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Ethics in The Marketplace
Ethics in The Marketplace
MARKETPLACE
Competition is part of the free enterprise
system. Competition tends to produce
efficiency in the market and benefits the
general consumer by resulting in a
variety of goods at the best prices.
We shall examine just a few of the areas
where the temptations to act immorally
are significant, and where some
practices are morally questionable.
In a perfectly free competitive market no buyer or seller
has the power to significantly affect the price of a good.
Such markets are characterized by seven features:
There are numerous buyers and sellers
All buyers and sellers can freely and immediately enter or
leave.
All have full and perfect knowledge of what every other
buyer and seller is doing.
The good are similar such that no one cares from whom
each buys or sells
The costs and benefits of producing or using goods are
borne entirely by the buyer or seller.
Everyone tries to get as much as possible for as little as
possible.
No external force regulates the price, quantity, or quality
of the goods.
In such markets, prices rise when supply
falls, inducing greater production. Thus,
prices and quantities move towards the
equilibrium point, where the amount
produced exactly equals the amount buyers
want to purchase. Thus, perfectly free
markets satisfy three of the moral criteria
justice, utility, and rights.
In the capitalist sense of the word, justice is when
the benefits and burdens of society are distributed
such that a person receives the value of the
contribution he or she makes to an enterprise.
Perfectly competitive free markets embody this
sense of justice, since the equilibrium point is the
only point at which both the buyer and seller
receive the just price for a product. Such markets
also maximize the utility of buyers and sellers by
leading them to use and distribute goods with
maximum efficiency.
Efficiency comes about in perfectly competitive free
markets in three main ways:
They motivate firms to invest resources in industries with a
high consumer demand and move away from industries
where demand is low.
They encourage firms to minimize the resources they
consume to produce a commodity and to use the most
efficient technologies.
They distribute commodities among buyers such that
buyers receive the most satisfying commodities they can
purchase, given what is available to them and the amount
they have to spend.
Perfectly competitive free markets also establish
capitalist justice and maximize utility in way that
respects buyers and sellers negative rights: both
are free to enter or leave the market as they
choose, and all of their exchanges are voluntary.
No single seller or buyer can dominate the market
and force others to accept his terms. Thus,
freedom of opportunity, consent, and freedom
from coercion are all preserved under this system.
Perfectly competitive free markets also establish
capitalist justice and maximize utility in way that
respects buyers and sellers negative rights: both
are free to enter or leave the market as they
choose, and all of their exchanges are voluntary.
No single seller or buyer can dominate the market
and force others to accept his terms. Thus,
freedom of opportunity, consent, and freedom
from coercion are all preserved under this system.
Monopoly competition
In a monopoly, two of the seven conditions
are absent: there is only one seller, and
other sellers cannot enter the market.
Monopolistic markets and their high prices and
profits violate capitalist justice because the seller
charges more than the goods are worth. Thus, the
prices the buyer must pay are unjust. In addition,
the monopoly market results in a decline in the
efficiency of the system. Shortages of things that
consumers want will result, and with these
shortages come higher than normal prices. Since
no other seller can enter the market, the shortage
will continue-along with the abnormally high
profits.
Oligopolistic Competition
Most industries are not entirely