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Chapter 2

J. R. Boatright

ETHICS AND THE CONDUCT OF BUSINESS


6th Edition

Welfare, Rights and Justice


C. H. Quah USM
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After studying this chapter you should be able to:

differentiate the different forms of ethical theories, i.e. teleological, deontological, utilitarianism, rights and justice.
explain cost-benefit analysis and the operations of the market system.

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After studying this chapter you should be able to:


differentiate the different forms of utilitarianism. understand the distinction between the concepts of rights and justice and the workings of the market system. explain how utilitarian ethics provide support for market economies.

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Your Call?

A group of children were playing near two railway tracks, one still in use while the other disused. Only one child played on the disused track, the rest on the operational track. You are the station master and you see the train coming. You could make the train change its course to the disused track and save most of the kids. However, that would mean the lone child playing by the disused track would be sacrificed. WHAT IS YOUR DECISION? 2010 Pearson Education South
Asia Pte. Ltd. All rights reserved
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Four Different Views of Ethics


Teleological (Consequence based theory) Deontological (Duty/rights based theory)

Justice (contractual based theory)

Virtues (Nichomacean ethics)


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Teleological Theories (Jeremy Bentham [1748 1832]; J. Stuart Mill [1806 1873])
Derived from the Greek word telos, which refers to an end. Holds that the rightness of an action is determined solely by the amount of good consequences they produce. Define good on the basis of each persons conception of what it means to be better off.

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Deontological Theory [Immanuel Kant, 1724 1804])

Ignored the consequences of actions and focused on the nature of the actions and the rules from which they follow.
The Golden Rule and ethical principles appeal to both human dignity and respect.

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UTILITARIANISM
Utilitarianism is a powerful and widely accepted ethical theory that has special relevance in business. Its application involves developing a list of available alternatives, following the consequences of each as far into the future as possible and selecting the alternative with the greatest balance of benefits over harms for everyone.

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Classical Utilitarianism
JEREMY BENTHAM (1748-1832) Actions that augment happiness are supported whilst those that oppose happiness are rejected. Measured pleasure or pain using a hedonistic calculus. If the above process were repeated for all individuals, the resulting sums would show the good or bad tendency of an action for the entire community.
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Classical Utilitarianism (cont.)


John Stuart Mill (1806 - 1873)

Actions that promote happiness are right whilst those that oppose happiness are wrong. Happiness is pleasure and the absence of pain. Humans enjoy higher pleasures than animals.

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Teleological Theory

Utilitarianism

Egoism

Consequentialist Hedonist Maximalist Universalist

Personal

Impersonal

Pursue goals that promote own long term self-interests

Follow goals not because they benefit others but because help achieve own interests too

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Forms of Utilitarianism
Consequentialism Hedonism Maximalism

Universalism
Consequences for everyone must be considered.

Rightness of an action determined solely by their consequences

Rightness determined solely by pleasure and the absence of pain.

Rightness determined not by just some consequences but the greatest amount of good consequences.

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Forms of Utilitarianism

Act and Rule Utilitarianism


Act Utilitarianism states that an action is right if

and only if it:

produces the greatest balance of pleasure over pain for everyone.

Is a simpler theory and provides an easily

understood decision procedure.


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Forms of Utilitarianism

Act and Rule Utilitarianism (cont)


Rule Utilitarianism states that an action is right

if and only if it:

Conforms to a set of rules


Acceptance of which would produce the greatest balance of pleasure over pain for everyone.

Gives firmer ground to the rules of morality.

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Advantages of Utilitarianism

It fits with much of our moral reasoning. Provides a relatively precise and objective method for moral decision making, i.e. a person need only to calculate the consequences of the available alternatives.

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RIGHTS AND JUSTICE

Concept of a Right
Used in many different ways yielding different

interpretations. Can come into conflict with one another. Tendency to stretch the concept of a right in ways that dilute its meaning. Disagreement over the existence of a particular right.
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What are Rights?

Entitlements that enable us to act on our own and be treated by others in a certain way, without asking for permission or being dependent on other peoples good will
(H. J. McCloskey, 1965)

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Different Kinds of Rights


Legal rights
Rights that are recognized and enforced as part of a legal system.
Rights that do not depend on a legal system but are rights people normally ought to have. Derived from special relationships, roles and situations.

Moral rights

Specific rights

Rights that involve claims on specific identifiable individuals.

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Different Kinds of Rights (cont.)


General rights Rights that involve claims against everyone or humanity in general.

Negative rights

Obligations on the part of others to refrain from acting in certain ways that interfere with our own freedom of action. Obligations imposed on others to provide us with some good or service and thereby act positively on our behalf. E.g. right to education, medical treatment, etc.
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Positive rights

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Different Kinds of Rights (cont.)


Belong to all persons solely by virtue of being human. Characterized by : i) universality - i.e. possessed by all persons ii) unconditionality [inalienable] - do not depend on any particular practices or institutions. E.g. Declaration of Independence
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Natural rights [Human rights]

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Utility and Rights


Rights are a major stumbling block to utilitarianism because rights serve to protect individual interests against claims based on general welfare. The right to free speech is respected only in so far as this right has good consequences [Bentham, 1748 1832] Denying the right of free speech risks suppressing not only falsehoods but also the truth [Mill, 1806 1873]

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JUSTICE

Justice is the fair treatment and due reward in accordance with ethical or legal standards.
Concerned with the righting of wrongs. Concerned with the fair distribution of benefits

and rewards
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Questions to Ponder?

What would be the fairest means of distributing a bookcase of books on different subjects? How can you ensure that the individual gets the book/s he/she values most? Can this end be achieved by auctioning off the books?

If yes, why? If no, why?


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Five Ways of Fair Distribution


Equality
Everyone gets an equal share

Effort

Those who expand greater effort receive more

Need

Those in critical need given priority, e.g. organ transplant

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Five Ways of Fair Distribution(cont.)

Social contribution

Those who contribute more receive greater share

Merit

Those who contribute more receive greater share

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Aristotles Theory of Justice


Justice

Universal

Particular

Whole of Virtue

Distributive

Compensatory

Retributive

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Aristotles Distributive Justice

Deals with the distribution of benefits and burdens in the evaluation of social, political and economic situations.
Distributive justice is comparative.

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Aristotles Compensatory Justice

Concerned with the compensation of persons for wrongs done to them in voluntary relations, such as contract breaches. Restore the moral equilibrium of the victim to his/her previous condition; or punishing the perpetrator for the crime.
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Aristotles Retributive Justice

Involve the punishment of wrong doers who have committed criminal acts. The moral equilibrium of the victim is restored with a punishment that fits the crime. Both compensatory and distributive justice are non-comparative.
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Aristotles Principle of Proportionate Equality

Like cases should be treated alike unless there is some relevant difference between the cases. As share of P Bs share of P = As share of Q Bs share of Q

Relevant differences consists of: Ability, Effort, Accomplishment, Contribution and Need.
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Utility and Justice


Justice

along with rights is commonly regarded as a stumbling block for utilitarianism


Why?

An injustice occurs when an individuals right is violated.


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Utility and Justice (cont.)


Utilitarian

Argument

A society with the greatest amount of

utility is also a just society [Bentham, 1748 -1832]


All persons possess a presumptive

right to equal treatment unless the inequalities are justified by a social need [Mill, 1806 1873]
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Utility and the Market System


The

market system is characterized by three main features:


Private ownership of resources and other

good and services produced


Voluntary exchange of resources and

goods
The profit motive
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The Market System

Decisions in a market are made on the basis of prices


Result from supply and demand

The principal aim of business firms in a market system is to:


Maximize the return on investment, i.e. to make

a profit.
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The Market System (cont)

The main justification of a market system over other forms of economic organization
Promotion of efficiency and hence welfare

Efficiency
Obtaining the greatest output for the least input

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Criticisms of The Market System

Markets fail for four main reasons:


Perfect competition Perfect rationality Externalities Collective choice

Public goods - markets ignore public goods due to the lack of profit and leave it to the government to supply them.
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Cost-Benefit Analysis

A quantitative method of decision-making, whereby any project that promises the greatest net benefit as measured in dollars, out to be chosen.

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Cost-Benefit Analysis [cont]


Characteristics Strengths Weaknesses

Quantitative method
Monetary units used to express benefits and drawbacks of alternatives

Prices of many goods set by market

Not all costs & benefits have an easily determined monetary value Market price does not correspond to opportunity cost Heavily value laden Shadow pricing

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Cost-Benefit Analysis [cont.]

Heavily value-laden - involves assigning monetary values to all things Shadow pricing - an approach that enables a value to be placed on goods that reflect peoples market and non-market behaviour.

E.g. By comparing prices of houses near airports with prices of similar houses elsewhere, can infer the value people are willing to pay for peace and quiet.
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Conclusions
Utilitarianism is a powerful and widely accepted method for evaluating alternatives and choosing the course of action with the greatest overall benefit. Utilitarianism fits easily with the concept of value in economics that underlie the market system and cost-benefit analysis. Utilitarianism fits with much of our ordinary moral reasoning.

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