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CORPORATIONS, PROFIT MAXIMIZATION AND THE PERSONAL SPHERE

  • Waheed Hussain (a1)
Abstract

The efficiency argument for profit maximization says that corporations and their managers should maximize profits because this is the course of action that will lead to an ‘economically efficient’ or ‘welfare maximizing’ outcome (see e.g. Jensen 2001, 2002). In this paper, I argue that the fundamental problem with this argument is not that markets in the real world are less than perfect, but rather that the argument does not properly acknowledge the personal sphere. Morality allows each of us a sphere in which we are free to pursue our personal interests, even if these are not optimal from the social point of view. But the efficiency argument does not come to terms with this feature of social life.

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This list contains references from the content that can be linked to their source. For a full set of references and notes please see the PDF or HTML where available.

S. Bainbridge 2008. The New Corporate Governance in Theory and Practice. Oxford: Oxford University Press.

J.L. Coleman 1984. Economics and the law: a critical review of the foundations of the economic approach to law. Ethics 94: 649679.

M.C. Jensen 2001. Value maximization, stakeholder theory, and the corporate objective function. Journal of Applied Corporate Finance 14: 821.

J.J.C. Smart and B. Williams 1973. Utilitarianism: For and Against. Cambridge: Cambridge University Press.

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Economics & Philosophy
  • ISSN: 0266-2671
  • EISSN: 1474-0028
  • URL: /core/journals/economics-and-philosophy
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