Abstract
Value-neutral (Robbinsian) economic science cannot directly address substantive normative issues. Economics can, however, provide analytical and empirical methods that make implications and consequences of normative premises (more) transparent and thereby indirectly contribute to normative opinion formation. To this effect, we translate substantive normative premises of stakeholder value approaches into operational axioms that characterize a class of collective decision mechanisms. If such implications seem less attractive to stakeholder theorists than the high-minded values from which they started in criticism of shareholder value approaches, they should come up with alternative collective decision mechanisms or a modified set of values.
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Notes
- 1.
In a normative welfare economic perspective, they would, to secure Pareto efficiency, also be normatively obliged to follow market signals. This fairly common assumption among economists—apparently including Friedman himself—is, however, not in line with a privilege of ownership that conceptualizes the owner as ‘sovereign’ in disposing of private property within the limits of law: the competitive market may provide extrinsic motives to choose in ways conducive to the attainment of efficiency—as defined in terms of the game form—but the intrinsic motive to act accordingly need not prevail and neither be seen as a morally binding precept to further the common weal.
- 2.
We do not claim to present an interpretation true to what Kant could have meant. We speak of Kantian ideals of equal interpersonal respect in opposition to utilitarian (aggregationist) ideals of the common weal. This is the spirit in which Rawls and also Buchanan are often seen as being part of the Kantian camp of moral philosophy and, say, Harsanyi of the utilitarian.
- 3.
This in turn demands acknowledging a. that prescriptive statements cannot be derived from sets of exclusively descriptive statements and b. that prescriptive statements cannot corroborate or falsify descriptive ones.
- 4.
- 5.
We use the concept of the game-form as familiar from social choice theoretical debates basically for the objective rules of the game. The Game as an object of common knowledge arises once subjective aspects—subjective preferences and beliefs are factored in. The latter are like the game-form also beyond choices within plays of the Game and in this sense part of the ‘rules of the Game’ along with its game-form.
- 6.
MacIntyre (1984) who provides this apt characterization of a narrow conception of reason is an ardent critic of it.
- 7.
Obviously, even in case of several Pareto improvements, not all need be maximally advantageous to each separate individual so that even then inter-individual conflict concerning which of several improvements should be realized prevails.
- 8.
In Buchanan’s scheme of things, the diagnosis that an alternative is a potential Pareto improvement is a hypothetical that must be corroborated (‘ratified’) by unanimous agreement to bringing it about. Unanimous agreement of the actors themselves rather than the external diagnosis of Pareto inferiority is the legitimation.
- 9.
Substantive restrictions to Pareto improvements on the diagnostic level and to unanimity requirements on the level of mechanisms may as a matter of fact be desired by particular persons. Yet, according to value-neutrality as a constitutive methodological norm of Robbinsian economics, the theorist has a reason to (re-)search exclusively such suggestions if those requiring her advice as a matter of fact demand to receive exclusively advice concerning Pareto superior moves.
- 10.
Which party will prevail is ultimately a matter of the ability to get ones way rather than a matter of argument. Of course, the fact that economic counsel concerning instruments may or may not be private information to the counseled party is relevant here, too. To avoid this, economists routinely assume that information is common knowledge—or at least subject to a process of dissemination that will approach common knowledge.
- 11.
As in the medical case, in case of management, partisanship rather than impartiality is the basis of the trust relationship between counselor and client.
- 12.
So-called consumer sovereignty is just one example of this sovereignty in matters that are by constitutional politics put beyond in period politics.
- 13.
Böhm (1966), an influential German constitutional lawyer, uses this expression to characterize markets as a subsystem of the economic order of a free western society. Like other members of the so-called ordo liberal Freiburg School, he strongly sympathized with the values of the Mont Pelerin society among whose ‘noble’ members were besides its founder F. A. v. Hayek, scholars like G. Becker, J. M. Buchanan, M. Friedman, V. Smith.
- 14.
By assumption, the relevant specification of law is assumed to comply with ‘the three fundamental rules of justice’ which rule such a positive law obligation out, likewise, by assumption the value-neutral practice of science leaves no room for justifying moral responsibilities as conclusions of science.
- 15.
A more detailed presentation of this argument can be found in Kliemt (2022).
- 16.
Article 2 of Bentham (1843).
- 17.
Even if we would assume that there is objective knowledge of what is ethically right and/or wrong this would as such still not explain the existence of rights as parts of legal and/or moral institutions. As it stands, Freeman’s list of stakeholders is no more than a personal wish list.
- 18.
- 19.
That participation in interactions in regular markets can be operationalized in implementable ways is, to put it mildly, not the least advantage of this social ‘technology’. But it is ruled out in the group participation framework endorsed by Freeman.
- 20.
- 21.
Only in case of commonly known \(v_1 (m)+\cdots {}+v_n (m)=S(m)\) underbidding incentives would not exist.
- 22.
The so-called “hold out problem”, that this gives rise to, probably motivates many scholars to reject the unanimity requirement. It should not be neglected, though, that some stakeholders i with \(v_i (m)<0\) for some \(m\in {}M\) may get compensated when moderately underbidding in terms of \(b_i (m)<v_i (m)\). In that case, m may still be acceptable and possibly implemented by management. In any event, the interest of guaranteeing that \(m\in {}M_a\) applies will recommend to exercise some moderation in strategic underbidding.
- 23.
This neglects bidding by which one bids for m also in order to prevent the implementation of another plan \(\tilde{m}\ne {}m\). In such cases, under-, respectively, overbidding incentives can depend on the expected bids after plan \(\tilde{m}\) for which property (O) may not be true.
- 24.
It can be shown that some such mechanisms can be fully characterized by requiring that they be “envy-free” and meeting requirement (E) with respect to overt bids; see Güth (2011).
- 25.
Using, for instance, the revelation principle would require the highly restrictive common knowledge assumption of game theoretic equilibrium analysis.
- 26.
This point has been rightly emphasized by adherents of stakeholder conceptions from the start. It can be supported by many findings of psychology and experimental economics. Starting from Hume’s well-known remark “that, in contriving any system of government, and fixing the several checks and controls of the constitution, every man ought to be supposed a knave and to have no other end, in all his actions, than private interest”. (Hume 1777, Essay VI, 42). Bowles (2016) provides an excellent overview over relevant experimental results concerning the validity of the behavioral assumptions underlying mechanism design in relation to ‘moral motives’.
- 27.
In an explorative experimental study (Alberti et al., 2022) that implemented “stakeholder participation as egalitarian bidding”, bounded bid shading and even some systematic overbidding could in fact be observed. It seems that some stakeholders did not want to block a plan that might be ‘good for the firm’ even though affecting themselves negatively. Obviously more research concerning effects of fairness perceptions and intrinsic motivation based on procedurally fair bidding is necessary before stronger evidence-based claims can be made.
- 28.
In the spirit of Alchian (1950).
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Alberti, F., Güth, W., Kliemt, H., Tsutsui, K. (2023). Egalitarian Collective Decisions as ‘Good’ Corporate Governance?. In: Kurz, S., Maaser, N., Mayer, A. (eds) Advances in Collective Decision Making. Studies in Choice and Welfare. Springer, Cham. https://doi.org/10.1007/978-3-031-21696-1_11
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