A Market Failures Approach to Business Ethics

  • Joseph Heath
Part of the Studies in Economic Ethics and Philosophy book series (SEEP)


“Business ethics” is widely regarded as an oxymoron. The only way to be a good soldier in an unjust war is to disobey orders, or maybe even to desert. Many people believe, along similar lines, that the only way to maintain one’s ethical integrity in business is not to go into business. The reasons for this are not hard to find. Students are still routinely taught in their introductory economics classes that in a market economy, when engaged in market transactions, individuals act out of self-interest — whether it be by maximizing profits as producers, or by maximizing satisfaction as consumers. This sets up an almost indissoluble link in people’s minds between “profit-maximization” and “self-interest.” As a result, anyone who thinks that the goal of business is to maximize profits will also tend to think that business is all about self-interest. And since morality is widely regarded as a type of constraint on the pursuit of individual self-interest, it seems to follow quite naturally that business is fundamentally amoral, if not immoral.


Business Ethic Social Responsibility Moral Obligation Market Failure Profit Maximization 
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  1. 1.
    Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” New York Times Magazine, (Sept. 13, 1970 ).Google Scholar
  2. 2.
    Andrew Stark, “What’s the Matter With Business Ethics,” Harvard Business Review (May/June, 1993): 38–48.Google Scholar
  3. 3.
    Ibid,p. 40.Google Scholar
  4. 4.
    Ibid,p. 44.Google Scholar
  5. 5.
    M. Friedman: “The Social Responsibility of Business is to Increase its Profits” and Milton Friedman, Capitalism and Freedom Chicago (University of Chicago Press) 1962.Google Scholar
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    M. Friedman: Capitalism and Freedom,p. 133.Google Scholar
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    M. Friedman: Capitalism and Freedom,p. 133.Google Scholar
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    Richard Lipsey and Kelvin Lancaster: “The General Theory of the Second Best”, Review of Economic Studies, 24 (1956) pp. 11–32.CrossRefGoogle Scholar
  9. 9.
    M. Friedman: Capitalism and Freedom,p. 120.Google Scholar

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© Springer-Verlag Berlin Heidelberg 2004

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  • Joseph Heath

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