The Production of Business Ethics

By Hulsmann, Guido | Journal of Markets & Morality, Fall 2008 | Go to article overview

The Production of Business Ethics


Hulsmann, Guido, Journal of Markets & Morality


Business ethics deals with practical problems of moral decision-making within firms. It has been relatively unconcerned about the systematic analysis of the implementation or application of business ethics. (1) Such analysis would have to start at a rather fundamental level, asking questions such as: Why do people choose to adopt any ethical orientation in their business? Why and to which extent do they invest any scarce resources to promote such orientation? In a next step, one would have to deal with the adoption of business ethics under the division of labor, asking questions such as: What role does it play whether people agree or disagree on such issues? How can disagreements on ethics be dealt with in firms? What are the possibilities and limits of coercing people to adopt certain ethical orientations?

As these questions show, the systematic analysis of why and how business ethics is in fact put into practice raises problems that transcend the realm of business. We believe that, ultimately, such questions can only be settled on the basis of a general theory of the production of ethics, which at present does not exist. However, it might be useful to approach the elaboration of such a theory by focusing, in a first step, on the production of ethics in a commercial context: the production of business ethics. This is what we purport to do in the present article, within a comparative theoretical framework.

A number of recent works have dealt with such implementation problems by focusing on the scope of political imposition of ethical norms on business. See for example Paine (2000); Waldkirch (2001); Cuesta Gonzales and Valor Martinez (2004); Cavanagh (2000, 2004); Izzo (2004); Heath and Norman (2004); and Buchholz and Rosenthal (2004). We will develop these different strands of argument by strictly focusing on positive (rather than normative) analysis and by arguing step by step from basic principles.

We will first study the nature and conditions of the production of business ethics on a hypothetical free market, in which ethical codes of conduct are chosen on a completely voluntary basis. Then we will examine the consequences of the imposition of such codes through legislation or other authoritarian acts.

Business Ethics on a Free Market

Choosing One's Ethics

A free market is commonly defined as social cooperation based on the respect of private property rights (see Hazlitt 1994, 303; Lecaillon 2001). In a completely free market, each individual would therefore be free to use his body and his material belongings--but only his body and only his material belongings--as he sees fit. In particular, he would be free to adopt a great variety of ethics--defined as any set of precepts or "ought" propositions--as an orientation for his conduct. He would be free also to make the respect of his ethics by other human beings a precondition for cooperating with these persons. This concerns especially cooperation in a business setting.

At first glance, a free market seems to be a place of anything goes in ethical terms. If ethics is a matter of choice; if people are completely free, within the boundaries of their property to choose their own business ethic, then there seems to be a natural tendency within such a free market for ethical standards to lose (or never to have in the first place) any larger social validity and to evaporate into the thin air of subjective preferences and desires--into "dust and powder of individuality" (Burke 1999, 96). In particular, firms and other business organizations might then tend to be ethical eunuchs, as seems to be implied in a venerable tradition of economic thought (Mandeville 1989; Wicksteed 1910; Friedman 1970).

However, on a free market, business ethics would not in fact tend to disintegrate. In what follows, we will highlight two mechanisms by virtue of which businessmen and firms come to adopt moral principles as a foundation of their activities. …

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