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Does Business Ethics Make Economic Sense?*

  • Amartya Sen

The importance of business ethics is not contrdicted in any way by Adam Smith’s pointer to the fact that our “regards to our own interests” provide adequate motivation for exchange. There are many important economic relationships other than exchange, such as the institution of production and arrangements of distribution. Here business ethics can play a major part. Even as far as exchange is concerned, business ethics can be crucially important in terms of organization and behavior, going well beyond basic motivation.

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1 Lamont University Professor, and Professor of Economics and Philosophy, at Harvard University.

2 Stephen, Leacock, Hellements of Hickonomics (New York: Dodd, Mead & Co., 1936), p. 75.

3 Adam, Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (1776; republished, London: Dent, 1910), vol. I, p. 13.

4 Adam, Smith, The Theory of Moral Sentiments (revised edition, 1790; reprinted, Oxford: Clarendon Press, 1976), p. 189.

5 On this and related matters, see my On Ethics and Economics (Oxford: Blackwell, 1987); Patricia, H. Werhane, Adam Smith and His Legacy for Modern Capitalism (New York: Oxford University Press, 1991); Emma, Rothschild, “Adam Smith and Conservative Economics,” Economic History Review, 45 (1992).

6 On this see Jean, Drèze and Amartya, Sen, Hunger and Public Action (Oxford: Clarendon Press, 1989).

7 Michio, Morishima, Why Has Japan ‘Succeeded’? Western Technology and Japanese Ethos (Cambridge: Cambridge University Press, 1982).

8 Ronald, Dore, “Goodwill and the Spirit of Market Capitalism,” British Journal of Sociology, 34 (1983), and Taking Japan Seriously: A Confucian Perspective on Leading Economic Issues (Stanford: Stanford University Press, 1987).

9 Eiko, Ikegami, “The Logic of Cultural Change: Honor, State-Making, and the Samurai,” mimeographed, Department of Sociology, Yale University, 1991.

10 Karl, Marx (with Engels, F.), The German Ideology (1845-46, English translation, New York: International Publishers, 1947); Richard, Henry Tawney, Religion and the Rise of Capitalism (London: Murray, 1926); Max, Weber, The Protestant Ethic and the Spirit of Capitalism (London: Allen & Unwin, 1930).

11 The classic treatment of public goods was provided by Paul, A. Samuelson, “The Pure Theory of Public Expenditure,” Review of Economics and Statistics, 35 (1954).

12 For a classic treatment of external effects, see Pigou, A. C., The Economics of Welfare (London: Macmillan, 1920). There are many different ways of defining “externalities,” with rather disparate bearings on policy issues; on this see the wide-ranging critical work of And reas Papandreou (Jr., I should add to avoid an ambiguity, though I don’t believe he uses that clarification), Ideas of Externality, to be published by Clarendon Press, Oxford, and Oxford University Press, New York.

13 A good general review of the literature can be found in Atkinson, A. B. and Stiglitz, J. E., Lectures on Public Economics (New York: McGraw-Hill, 1980). On the conceptual and practical importance of the incentive problem and other sources of potential conflict between efficiency and equity, see my Inequality Reexamined (Cambridge, MA: Harvard University Press, 1992), Chapter 9.

* A paper presented at the International Conference on the Ethics of Business in a Global Economy, held in Columbus, Ohio, in March 1992.

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Business Ethics Quarterly
  • ISSN: 1052-150X
  • EISSN: 2153-3326
  • URL: /core/journals/business-ethics-quarterly
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