testionia# ust confor to the Code&
4ictitious testionia#s shou#d not be !resented as though they are genuine&
Gn#ess they are genuine stateents taken fro a !ub#ished source" references to tests"
tria#s" !rofessiona# endorseents" research faci#ities and !rofessiona# <ourna#s shou#d be
used on#y with the !erission of those concerned&
Marketers shou#d not refer in arketing counications to ad$ice recei$ed fro C*L
or i!#y any endorseent by the *;* or C*L&
(rices
(see C%( "el! Notes on &o;est (rice Claims an (rice (romises an on Retailers. (rice
Com!arisons)
*ny stated !rice shou#d be c#ear and shou#d re#ate to the !roduct ad$ertised&
Marketers shou#d ensure that !rices atch the !roducts i##ustrated -see J)&D.&
Lrices 7uoted in arketing counications addressed to the !ub#ic shou#d inc#ude
F*T and other non%o!tiona# ta0es and duties i!osed on a## buyers& 'n soe
circustances" for e0a!#e where arketing counications are #ike#y to be read
ain#y by businesses ab#e to reco$er F*T" !rices ay be 7uoted e0c#usi$e of F*T or
other ta0es and duties" !ro$ided !roinence is gi$en to the aount or rate of any
additiona# costs&
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'f the !rice of one !roduct is de!endent on the !urchase of another" the e0tent of any
coitent by consuers ust be ade c#ear&
Lrice c#ais such as Xu! to and Xfro shou#d not e0aggerate the a$ai#abi#ity of benefits
#ike#y to be obtained by consuers&
* recoended retai# !rice -66L." or sii#ar" used as a basis of co!arison shou#d be
genuineI it shou#d not differ significant#y fro the !rice at which the !roduct is
genera##y so#d&
%vaila-ility o1 !roucts
Marketers ust ake it c#ear if stocks are #iited& Lroducts ust not be ad$ertised
un#ess arketers can deonstrate that they ha$e reasonab#e grounds for be#ie$ing that
they can satisfy deand& 'f a !roduct becoes una$ai#ab#e" arketers wi## be re7uired
to show e$idence of stock onitoring" counications with out#ets and swift
withdrawa# of arketing counications whene$er !ossib#e&
Lroducts which cannot be su!!#ied shou#d not nora##y be ad$ertised as a way of
assessing !otentia# deand un#ess it is c#ear that this is the !ur!ose of the arketing
counication&
Marketers ust not use the techni7ue of switch se##ing" where their sa#es staff critici(es
the ad$ertised !roduct or suggest that it is not a$ai#ab#e and recoend the !urchase of
a ore e0!ensi$e a#ternati$e& They shou#d not !#ace obstac#es in the way of !urchasing
the !roduct or de#i$ering it !ro!t#y&
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LESSON 44
CON'UMER (RIV%C#
Going on#ine and taking ad$antage of what the 'nternet has to offer ay re7uire that you
disc#ose !ersona# inforation& 9hether you,re new to the @et" or consider yourse#f sa$$y in the
ways of the 9eb" you ay ha$e concerns about how !ersona# inforation is co##ected" what
choices you ha$e about how it is used and shared" and under what circustances you can
access it&
Many of the creators of Consuer Lri$acy Guide be#ie$e that to assure the !ri$acy of their
!ersona# inforation" consuers ust ha$e the !rotection !ro$ided by basic #aw& Law wou#d
!ro$ide 'nternet users with basic e0!ectations about 9eb sites, res!onsibi#ities for !rotecting
the !ri$acy of the !ersona# inforation they co##ect& 9e continue to work toward this goa#& But
whether inforation in the on#ine wor#d is !rotected by #aw or not" consuers need inforation
and too#s to take charge of their !ri$acy&
Lri$acy Guide gi$es you usefu# ti!s for !rotecting your !ri$acy and he#!s you take contro# of
the way your inforation is used& 't atte!ts to answer your 7uestions" in consuer friend#y"
!ractica# ters" about what you can do to assure that inforation that you choose to share with
co!anies is used in ways you be#ie$e are a!!ro!riate& This site wi## e0!#ain ters used on the
'nternet that ay be unfai#iar to you" !ro$ide Bhow%toB guides to understanding !ri$acy
resources and techno#ogies" and !oint you toward other he#!fu# resources&
Consumer (rivacy
*d$ances in co!uter !rocessing !ower" database software" and counication techno#ogies
ha$e gi$en us the !ower to co##ect" ani!u#ate" and disseinate !ersona# inforation about
consuers on a sca#e un!recedented in the history of the huan race& This new !ower o$er the
co##ection" ani!u#ation" and disseination of !ersona# inforation has enab#ed ass in$asions
of the !ri$acy of consuers and has created the !otentia# for significant hars arising fro
istaken or fa#se inforation& 4or e0a!#e" a !air of British in$estigators re!orted that in
Eng#and" where co!anies register with the go$ernent the kind of inforation they wi##
co##ect" businesses were co##ecting high#y detai#ed and $ery !ersona# inforation about their
custoers&
;!eaking broad#y" the right to !ri$acy is the right to be #eft a#one& 9e do not discuss this broad
characteri(ation of the right to !ri$acy" howe$er" but concentrate on !ri$acy as the right of a
!erson not to ha$e others s!y on his or her !ri$ate #ife& 'n this ore narrow sense" the right to
!ri$acy can be defined as the right of !ersons to deterine what" to who" and how uch
inforation about these#$es wi## be disc#osed to other !arties&
There are two basic ty!es of !ri$acy+ (sycholo*ical !rivacy is !ri$acy with res!ect to a
!erson,s inner #ife& This inc#udes the !erson,s thoughts and !#ans" !ersona# be#iefs and $a#ues"
fee#ings" and wants& These inner as!ects of a !erson are so intiate#y connected with the !erson
that to in$ade the is a#ost an in$asion of the $ery !erson& (hysical !rivacy is !ri$acy with
res!ect to a !erson,s !hysica# acti$ities& 4or e0a!#e" a !erson in our cu#ture nora##y fee#s
degraded if force to disrobe !ub#ic#y or !erfor bio#ogica# or se0ua# functions in !ub#ic&
Lhysica# !ri$acy" therefore" is a#so $a#ued for its own sake&
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Lri$acy is a#so i!ortant because it has se$era# enab#ing functions& 4irst" !ri$acy enab#es a
!erson to de$e#o! ties of friendshi!" #o$e" and trust& 9ithout intiacy" these re#ationshi!s cou#d
not f#ourish& 'ntiacy" howe$er" re7uires both sharing inforation about onese#f that is not
shared with e$eryone and engaging in s!ecia# acti$ities with others that are not !ub#ic#y
!erfored& Therefore" without !ri$acy" intiacy wou#d be i!ossib#e and re#ationshi!s of
friendshi!" #o$e" and trust cou#d not e0ist&
;econd" !ri$acy enab#es certain !rofessiona# re#ationshi!s to e0ist& 'nsofar as the re#ationshi!s
between doctor and !atient" #awyer and c#ient" and !sychiatrist and !atient a## re7uire trust and
confidentia#ity" they cou#d not e0ist without !ri$acy&
Third" !ri$acy a#so enab#es a !erson to sustain distinct socia# ro#es& The e0ecuti$e of a
cor!oration" for e0a!#e" ay want" as a !ri$ate citi(en" to su!!ort a cause that is un!o!u#ar
with his of her fir& Lri$acy enab#es the e0ecuti$e to do so without fear of re!risa#&
4ourth" !ri$acy enab#es !eo!#e to deterine who they are by gi$ing the contro# of the way
they !resent these#$es to society in genera# and of the way that society in genera# #ooks on
the& *t the sae tie" !ri$acy enab#es !eo!#e to !resent these#$es in s!ecia# way to those
who they se#ect& 'n both cases" this se#f%deterination is secured by the right of the indi$idua#
to deterinate the nature and e0tent of disc#osure of inforation about onese#f&
't ust be ba#anced" howe$er" with the rights and needs of others& Banks ust know soething
about the credit history of those to who they are #ending oney" for e0a!#e& ;ince
consuers benefit fro the banking syste" they a#so benefit fro their right to !ri$acy being
ba#anced against the banks, right to know their !ersona# inforation&
To ba#ance these two factors" the fo##owing factors are crucia#+
1& Relevance % 5atabases shou#d contain on#y inforation direct#y re#e$ant to the !ur!ose
for which it is co##ected&
3& In1ormin* % Consuers shou#d be infored that inforation is being co##ected and to#d
what the !ur!ose of its co##ection is&
2& Consent % Businesses shou#d co##ect inforation on#y if consuers consent to !ro$ide
it&
J& %ccuracy 3 *gencies ust ensure that the inforation is u! to date and otherwise
accurate" 7uick#y correcting any errors&
K& (ur!ose % The !ur!ose for which the inforation is co##ected ust be #egitiate"
resu#ting in benefits genera##y en<oyed by those who are ha$ing the inforation
gathered fro the&
6& Reci!ients an 'ecurity % *gencies ust ensure that the inforation is secure and not
a$ai#ab#e to unintended users or so#d to others without the indi$idua#,s consent&
Lri$acy is the nuber one concern of 'nternet usersI it is a#so the to! reason why non%users sti##
a$oid the 'nternet& ;ur$ey after sur$ey indicates ounting concern& 9hi#e !ri$acy faces threats
fro both !ri$ate and go$ernent intrusions" the e0isting ot#ey !atchwork of !ri$acy #aws
and !ractices fai#s to !ro$ide co!rehensi$e !rotection& 'nstead" it causes confusion that fue#s a
sense of distrust and ske!ticis" #iiting rea#i(ation of the 'nternet,s !otentia#&
* uni7ue cobination of too#s %% #ega#" technica#" and se#f%regu#atory %% is being designed to
address the !ri$acy concerns of 'nternet users& To!%!riority ob<ecti$es inc#ude setting #iits on
go$ernent access to !ersona# inforation" ensuring that new inforation and counication
techno#ogies are designed in ways that !rotect rather than diinish !ri$acy" and de$e#o!ing
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a!!ro!riate federa# #egis#ation to set base#ine standards for consuer !ri$acy& This guide is
intended to educate 'nternet users about on#ine !ri$acy" and offer !ractica# suggestions and
!o#icy recoendations&
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LESSON 45
T"E ET"IC' O$ <OB DI'CRIMIN%TION
This #ecture discusses one of the interna# conf#icts that arise in business" nae#y the issue of <ob
discriination& 't begins by 7uoting two #ong !assages i##ustrating the current state of the
debate in the G&;&one by forer Lresident Bi## C#inton" one by forer Ca#ifornia Go$ernor
Lete 9i#son&
C#inton ca##s for the G&;& to !reser$e its affirati$e action !rogras& /e out#ines any
ine7uities that sti## reain in *erican business" and argues that affirati$e action is sti##
necessary to Bgi$e our nation a way to fina##y address the systeatic e0c#usion of indi$idua#s of
ta#ent on the basis of their gender or race&B *s #ong as there are no s!ecific 7uotas" he
aintains" then the affirati$e action,s critics are wrong&
9i#son" on the other hand" cites Thoas =efferson in his criticis of affirati$e action& /e
argues that it is unfair to award <obs based on any criteria other than erit& /e sees affirati$e
action as !referentia# treatent" Bs!ecia# !ri$i#egesB for a se#ect inorityin effect" a ty!e of
re$erse discriination&
Because discriination based on gender and race ha$e been around for so #ong in business" its
conse7uences in this area ha$e been substantia# and !ersistent& This cha!ter e0aines the
nature of discriination" discusses the ethica# as!ects of such beha$ior" and conc#udes by
considering affirati$e action !rogras in !articu#ar&
<o- Discrimination/ Its Nature
Though ore woen and inorities are entering forer#y white a#e%doinated <obs" they
sti## face discriination& The e0!erient conducted by *BC shows that woen and inorities
were systeatica##y gi$en #ess consideration in hiring+ they recei$ed fewer <ob offers and #ess
desirab#e <obs than white a#es& Ather research suggests that b#acks and /is!anics were offered
<obs K0P fewer ties than white a#es&
5iscriination in its root eaning is not at a## wrong& 't si!#y refers to the act of distinguishing
one ob<ect fro another& /owe$er" in odern usage" the ter refers to Bwrongfu#
discriination"B or distinguishing aong !eo!#e on the basis of !re<udice instead of indi$idua#
erit&
5iscriination in e!#oyent in$o#$es three basic e#eents+
1& 't ust be a decision not based on indi$idua# erit&
3& The decision ust deri$e fro racia# or se0ua# !re<udice&
2& The decision ust ha$e a harfu# i!act on the interest of e!#oyees&
5iscriinatory acts these#$es can be categori(ed according to the e0tent to which they are
intentiona# and institutiona#i(ed& *n act ay be !art of the iso#ated beha$ior of a sing#e
indi$idua# who+
1& 'ntentiona##y discriinates based on !ersona# !re<udice&
3& *n act ay be !art of the routine" institutiona#i(ed beha$ior of a grou!&
2& The act ust intentiona##y discriinate out of !ersona# !re<udice&
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J& *n act ay be !art of the iso#ated beha$ior of a sing#e indi$idua# who unintentiona##y
discriinates because he or she uncritica##y ado!ts the !ractices and stereoty!es of his
or her society&
*n act ay be !art of the systeatic routine of a grou! that unintentiona##y discriinates
because grou! ebers uncritica##y incor!orate the discriinatory !ractices of society&
9hereas in the ear#y 1M60s discriination was genera##y seen an intentiona# and indi$idua#" by
the 1MD0s a shift had occurred to e!hasi(e the effects of unintentiona# fors of
discriination& * grou! wou#d be gui#ty of discriination if inority grou! re!resentation
were not !ro!ortionate to the inority grou!,s #oca# a$ai#abi#ity&
;ubse7uent#y" !eo!#e cae to critici(e this $iew& They argued that discriination was the act of
indi$idua#s" that indi$idua# inority and woen were its $ictis& The !rob#e with this
criticis is that it is often difficu#t to know whether a s!ecific indi$idua#" was discriinated
against& The on#y way of te##ing whether a !rocess is fair or discriinatory is to see what
ha!!ens to inorities as a grou!& *erican society has gone back and forth on this issue e$er
since& Many e$en be#ie$e that though businesses in the G&;& used to be discriinatory" they are
no #onger so&
Discrimination/ It.s ECtent
*n indication of discriination e0ists when a dis!ro!ortionate nuber of a certain grou!,s
ebers ho#d #ess desirab#e !ositions des!ite their !references and abi#ities& 9e can ake
three ty!es of co!arisons to !ro$ide e$idence of this ty!e+ co!arisons of a$erage benefits
gi$en to $arious grou!s" co!arisons of the !ro!ortion of a grou! found in the #owest #e$e#s of
the institution" and co!arisons of the !ro!ortion of a grou! found in the ost ad$antageous
!ositions in the institution& 9hen we ake these three co!arisons" it sees c#ear that soe
for of discriination is sti## !resent in the G&;&" though for soe grou!s it is not as intense as
it used to be&
'ncoe co!arisons are the ost suggesti$e indicators of discriination& The incoe ga!
between whites and b#acks" counter to what any think" has not decreased -b#ack a$erage
fai#y incoe reains about 6KP that of whites.& There are sii#ar ine7ua#ities found based on
gender as we##& Though the ratio between a#e and fea#e earnings is getting ore e7ua#" this
is #arge#y due not to a rise in fea#e earnings but to a dro! in" a#e earnings& 5is!arities begin
iediate#y after graduationI in fact" fea#e co##ege graduates earn about as uch as a#e high
schoo# graduates& 'n e$ery occu!ationa# grou!" woen earn #ess than en& B#acks fare a bit
better than fea#es" but not uch& 4or b#ack a#e co##ege graduates" the !icture is better+ they
now earn about what white a#e co##ege graduates do&
4or ost other b#acks" howe$er" the !icture reains gri& Lowest incoe grou! co!arisons
and desirab#e occu!ation co!arisons gi$e sii#ar resu#ts& ;tatistica##y" #arger !ro!ortions of
inorities and woen are !oor" and #arger !ro!ortions of white a#es ha$e the ost desirab#e
occu!ations& 'n fact" the ore woen who work in an occu!ation" the #ower the a$erage !ay
for that <ob& Though !erha!s soe of the dis!arities between white a#es and woen or
inorities can be accounted for by the !references of the #atter -who $o#untari#y choose to work
in the #ower !aying <obs." the dis!arities are so #arge that it cannot entire#y be accounted for in
this way&
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The difficu#ties for inorities see to be getting worse& Though they wi## soon be a a<ority of
the #abor force" studies indicate that any of the new <obs that wi## be created wi## re7uire
education beyond high schoo#" and ost inorities are fa##ing behind in their educationa#
attainent& 4or woen" another obstac#e e0ists+ unwanted se0ua# attention&
4inding that our econoic institutions genera##y see to ebody discriination" as this section
!ro$es it" does not in itse#f !ro$e that any !articu#ar business is discriinatory" howe$er&
Discrimination/ Utility: Ri*hts: an <ustice
Gi$en the ine7ua#ities found in G&;& businesses" we ust address the issue of whether these
ine7ua#ities are wrong and" if they are" how they shou#d be changed& *rguents against
discriination fa## into three grou!s+ uti#itarian arguents" rights arguents" and <ustice
arguents& The uti#itarian arguent against discriination aintains that society,s !roducti$ity
wi## be highest when <obs are awarded based on co!etence or erit& 5iscriination based on
anything e#se is inefficient and" therefore" counter to uti#ity&
Gti#itarian arguents ha$e been attacked on two fronts& 4irst" if <obs shou#d be assigned on the
basis of <ob%re#ated 7ua#ifications on#y so #ong as such assignents wi## ad$ance the !ub#ic
we#fare" then if !ub#ic we#fare wou#d be ad$anced to a greater degree by assigning <obs on the
basis of soe factor not re#ated to <ob !erforance" then the uti#itarian wou#d ha$e to ho#d that
in those situations <obs shou#d not be assigned on the basis of <ob re#ated 7ua#ifications" but on
the basis of that other factor& ;econd" it ight be true that society as a who#e wou#d benefit by
ha$ing soe grou! discriinated against&
Ather" non%uti#itarian arguents against discriination aintain that it is wrong because it
$io#ates !eo!#e,s basic huan rights& Eant" for e0a!#e" says that huans shou#d be treated as
ends in these#$es and ne$er as a eans to an end& Therefore" discriination is wrong because
it $io#ates !eo!#e,s rights to be treated as e7ua#s& 'n addition" soe Eantian thinkers argue that
discriination is wrong because the !erson who discriinates wou#d not want to see his or her
beha$ior uni$ersa#i(ed -at #east they wou#d not want to change !#aces with the $icti of their
own discriination.&
* third grou! of arguents against discriination $iews it as un<ust& 6aw#s argues that it is
un<ust arbitrari#y to gi$e soe !eo!#e ore o!!ortunity than others& *nother re#ated arguent
sees it as a for of in<ustice because indi$idua#s who are e7ua# in a## re#e$ant res!ects cannot
be treated different#y <ust because they differ in other" non%re#e$ant res!ects& The !rob#e with
this arguent is that it is difficu#t to define !recise#y what counts as re#e$ant and to e0!#ain
why se0 and race are not re#e$ant" but inte##igence is&
5es!ite the difficu#ties with these arguents against discriination" there are fi$e wide#y
recogni(ed categories of discriinatory !ractices+
1& 6ecruitent !ractices that re#y on the word%of%outh referra#s of !resent e!#oyees
wi## tend to recruit on#y fro the grou!s a#ready re!resented&
3& ;creening !ractices that inc#ude 7ua#ifications not re#e$ant to a <ob -such as re7uiring a
certain #e$e# of education for $ery #ow%#e$e# <obs.&
2& Lrootion !ractices that !#ace grou!s on se!arate tracks or that re#y so#e#y on seniority
when !ast discriination has ke!t woen or inorities out of senior !ositions&
J& Conditions of e!#oyent that do not award e7ua# wages and sa#aries to !eo!#e doing
essentia##y the sae work&
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K& 5ischarging an e!#oyee based on race or gender" or #ayoff !o#icies that re#y so#e#y on
seniority&
9oen are $ictis of a different and troub#esoe ty!e of discriination+ se0ua# harassent&
Genera##y" the guide#ines against se0ua# harassent are c#ear#y ora##y <ustified& /owe$er"
there are soe as!ects of the guide#ines that ust be e0ained& They !rohibit ore than <ust
!articu#ar acts of harassentI they a#so !rohibit creating an intiidating" hosti#e" or offensi$e
working en$ironent&
This raises soe difficu#t 7uestions& *re echanics who hang !in%u! ca#endars gui#ty of se0ua#
harassent: Though ost !eo!#e now say yes" there are a nuber of critics who say that these
kinds of en$ironents were not intended to degrade woen" and besides" woen ha$e the
!ower to take care of these#$es& 'n addition" the guide#ines say that $erba# or !hysica# contact
is harassent if it has the effect of unreasonab#y interfering with the $icti,s work
!erforance& This eans" c#ai soe critics" that se0ua# harassent de!ends on the !ure#y
sub<ecti$e <udgents of the $ictiI what is unreasonab#e to one !erson ay see !erfect#y
acce!tab#e to another&
* ore serious ob<ection to such guide#ines is that they $io#ate !eo!#es right to free s!eech&
/owe$er" though these ob<ections ay be $a#id on co##ege ca!uses" they are not at a##
re#e$ant to businesses" where free discussion and e0aination of ideas are not the focus&
* fir can be gui#ty of se0ua# harassent e$en if it did not know and cou#d not ha$e known
that the harassent was going onindeed" e$en if the fir had e0!ress#y forbidden the
offensi$e act& ;u!!orters of the guide#ines !oint out that the hars caused by se0ua#
harassent shou#d be considered a cost of doing business" which it is !ro!er to interna#i(e&
Grou!s other than woen and racia# inorities can be the $ictis of discriination& The
disab#ed" $ictis of *'5;" hoose0ua#s" and the o$erweight are a## discriinated against&
Current#y" there are no federa# #aws !rohibiting discriination against any of these grou!s&
%11irmative %ction
;o far" the !o#icies discussed in this cha!ter are a## negati$e" aied at !re$enting further
discriination& *ffirati$e action !rogras" in contrast" ca## for !ositi$e ste!s designed to
e#iinate the effects of !ast discriination& ;uch !rogras are now #ega##y re7uired of a## firs
ho#ding go$ernent contracts&
*ffirati$e action !rogras begin with a detai#ed study" a Buti#i(ation ana#ysisB of the a<or
<ob c#assifications in an organi(ation& The ana#ysis is designed to disco$er whether there are
fewer inorities or woen in a !articu#ar <ob c#assification than cou#d reasonab#y be e0!ected&
'f the ana#ysis shows that woen or inorities are underuti#i(ed" then the fir ust estab#ish
!ractices to correct these deficiencies&
The G&;& ;u!ree Court has not been c#ear about the #ega#ity of affirati$e action !rogras&
6u#ings suggest significant $aci##ation on the issue& The ain grounds for attacking the is
that" in atte!ting to correct the effects of !ast in<ustice" affirati$e action ay actua##y be
racia##y or se0ua##y discriinatory itse#f&
'n the face of this ob<ection" su!!orters of affirati$e action ake two ain counterarguents&
Ane of these is to inter!ret affirati$e action as a for of co!ensation for !ast in<uries& The
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other inter!rets !referentia# treatent as an instruent for achie$ing socia# goa#s& The forer
arguents are backward #ooking" focusing on the wrongness of the !astI the #atter are forward
#ooking" instruenta#ist arguents focusing on what the future ought to be&
Those who see affirati$e action as a for of co!ensation aintain that white a#es ust
!ay re!arations for un<ust#y in<uring others by discriination in the !ast& The difficu#ty with
such arguents is that the !rinci!#e of co!ensatory <ustice re7uires that co!ensation shou#d
coe on#y fro those s!ecific indi$idua#s who intentiona##y inf#icted a wrong" and shou#d be
!aid on#y to those s!ecific indi$idua#s who suffered that wrong& 't does not re7uire that
co!ensation shou#d coe fro a## ebers of a grou! containing soe wrongdoers" nor that
co!ensation shou#d go to a## ebers of a grou! containing soe in<ured !arties& Many ha$e
atte!ted to counter this arguent by c#aiing that e$ery inority #i$ing today has been
in<ured by discriination and that e$ery white a#e has benefited fro those in<uries& 9hether
these arguents are successfu# or not is unc#ear&
The second way of <ustifying affirati$e action sees it as an instruent for socia# change&
Based on the statistics such as those at the beginning of this cha!ter" such arguents aintain
that race and gender !ro$ide an indicator of need& ;ince reducing this need is consistent with
uti#itarian !rinci!#es -as it wi## increase tota# uti#ity." affirati$e action is <ustified&
Ab<ections ade to this arguent 7uestion whether the socia# costs of affirati$e action
outweigh their benefits& /owe$er" e$en ore e#aborate and con$incing arguents for
affirati$e action are ade& They argue that the goa# of affirati$e action is socia# <ustice" and
that affirati$e action is a ora##y #egitiate eans for achie$ing this goa#&
Lresent#y" woen and inorities do not ha$e the e7ua# o!!ortunity that <ustice deands statistics
!ro$e this& The conscious and unconscious bias that brings this in<ustice about ust be
neutra#i(ed" a#ong with the co!etiti$e disad$antages with which woen and inorities are
burdened& The basic end" therefore" is a ore <ust society" and !referentia# treatent is a ora##y
#egitiate eans to attain this end&
/owe$er" three reasons ha$e been ad$anced to show that affirati$e action is not" in fact"
ora##y #egitiate& 4irst" it is c#aied that affirati$e action discriinates against white a#es&
/owe$er" gi$en the definition of discriination" because the !referentia# treatent is not based
on conte!t of white a#es" it cannot be said to be the sae thing as discriination against
inorities or woen&
;econd" soe c#ai that !referentia# treatent $io#ates the !rinci!#e of e7ua#ity because it takes
into consideration race" which is an irre#e$ant characteristic& 5efenders of affirati$e action
counter by saying that se0ua# and racia# differences are actua##y re#e$ant characteristics& Third"
critics c#ai that affirati$e action actua##y hars inorities by i!#ying that they are so
inferior to white a#es that they need s!ecia# he#! to succeed& This c#ai is countered by saying
that" though affirati$e action undoubted#y has soe costs" the benefits of such !rogras
outweigh the& Moreo$er" they !oint out that affirati$e action is not based on an assu!tion
of white a#e su!eriority but on recognition of bias in fa$or of white a#es& 4ina##y" they !oint
out that though soe inorities ay fee# inferior because of affirati$e action" any ore are
ade to fee# inferior because of racisand besides" showing !reference towards the does not
ake the fee# inferior& The arguents on both sides are !owerfu#" and the debate continues&
Because of concerns raised by o!!onents of affirati$e action" guide#ines ha$e been suggested
to ensure that its ore harfu# effects wi## be #essened& Af course" the !rob#es encountered by
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inorities differ arked#y fro those encountered by woen& 6ecent#y" soe !ro!osa#s that
are ore radica# than affirati$e action ha$e been ade to dea# with se0ua# discriination&
;ince the <obs woen ha$e historica##y taken !ay #ow wages and sa#aries" !ro!onents of
comparable worth programs atte!t not to !#ace woen into higher !aying <obs" but to
increase the sa#aries of those <obs where woen current#y are e!#oyed&
'n a co!arab#e worth !rogra" each <ob in a fir is assigned a certain nuber of !oints for
difficu#ty" ski## re7uireents" e0!erience" and other factors& Then" <obs are assued to deser$e
e7ua# !ay if they score sii#ar#y& The fundaenta# arguent in fa$or of co!arati$e worth is
the !rinci!#e of <ustice& A!!onents counter that the arket is the ost a!!ro!riate deterining
factor of wages& 'f the arket !ays a certain <ob a #ow sa#ary" they c#ai" it is because there is a
#arge su!!#y of workers in that category&
'n the near future" on#y a sa## !ro!ortion of new workers wi## be white a#es& Because of this
deogra!hic trend" firs, en#ightened se#f%interest wi## !ro!t the to gi$e woen and
inorities s!ecia# consideration& 'f they do not accoodate these#$es to these workers" they
ay not be ab#e to find the workers they need to co!ete in the wor#d arket&
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