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Economic Responsibility Revisited

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Economic Responsibility

Part of the book series: Ethical Economy ((SEEP,volume 53))

Abstract

This article addresses economic responsibility at the intersection of economics, business ethics, and corporate social responsibility (CSR) studies. We argue that Caroll’s influential CSR models draw on a concept of economic responsibility that is only loosely or indirectly connected to economics. These CSR models are compared with Milton Friedman’s economic approach to social responsibility that does not add much to the business ethics or CSR agendas. We show that John Maurice Clark’s approach to economic responsibility is different from that. His article The Changing Basis of Economic Responsibility (J Polit Econ 24(3):209–229, 1916) is indicative of the early discussion of the social responsibilities of individuals and businesses in the U.S. Clark’s approach to economic responsibility is based on two pillars: the economics of responsibility and the responsibility of economic actors. Drawing on institutional-economic knowledge about what he called significant and responsible causes, Clark aimed at the development of an economics able to address economic change and to inform the working business ethics of economic actors. Clark delineated a vision about a future economy based on responsible economic action and moderate, well-informed public control. Clark’s economics of responsibility can adjust the CSR models in two respects: First, it is an economic approach to economic responsibility more suitable than Friedman’s approach. Second, it criticizes charity as a form of Band-Aid measures and the idea that social responsibility can be conducted voluntarily or as an add-on to economic responsibility. The article concludes that the ideas underlying Clark’s approach are still of importance for understanding economic and social responsibility.

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Notes

  1. 1.

    Clark was president of the American Economic Association (1935–1936) and a founding member of the Econometric Society (Markham 1968). He received several honorary doctorates and in 1951 the Francis A. Walker Medal “awarded every five years ‘to the living American economist who in the judgement of the awarding body has during his career made the greatest contribution to economics’.” After the establishment of the Nobel Memorial Prize for economics, the awarding of the Francis A. Walker Medal stopped in 1977. https://www.aeaweb.org/honors_awards/ walker_medal.php (accessed 14 March 2016).

  2. 2.

    “We have begun to realize the many inappropriable values that are created and the many unpaid damages that are inflicted in the course of business exchanges” (Clark 1916, p. 218).

  3. 3.

    Wharton, founded in 1898, was the first one (Abend 2013). Interestingly, this is exactly the date the first German business school came in to being, the Handelshochschule Leipzig (http://www.hhl.de/de/hhl/im-ueberblick/ [accessed 10 January 2016]). See Göschel (2008).

  4. 4.

    Caroll (1979, p. 497) acknowledged that “(c)oncepts of corporate social responsibility have been evolving for decades.” However, “the modern era of social responsibility (…) may be marked by Howard R. Bowen’s 1953 publication of Social Responsibilities of the Businessman” (ibid.). Caroll and Shabana (2010, p. 85) point out “The idea that business enterprises have some responsibilities to society beyond that of making profits for the shareholders has been around for centuries. For all practical purposes, however, it is largely a post-World War II phenomenon and actually did not surge in importance until the 1960s and beyond. Therefore, it is largely a product of the past half century.”

  5. 5.

    Notice that Caroll and Shabana (2010, p. 86) relate the approach presented in Caroll (1979) to “the concept of corporate social performance (CSP) (that, author) has become an established umbrella term which embraces both the descriptive and normative aspects of the field (…).”

  6. 6.

    Caroll and Shabana (2010, p. 90) point out: “Caroll (1991) observes that the profit principle was originally set in terms of ‘acceptable profits’; however, the principle transformed to ‘profit maximization’.”

  7. 7.

    Caroll (1998, p. 2) ascribes this formulation to U.S. president Theodor Roosevelt.

  8. 8.

    Clark referred to the title of his article.

  9. 9.

    As Caroll (1999, p. 289) clarified with respect to the four dimensions, “that business should not fulfill these in sequential fashion but that each is to be fulfilled at all times.” This does not exclude that there is a difference in the relevance of each dimension. Visser (2006), in his CSR pyramid for developing countries, has changed the order of the layers.

  10. 10.

    According to Caroll and Shabana (2010, p. 90), the “‛responsibilities’ are the expectations placed on the corporation by corporate stakeholders and society as a whole.” That these views do not derive their origin from theory does not mean that they are not consistent with theory or communicated by the advocates of a theory.

  11. 11.

    There are different strands of methodological individualism (Heath 2015). Note that there are views in methodological individualism that do not exclude that firms can be held responsible.

  12. 12.

    Roth (1999, p. 1) lists assumptions of „received, neoclassical theory” ignoring uncertainty or imperfect information, which say, with respect to the individual consumer : “His preferences are both exogenously determined and stable, and defined on objects of choice whose qualitative and other properties are known with certainty.” In the meantime, these assumptions have been put into perspective, in part by information economics (e.g., Stigler 1961; Akerlof 1970), in part by works critical to “received” rational choice (Hargreaves Heap 2009).

  13. 13.

    In Adam Smith ’s work, this division is presented in his writings Inquiries into the Wealth of Nations (2003 [1776]) and The Theory of Moral Sentiments (2000 [1759]).

  14. 14.

    Introduction to Smith (2000 [1759]), author unknown. See Zaman (2012, n.p.)

  15. 15.

    Notice that the invisible-hand metaphor has not been proved worthlessly; in fact, the content of this metaphor adds to insights into the functioning of a particular type of macro systems. As a metaphor cannot be “true” or “false,” it can however be argued that this metaphor is less useful for the understanding of “economic responsibility .” For the solution of problems requiring the economic responsibility of an actor, this metaphor remains relevant insofar it is a starting point for the development of alternative perspectives.

  16. 16.

    The article “Adam Smith ’s Message in Today’s Language” was taken from the Daily Telegraph, London, 9 March 1976, and published in Hayek (1978 [1976]).

  17. 17.

    Hayek used the term “open society .”

  18. 18.

    Hayek quotes Francis Jeffrey, editor of the Edinburgh Review, a statement from 1803.

  19. 19.

    The conditional connects two sentences in the “if …, then …” form (Suppes 1957). If a conditional with a wrong antecedens is interpreted as true (sic), then the “if …, then …” sentence is named a “material conditional” (Quine 1969, p. 39).

  20. 20.

    In (i) and (ii), we abstract from information concerning time and space, for example: if there is profitable economic action in the 20th century in the United States, then there is responsible economic action in the 20th century in the United States. As Quine (1969, p. 38) points out, if the antecedent (the if-part) of the conditional is true, then we are committed to its consequent (the then-part). In other words, in case of (i) we want to say: it cannot happen that P and non-ER occurs, and if it happens, then we are no longer committed to the conditional.

  21. 21.

    According to Roth (1999, p. 2), the new social welfare theory is „a hybrid moral theory incorporating elements of goal- and rights-based moral theories.”

  22. 22.

    The moral philosopher Adam Smith was interested in more than in this in basic mechanism.

  23. 23.

    Clark (1916, p. 209) noticed that there was a change: “The ideas of obligation which embody the actual relation of man to man in the twentieth century, and answer the needs of the twentieth century, are radically different from the ideas which dominated the nineteenth.”

  24. 24.

    If the ethic of responsibility cooperates with empirical science, then normative content accrues from the latter as well.

  25. 25.

    For a detailed description, see Haase (2015a).

  26. 26.

    We exclude from our discussion a third category of value amending economic and social value : ecological value. Notice that Clark’s discussion of negative action consequences includes the creation of value that, if measurable and measured, leads to negative measures (or destruction of value) of what we call “ecological value” (Haase 2015b). Clark did not use contemporary vocabulary, for example, the expression “negative externalities” in the discussion of such issues, but formulations such as “inappropriable values that are created” or “the many unpaid damages that are inflicted in the course of business exchanges” (Clark 1916, p. 218).

  27. 27.

    Sharfman refers to a lecture given by Clark in 1947 and published in Clark (1948).

  28. 28.

    The Foundation for European Economic Development (FEED) awards this prize. http://www.feed-charity .org/essay-prize.htm (accessed 30 March 2016).

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  1. School of Business & Economics, Marketing Department, Freie Universität Berlin, Berlin, Germany

    Michaela Haase

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    Michaela Haase

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Haase, M. (2017). Economic Responsibility Revisited. In: Haase, M. (eds) Economic Responsibility. Ethical Economy, vol 53. Springer, Cham. https://doi.org/10.1007/978-3-319-52099-5_8

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