The Cost of Being Ethical

By Dougherty, Michael John | Global Virtue Ethics Review, July 2000 | Go to article overview

The Cost of Being Ethical

Dougherty, Michael John, Global Virtue Ethics Review


Governments are faced with the daunting prospect of being held to a higher ethical standard than private sector entities. Typically, this has been used to explain the existence of large and seemingly inefficient bureaucracies in the public sector. However, such entities can also exist in business enterprises. Thus, the added costs on government because of the presence of regulations to promote (and ensure) ethical conduct needs to be quantified. This article begins that discussion by examining the estimated costs on a variety of transactions. These estimates are based upon the experiences of local governments and state agencies in West Virginia. The findings show the marginal cost to ensure ethics requirements are met can range from almost nothing to thousands of dollars, depending upon the activity. And since these costs can be additive and apply to each transaction, it can become an expense, though necessary, obligation on governments.


Americans traditionally hold governmental operations to higher ethical standards than activities in the private sector (Herring, 1936; Mosher et al., 1974). Rumors of peccadilloes brought disgrace and dishonor to politicians from colonial times to the present era. Conversely, business leaders generally do not have their position or advancement threatened by their lapses of character judgement as long as it does not have a negative impact on the return on investment for stockholders. In other words, maintaining ethical standards and appearances of propriety means more when working in the public sector than in the private sector in the United States. However, no one has calculated how much money this costs governments in their operation in terms of additional activities or reduced efficiency. This is particularly true with regard to financial matters. Activities such as procurement and purchasing are renown for their bureaucracies that agencies often justify by the need to "follow the rules and regulations" (Wilson, 1989). Commentators on government rarely explore what this really means to the average citizen - and how much this costs the average taxpayer.

There are two reasons why this topic needs to be examined. First, governments serve as stewards for the dollars they collect. The public expects that they act responsibly when using public funds. In the case of procurement, this means getting valuable goods and services for the community. It also means getting value for every dollar spent on these goods and services. The items procured must meet the needs of the community while at the same time not be unreasonably priced. Second, governments often play the role of the great "equalizer." The public generally perceives that government should promote the standards of equality and fair play as well as work to create a "level playing field" for all. With regard to purchasing, this means setting up and enforcing rules, including those that define acceptable practices and those that ensure fair competition.

This article examines the cost of being ethical with regard to the procurement and purchasing function in the public sector. It discusses the concept of ethics, highlights the differences between the public sector and private sector with regard to ethical behavior, and ponders whether Byzantine bureaucracies have any connection to ethics as is so often rationalized within the public sector. It studies the "costs" of ethical operations in public sector procurement and contrasts these to private sector purchasing.

Ethical Behavior Defined

Development of Public Ethics

In Western civilization, the notion of ethics in the public arena dates back almost two-and-one-half millennia to the Occidental tradition. The ancient Athenians developed and refined the concept, though other civilization in the Far East and Middle East also addressed this subject even prior to the Greeks. Plato discussed the notion of justice in ideal terms in The Republic and in more practical terms in The Laws. …

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