Abstract
This paper gives prescriptions for introducing ethical concerns into the economic theory of the firm. Topics include social responsibility, corporate governance, profit maximization, competition barriers, collusion, the market system, and welfare economics. The need for such prescriptions is based on a content analysis of 21 managerial economics texts for their coverage of ethics. My analysis finds that substantive discussions of ethics are conspicuous by their absence. As ethical breaches can involve significant monetary damages to a firm – particularly through adverse market reactions – moral-reasoning abilities can complement analytical skills. Consequently, my analysis demonstrates how ethics figure into the opportunity costs of managerial decision making, which is central to the economic definition of profit.
Similar content being viewed by others
References
, H.: 1994, The Myth of the Heartless Businessman, The Wall Street Journal,7 Feb, A14.
Arce M., D. G. and L. B. Gunn: in press, Working Well with Others: The Evolution of Teamwork and Ethics, Public Choice.
K. J. Arrow (1968) ArticleTitleThe Economics of Moral Hazard: Further Comment American Economic Review 58 IssueID3 537–538
K. J. Arrow (1973) ArticleTitleSocial Responsibility and Economic Efficiency Public Policy 21 303–317
Bartley, R. L.: 2003, Economic Profit vs. Accounting Profit, The Wall Street Journal, 2 June, A17.
N. E. Bowie (1988) ArticleTitleFair Markets Journal of Business Ethics 7 89–98
R. B. Braithwaite (1963) Theory of Games As a Tool for the Moral Philosopher Cambridge University Press Cambridge
J. M. Buchanan (1992) ArticleTitleEconomic Science in the Future Eastern Economic Journal 18 IssueID4 401–403
H. W. Chappell SuffixJr. T. M. Havrilesky R. R. McGregor (1997) ArticleTitleMonetary Policy Preferences of Individual FOMC Members: A Content Analysis of the Memoranda of Discussion Review of Economics and Statistics 79 IssueID3 454–460
J. Creedy (1994) ArticleTitleExchange Equilibria: Bargaining, Utilitarian, and Competitive Solutions Australian Economic Papers 33 IssueID8 34–52
A. Ehrbar (1998) Economic Value Added: The Real Key to Creating, Wealth Wiley New York
J. Evensky (1993) ArticleTitleRetrospectives: Ethics and the Invisible Hand Journal of Economic Perspectives 7 IssueID2 197–205
J. Evensky (2001) ArticleTitleAdam Smith’s Lost Legacy Southern Economic Journal 67 IssueID3 497–517
R. E. Freeman D. R. Gilbert (1988) Disconnecting Ethics from Strategy: The Case of Corporate Social Responsibility. Chapter 5 in Corporate Strategy and the Search for Ethics Prentice Hall Englewood Cliffs, NJ 87–105
Friedman, M.: 1970, The Social Responsibility of Business Is to Increase Its Profits, New York Times, Sunday Magazine, September 13, pp. 32, 33, 122, 124, 126.
N. Frohlich J. A. Oppeheimer (1992) Choosing Justice. An Experimental Approach to Ethical Theory University of California Press Berkeley
J. J. Graafland (2002) ArticleTitleProfits and Principles: Four Perspectives Journal of Business Ethics 35 293–305
R. E. Hattwick (1986) ArticleTitleThe Behavioral Economics of Business Ethics Journal of Behavioral Economics 15 IssueID1/2 87–101
D. M. Hausman M. S. McPherson (1996) Economic Analysis and Moral Philosophy Cambridge University Press Cambridge
T. Havrilesky (1993) ArticleTitleLife Philosophy: Ethics and Economists American Economist 32 IssueID5 1–5
D. E. Hecker (1998) ArticleTitleEarnings of College Graduates: Women Compared with Men Monthly Labor Review 121 62–71
J. Hirshleifer (1987) Disaster Behavior: Altruism or Alliance? Chapter4 J. Hirshleifer (Eds) Economic Behavior in Adversity University of Chicago Press Chicago 134–141
Hosmer, L. T.: 2004, Enron Corporation and the Need to Extend the Scope of Business Ethics, working paper, School of Business Administration, University of Michigan.
L. T. Hosmer F. Cheng (2001) ArticleTitleEthics and Economics: Growing Opportunities for Joint Research Business Ethics Quarterly 11 IssueID4 599–622
Jenkins, H. W. Jr.: 2003, Business World, The Wall Street Journal, 21 May, A13.
K. Koford M. Penno (1992) Accounting Principal-Agent Theory, and Self-Interested Behavior N. E. Bowie R. E. Freeman (Eds) Ethics and Agency Theory: An Introduction Oxford University Press N.Y. 127–142
Knight, F.: 1921, Risk, Uncertainty and Profit Houghton, Mifflin, Boston.
Knight, F. H.: 1935, The Ethics of Competition and Other Essays (Harper, New York).
K. Krippendorff (2004) Content Analysis. An Introduction to Its Methodology EditionNumber2 Sage Thousand Oaks, CA
Langley, M.: 2003, Making the Grade: Want to Raise Your Firm’s Rating for Governance? Buy the Test, The Wall Street Journal, 6 June.
S. Maital (1994) Executive Economics The Free Press New York
D. N. McCloskey S. T. Ziliak (1996) ArticleTitleThe Standard Error of Regressions Journal of Economic Literature 34 IssueID1 97–114
R. E. Moor (1987) ArticleTitleEthics for Businesses⋖ And Their Economists Business Economics 22 IssueID3 11–14
Nash, J.: 1950, Noncooperative Games, Ph.D. Thesis, Princeton University.
T. H. Noe M. J. Rebello (1994) ArticleTitleThe Dynamics of Business Ethics and Economic Activity American Economic Review 84 IssueID3 531–547
E. Noreen (1988) ArticleTitleThe Economics of Agency: A New Perspective on Agency Theory Accounting, Organizations and Society 13 IssueID4 359–369
E. Northrup (2000) ArticleTitleNormative Foundations of Introductory Economics American Economist 44 IssueID1 53–61
G. L. Pamental (1988) ArticleTitleA Different Look at Texts Journal of Business Ethics 7 IssueID7 531–536
J. N. Prasad Y. Kathawala M. Monippallil R. Hattwick (1993) ArticleTitleBusiness and Academe: A Comparison of Perceptions and Business Ethics Journal of Socio-Economics 22 IssueID1 69–83
P. Primeaux J. Stieber (1995) Profit Maximization. The Ethical Mandate of Business Austin & Winfield San Francisco
P. Primeaux J. Stieber (1999) ArticleTitleWhen MR=MC: Ethical Efficiencies in Valuing and Pricing Journal of Business Ethics 18 201–211
J. Rawls (1971) A Theory of Justice Harvard University Press Cambridge, MA
T. Sandler (2001) Economic Concepts for the Social Sciences Cambridge University Press Cambridge
A. Sen (1987) Ethics and Economics Oxford New Delhi
M. Shaffer (1989) ArticleTitleAre Profit Maximizers the Best Survivors? A Darwinian Model of Economic Natural Selection Journal of Economic Behavior and Organization 12 29–45
Shell Corporation: 1998, Profits and Principles – Does There Have To Be A Choice?.
Sidel, R.: 2004, Poison-Pill Defenses Lose Favor, The Wall Street Journal, March 2. p. C1.
G. J. Stigler (1981) Economics or Ethics S. M. McMurrin (Eds) The Tanner Lectures on Human Values, Vol. II University of Utah Press Salt Lake City 143–191
The Economist: 2002, Economics Focus: Never the Twain Shall Meet, 2 February, p. 74.
A. Tucker (1950) ArticleTitleA Two-Person Dilemma UMAP Journal, 1980 1 101–103
R. P. Weber (1990) Basic Content Analysis EditionNumber2 SAGE Publications Newburry Park, CA
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Arce M., D.G. Conspicuous By Its Absence: Ethics and Managerial Economics. J Bus Ethics 54, 261–277 (2004). https://doi.org/10.1007/s10551-004-1773-5
Issue Date:
DOI: https://doi.org/10.1007/s10551-004-1773-5