The Role of Ethics in Economics and Management: Galbraith-Drucker Approaches

By Galindo, Miguel-Angel; Guzman Cuevas, Joaquin | International Advances in Economic Research, May 2008 | Go to article overview

The Role of Ethics in Economics and Management: Galbraith-Drucker Approaches


Galindo, Miguel-Angel, Guzman Cuevas, Joaquin, International Advances in Economic Research


Abstract Ethics has been linked to virtue, considering it within an individual sphere. It has also been related to good social behaviour or even religious factors, and so on. In general, economic thinkers have not questioned some of the basic principles which help to shape the fundamental ethical criteria in economic behaviour. The pursuit of individual interest has been identified as pecuniary profit maximization and, in this sense, Peter Drucker states that this has been the fundamental motivation of any economic agent, even before capitalism was born and Galbraith pointed out that the lack of consideration of other motivations, apart from earning money, has been one of the biggest mistakes in economics. The main goal of this paper is to analyse the Drucker and Galbraith approaches on ethics.

Keywords Ethics. Galbraith. Drucker. Economic behaviour

JEL Classification Z 10

Introduction

During the last decades, economists have been interested in considering their approaches to the role of ethics. It is not a new perspective. Classical and Neoclassical economists, and before them, i.e. Adam Smith (1759) and Marshall (1890), for instance, have considered ethical aspects in their works. These authors considered that there is a relationship between ethics and economics, because the former plays an important role in most social activities, which economics is included. And this idea was accepted, mainly, till the called "marginalist revolution," considered as the main role of economics to analyse the relationship between means and objectives. Since then, the role of the economist is to consider the objective to fulfil and to maximize the instrument that achieves such objective. Therefore, it is an optimization problem and ethics has no room in it.

However, several authors, Schmoller (1881) for instance, questioned this view on economic analysis, and considered that it is relevant to study the relationship between ethics, economics and politics. From this perspective, it is necessary not only to consider the means, but also the goals, in which ethics plays an important role, trying to answer the question as to what kind of society we would like to achieve.

From this new perspective, several reasons have been indicated for the necessity to consider ethical aspects in the economic analysis (Hausman and McPherson 1993, p. 673):

1. The morality of economic agent's influences on their behavior and therefore on the economic results.

2. The economic welfare levels rest upon relevant ethics assumptions. Therefore, if we are interested in developing welfare economics theory, we need to consider ethics subjects.

3. The conclusions achieved by economists must be related to moral obligations.

However, the main problem in this field is to determine the concept of "ethics" has had different meanings in accordance with different thinkers. Sometimes, ethics has been linked to virtue, which is, doing well within an individual sphere. Other thinkers have related it to good social behaviour. On other occasions, it has been related to religious factors, and so on. Nevertheless, at least in the economic field and since the time of Socrates, thinkers in general have not questioned some of the basic principles which help to shape the fundamental ethical criteria in economic behaviour. These principles are the following:

1. Ethics deals with "values."

2. These values must be widely established in society.

3. Economic behaviour must pursue individual interest.

4. At the same time, economic behaviour must pursue common interest.

Since the times of Adam Smith, economic thought has willingly admitted these principles, but a lack of consensus began to arise when it was necessary to develop the meaning of the last two and, above all, when it was necessary to make them compatible.

But several modern authors have also been interested in analyzing these principles, achieving or proposing different ideas. …

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