A Laissez Faire Approach to Business Ethics

  • Donald R. Koehn
Part of the Contemporary Issues in Biomedicine, Ethics, and Society book series (CIBES)


In this paper I examine an ethic that is seldom explicitly recognized as an ethic. It is familiar to many people in business and to faculty and students in the fields of Business and of Economics. Though seldom recognized or articulated as an ethic, the view to be examined is today most widely associated with the laissez faire philosophy of Milton Friedman. Twenty years ago, the view was probably most widely associated with the writings of Ayn Rand. Perhaps, as many people believe, the ethic is to be traced back to Adam Smith’s The Wealth of Nations, where, in a frequently quoted passage, he says, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”1 Those familiar with this passage or with the laissez faire advocacy of Friedman or of Rand will recognize an idea that provides the foundation of a business ethic: in a laissez faire system one individual’s pursuit of self-interest does not have to be tempered by concern for the interests of other individuals because the free markets of such a system integrate the diverse interests of different individuals. The butcher, for example, may be ever so selfish, but is forced by the market to meet the demands of customers in order to fulfill self-interests. This idea, indeed, this ideal is readily recognizable by many businesspeople and people with an academic background of business or economics. Few, however, would be able to identify a writing where the ideal is briefly articulated and vigorously defended as an ethic of business. Fortunately, there is such a writing.


Business Ethic Moral Responsibility Free Market Racial Discrimination Economic Affair 
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Notes and References

  1. 1.
    Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, R. H. Campbell, A. S. Skinner, and W. B. Todd, eds., in two volumes (Oxford: Oxford University Press, 1976), pp. 26–27. The first volume of the original edition was published in London in 1776.Google Scholar
  2. 2.
    Jack Hirshleifer, “Capitalist Ethics-Tough or Soft?” The Journal of Law and Economics 2 (1959), 114–119.CrossRefGoogle Scholar
  3. 3.
    James C. Worthy, “Religion and Its Role in the World of Business,” Journal of Business 31 (1958): 293–303. Hirschleifer very accurately summarizes the portion of this paper that is relevant to his own article.CrossRefGoogle Scholar
  4. 4.
    Hirshleifer, op. cit., p. 117.Google Scholar
  5. 5.
    Hirshleifer briefly indicates why both tough and soft socialism must be rejected.Google Scholar
  6. 6.
    Ibid., p. 118.Google Scholar
  7. 7.
    Ayn Rand, The Virtue of Selfishness: A New Concept of Egoism, (New York: The New American Library, 1964).Google Scholar
  8. 8.
    Ibid., p. 17.Google Scholar
  9. 9.
    Ibid., p. 28.Google Scholar
  10. 10.
    Ibid., p. 29.Google Scholar
  11. 11.
    Ibid., p. 22.Google Scholar
  12. 12.
    Ibid., p. 23.Google Scholar
  13. 13.
    Ibid., p. 27.Google Scholar
  14. 14.
    Milton and Rose D. Friedman, Free to Choose: A Personal Statement (New York: Harcourt, Brace, Jovanich, 1980). The fifteen lectures, with a question period following each, were given at various locations in 1977–1978. Edited versions of the lectures and question periods are available on videotape from Harcourt, Brace, Jovanovich, New York: 1980. The booklet, “The Economics of Freedom,” is published by the Standard Oil Company of Ohio, Cleveland: 1978. Capitalism and Freedom (Chicago: University of Chicago Press, 1962) is Milton Friedman’s predecessor work to Free to Choose, and was written with the assistance of his spouse, Rose. Because the positions of Milton are of interest in this paper, I shall refer to “Friedman’s” views, meaning those of Milton, rather than to the views of the Friedmans.Google Scholar
  15. 15.
    Friedman, Free to Choose, op. cit., pp. 28–33.Google Scholar
  16. 16.
    Friedman, Capitalism and Freedom, op. cit., pp. 110–113.Google Scholar
  17. 17.
    Ibid., p. 112–113.Google Scholar
  18. 18.
    Ibid., p. 113.Google Scholar
  19. 19.
    Ibid., p. 32; quoted by Friedman, Free to Choose, op. cit., p. ix.Google Scholar
  20. 20.
    Op.cit., p. 27.Google Scholar
  21. 21.
    Op.cit., p. 200.Google Scholar
  22. 22.
    Hirshleifer, op. cit., p. 118.Google Scholar
  23. 23.
    Friedman, Free to Choose, op. cit., p. 222.Google Scholar
  24. 24.
    Friedman, Capitalism and Freedom, op. cit., p. 195.Google Scholar
  25. 25.
    Ibid., p. 12.Google Scholar
  26. 26.
    A minimum that Friedman means by “individual freedom” (or “voluntary transaction”) is that an individual is free, or a transaction voluntary, only if the person is unrestrained by physical force-whether by its use or the threat of its use. Consequently, it seems that there is a clear minimal restriction that Friedman places upon both selfish and non-selfish behavior: an individual is not ethically permitted to restrain another by physical force. Friedman, however, does not unambiguously maintain this restriction. For he clearly grants that restraint by physical force is sometimes justified, but he does not provide any definite principles of its justification.Google Scholar
  27. 27.
    In rebuttal of my charge, a defender of Friedman could reply that Friedman’s ethic seems to be vague, ambiguous, or in some other way facile by arguing that Friedman should not be expected to have clear positions about human goods or morally right actions because Friedman maintains some kind of ethical relativism. If a person is sceptical about ethics, why should that person be held responsible for having a clear ethic? This rebuttal of my charge, however, will not do. I shall mention only one reason. That Friedman is some kind of ethical relativist can be supported by citing two sentences from page 12 of Capitalism and Freedom and pages 106 and 135 of Free to Choose. But Friedman does not clearly imply any ethical relativism in either book. There is only the suggestion, the flirtation with, not the statement of clear implication of any kind of relativism. Friedman’s ethical relativism cannot provide an adequate defense of the obscurity of his ethics because that too is obscure.Google Scholar
  28. 28.
    Friedman, Free to Choose, op. cit., pp. 11–12.Google Scholar

Copyright information

© The Humana Press Inc. 1983

Authors and Affiliations

  • Donald R. Koehn

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