Does the “Market Failures View” Provide Real-World Guidance?
Andrew Gustafson. Email: AndrewGustafson creighton.
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The second is that considerations of allocative efficiency or aggregate social welfare justify this adversarial ethic and the use of markets, more generally. If Hsieh is correct, then first, the MFA fails to be motivated because ordinary morality will adequately constrain business practices, and secondly the MFA fails to be adequate for a market morality because the Paretian criterion is indeterminate when comparing allocations.
Understanding Heath Joseph Heath claims stakeholder theory fails because it as- sumes ordinary morality for business practices, which are by nature competitive. It is typically designed to prevent collective action problems—situations in which if! Ordinary morality works fine for non-adversarial relations such as manager—stockholder, em- ployer—employee, and corporation—investors, where both sides are trying to achieve solutions to collective-action problems and get to win-win solutions. When businesses work out win-win sce- narios with their competitors to maximize profits it is typically called collusion, which is wrong—not because of ordinary morality, but because such behavior is a market failure, undermines the perfect mar- ket, and thus violates Pareto conditions of exchange.
Morality, Competition, and the Firm : The Market Failures Approach to Business Ethics
Pareto condition constraints will prevent collusive cooperation, and provide basic rules for competitive market behavior—while ordinary morality cannot seem to handle competition. His example, dating, is competitive: one lucky guy wins and the other guy loses is harmed. Thus, ordinary morality, if it can provide guidance for dating, can likewise provide morality for the market The problems with this argument are twofold: 1.
However, Heath never argues that the markets are uniquely adversarial. As mentioned above, Heath actually uses sports as another example of competition not governed by ordinary morality.
Review of Heath's Morality, Competition, and the Firm - Bleeding Heart Libertarians
However, Heath 38 does not think all laws are aimed at market failures and so, maintaining efficiency of the market , but nevertheless managers 2 For arguments on the positive externalities of dating competition, see Buss Here Hsieh is denying the basis of the first fundamental theorem of welfare economics, as many public choice theorists have done. One response might be: the genius of the MFA is that it appears to draw ethical water from the rock of economics, particularly its assumptions of the ideality of Pareto-conditioned markets.
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For those still accepting these basic economic theorems, the MFA can provide normative rules for behavior. This is true of everything from antitrust to consumer protection law. Heath gives baseline guidelines for managers — found in the basic laws to prevent market failures — not a full- blown decision making ethics.
The rules of the market are derived according to the well-established notion that the well-being of society is best achieved when prices reflect social costs, and when no firm benefits by exploiting market failures. The CEO should do what he can to maximize profit, while following regulations, particularly those which exist to preserve healthy competitive markets, and the spirit of those laws: i.
Carr, Albert Z. Oxford: Oxford University Press. Teacher responsible Mr Thomas Ferretti. Topics discussed in the context of this course include: What are the moral responsibilities of managers? Is Milton Friedman correct that the main purpose of business is to increase profits? Do managers have instead moral responsibilities that are specific to their role as market actors, such as avoiding deception, fraud, or environmental degradation?
What, if anything, is wrong with exploitation? If sweatshop workers voluntarily choose to work under exploitative conditions because they want a job, are such working conditions acceptable then? Should firms have an obligation to protect the privacy of their workers or customers? Why and how should firms tackle gender discrimination in the workplace?
To what extent are the large pay packages that CEOs receive justified? What makes wages fair or unfair? Required readings amount to about two papers per week.
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