Self Regulation and Chicken!


Can't claim credit for this cooking, my friend...
Can’t claim credit for this cooking, my friend Paul was responsible. (Photo credit: Wikipedia)

 

Self Regulation and Chicken!

 

Here Milton Friedman explains that business will self regulate without government regulation.

 

How do you feel about that? Ever had food poisoning? Fun?

 

I don’t get the impression that businesses aren’t willing to lose a few customers (and I mean permanent losses) if it means more profits.

 

Maybe I’m cynical or maybe I just read the news?

 

Or how about this?

 

How many people have to be killed or injured by supposedly self regulating businesses before you realize that Milton Friedman was a much better television celebrity than an economist?

 

James Pilant

 

Is our chicken safe to eat? | Business Watch | McClatchy DC

 

http://www.mcclatchydc.com/2013/10/17/205695/us-urged-to-do-more-to-protect.html

 

After 317 people in 20 states got sick from eating contaminated chicken, consumer groups today urged the U.S. Department of Agriculture to do a better job of inspecting poultry.

 

via Is our chicken safe to eat? | Business Watch | McClatchy DC.

 

From around the web.

 

From the web site, Eslkevin’s Blog.

 

http://eslkevin.wordpress.com/2013/10/09/government-washes-its-hands-of-meat-and-poultry-safety-inspections/

 

In 1998, USDA rolled out its pilot HACCP system. The acronym stood

 

for “Hazard Analysis and Critical Control Points” but federal meat

 

inspectors, industry watchers and food advocates quickly dubbed it “Have

 

a Cup of Coffee and Pray” because it transferred oversight from the

 

government to the plant, in shocking, industry-friendly de-regulation.

 

HACCP was supposed to replace meat inspectors’ old-fashioned “poke and

 

sniff” method of visually examining carcasses by instituting advanced

 

microbiology techniques. But it is also an “honors system” in which

 

federal inspectors simply ratify that companies arefollowing their own

 

self-created system. As in “Trust us.”

 

Last week,   a coalition of food and worker safety advocates and

 

allies gathered outside the White House to protest USDA’s imminent plan

 

to implement HACCP system-wide now that it has been used at pilot

 

locations. “Instead of trained USDA inspectors, companies will police

 

themselves,” says the site of the group that organized the protest, sumofus.org.

 

“Plants will be allowed to speed up production dramatically. Chickens

 

will spend more time soaking in contaminants (including pus and feces!),

 

and poultry plants are compensating by washing them in with chlorine.”

 

Niall Ferguson Gets Return Fire


English: The ten largest economies in the worl...
English: The ten largest economies in the world and the European Union in 2008, measured in GDP PPP (millions of USD), according to the International Monetary Fund. (Photo credit: Wikipedia)

 

 

 

I read the Huffington Post almost every day. Niall Ferguson has written three attacks on Paul Krugman which have appeared in that publication which has me wondering about what’s going on? I was under the impression that Ferguson’s hit piece on Obama has been so awful that his credibility had taken a substantial hit but apparently not a substantial enough hit for the Huffpost not to publish him. I find Ferguson’s beliefs appalling, his attacks on Krugman ridiculous and I am pleased that so many are firing back at Ferguson’s attacks. Here is one from the web site, Beat the Press.

James Pilant

The Ravings of Niall Ferguson, the Real World, and the Needless Suffering of Tens of Millions | Beat the Press

http://www.cepr.net/index.php/blogs/beat-the-press/the-ravings-of-niall-ferguson-the-real-world-and-the-needless-suffering-of-tens-of-millions

But it is hardly worth wasting time and killing electrons in a tit for tat with Ferguson. What matters is the underlying issues of economic policy. These affect the lives of billions of people. The absurdities pushed by Ferguson and like-minded people in positions of power, in direct defiance of massive evidence to the contrary, have ruined millions of lives and cost the world more than $10 trillion in lost output since the crisis began.

First, contrary to what Ferguson claims, the downturn is not primarily a “financial crisis.” The story of the downturn is a simple story of a collapsed housing bubble. The $8 trillion housing bubble was driving demand in the U.S. economy in the last decade until it collapsed in 2007. When the bubble burst we lost more than 4 percentage points of GDP worth of demand due to a plunge in residential construction. We lost roughly the same amount of demand due to a falloff in consumption associated with the disappearance of $8 trillion in housing wealth. (FWIW, none of this was a surprise to folks who follow the economy with their eyes open. I warned of this disaster beginning in 2002, see also here and here.)

The collapse of the bubble created a hole in annual demand equal to 8 percent of GDP%

via The Ravings of Niall Ferguson, the Real World, and the Needless Suffering of Tens of Millions | Beat the Press.

From around the web.

From the web site, This is Ashok.

http://ashokarao.com/2013/10/06/the-three-contradictions-of-niall-ferguson/

As I have documented in detail before,

Niall Ferguson’s grand theory is devoted to a time of big government,

but of a different kind. He yearns for the day when big governments

taxed the poor to finance colonial adventures and fought with each other

for glory and nothing else. Indeed, as he’s written before, he yearns

for the day when “Britannia bestrode the globe”.

We today owe our intellectual and humanitarian heritage to Franklin

Roosevelt. Not because he vindicated principles of easy money or public

finance. Not because he vindicated principles of modern liberalism. But –

for the first time in the history of our nation and all nations – he

demonstrated that government can exist for the great benefit of the many

at the minor cost of the few. For almost a century both political

parties have lived by this end, if disagreeing on the means.

There is an ideology that accommodates the worst of efficient

markets, supply side economics, and neoliberal economists like Milton

Friedman. It is called right wing hackery, with Niall Ferguson as its

high priest.

Milton Friedman’s Dumbest Idea


Milton Friedman’s Dumbest Idea (The article actually says “the world’s dumbest idea,” but it is longer than the recommended length for titles if you are doing “search engine optimization and I had to cut it. jp)

English: Portrait of Milton Friedman
English: Portrait of Milton Friedman (Photo credit: Wikipedia)

I wish I had written the article below. I love every word of it, and the most astonishing thing about this writing is where it appears, in Forbes. That takes by breath away. How did he get past the editor?

Well, enough of that –

The article is very much what I have been saying in previous articles on this web site and in public, that is, the idea that a corporation’s sole purpose is to make money for the shareholder is ridiculous. I’d start my analysis with “non-profits,” and get more legally  critical as I went through the various kinds of corporations and what they were used for.

This is a quote of mine from 2010 –

http://pilantsbusinessethics.com/2010/07/27/american-business-ethical-collapse/

Generally speaking, articles dealing with the crisis focus on derivatives, Sallie Mae, the business press, rating agencies, etc. They all share blame and a lot of it. I have always been convinced that the underlying problem was greed, self interest, the corrosive effects of Milton Friedman’s bizarre doctrine of economic utopia, and the replacement of critical scrutiny by frantic cheerleading in the financial press, and I have some more villains to name.

Bogle doesn’t dodge the ethical question. He wonders how we got here and how we can get out. He longs for the day when businessmen understood the value of trust and fair dealing. I’m not surprised to find that Mr. Bogle has no simple solution. It took four decades of worship of the financial means of production of little more than electronic impulses to triumph over the creation of actual goods. This isn’t going to be easy, and it it likely to fail subjecting this country to a chain of financial meltdowns each one of which will severely damage the lives of millions of Americans who will bear the chief cost not only of their way of life but paying for the meltdown themselves out of their “widow’s mite.”

This is another from 7/25/2010.

http://pilantsbusinessethics.com/2010/07/25/wall-street-looked-the-other-way/

This is capitalism run off the tracks. Greed out weighed simple good judgment. Obvious signs of trouble, not just obvious but certain evidence of approaching disaster, were ignored as money piled up.

The market was supposed to be self regulating. Read a little Milton Friedman. This economic freedom to innovate was supposed to lead to better lives for all Americans, perhaps the whole world. This utopia, this nirvana, has thus far failed to appear. But incomes in a handful of the well placed are measured in the billions.

And another from 12/20/2009.

http://pilantsbusinessethics.com/2009/12/20/are-businessmen-morally-older-than-ten/another,

Now, you could make a good argument that this kind of business thought (Milton Friedman, etc) actually falls into the second level where self interest and avoidance of punishment become primary concerns.  However, making moral decisions at the second level of Kohlberg’s six stages is just about as insulting as reasoning at the first.

My second point is when business is considered only as a money making endeavor, all the other levels of moral development don’t just become irrelevant, they become a block and a hazard to making maximum profit.

If you are short on time, please read the brief excerpt below, but if you have time click on the link and read the whole article. It merits it.

James Pilant

http://www.forbes.com/sites/stevedenning/2013/06/26/the-origin-of-the-worlds-dumbest-idea-milton-friedman/

No popular idea ever has a single origin. But the idea that the sole purpose of a firm is to make money for its shareholders got going in a major way with an article by Milton Friedman in the New York Times on September 13, 1970.

As the leader of the Chicago school of economics, and the winner of Nobel Prize in Economics in 1976, Friedman has been described by The Economist as “the most influential economist of the second half of the 20th century…possibly of all of it”. The impact of the NYT article contributed to George Will calling him “the most consequential public intellectual of the 20th century.”

Friedman’s article was ferocious. Any business executives who pursued a goal other than making money were, he said, “unwitting pup­pets of the intellectual forces that have been undermining the basis of a free society these past decades.” They were guilty of “analytical looseness and lack of rigor.” They had even turned themselves into “unelected government officials” who were illegally taxing employers and customers.

How did the Nobel-prize winner arrive at these conclusions? It’s curious that a paper which accuses others of “analytical looseness and lack of rigor” assumes its conclusion before it begins. “In a free-enterprise, private-property sys­tem,” the article states flatly at the outset as an obvious truth requiring no justification or proof, “a corporate executive is an employee of the owners of the business,” namely the shareholders.

Come again?

If anyone familiar with even the rudiments of the law were to be asked whether a corporate executive is an employee of the shareholders, the answer would be: clearly not. The executive is an employee of the corporation.

From around the web.

From the web site, Brad DeLong.

http://delong.typepad.com/sdj/2011/10/milton-friedmans-magical-thinking-dani-rodrik-project-syndicate.html

But Friedman also produced a less felicitous legacy. In his zeal to promote the power of markets, he drew too sharp a distinction between the market and the state. In effect, he presented government as the enemy of the market. He therefore blinded us to the evident reality that all successful economies are, in fact, mixed. Unfortunately, the world economy is still contending with that blindness in the aftermath of a financial crisis that resulted, in no small part, from letting financial markets run too free.

The Friedmanite perspective greatly underestimates the institutional prerequisites of markets. Let the government simply enforce property rights and contracts, and – presto! – markets can work their magic. In fact, the kind of markets that modern economies need are not self-creating, self-regulating, self-stabilizing, or self-legitimizing. Governments must invest in transport and communication networks; counteract asymmetric information, externalities, and unequal bargaining power; moderate financial panics and recessions; and respond to popular demands for safety nets and social insurance.

From the web site, Reflection to Transformation.

http://theachiever2011.wordpress.com/2011/04/25/shareholder-value-is-the-dumbest-idea-in-the-world/

The birth of the shareholder value movement is commonly traced to a speech Jack Welch gave at New York’s Pierre hotel in 1981, shortly after taking the helm at GE.  In that famous speech, entitled “Growing Fast in a Slow-Growth Economy,” Jack Welch outlined his beliefs in selling underperforming businesses and aggressively cutting costs in order to deliver consistent profit rises that would outstrip global economic growth.  He told analysts then, “GE will be the locomotive pulling the GNP, not the caboose following it…,” according to reports of the speech.

Jack Welch said in the interview given on 11-March-2009 that he never meant to suggest that setting, and meeting, profit expectations quarter after quarter in an effort to boost a company’s share price should be the main goal of corporate executives.

“It is a dumb idea,” he said. “The idea that shareholder value is a strategy is insane. It is the product of your combined efforts – from the management to the employees”.

What he was talking about is the commonly held belief that the purpose of business is to increase shareholder value. That belief is variously attributed to Milton Friedman, Adam Smith, and perhaps common sense.  BUT, it was the operating principle that resulted in two market busts and innumerous scandals in the past decade. The fact that Welch was one of the main proponents certainly adds a fair amount of gravitas to his comments.

Profitability, shareholder value, and measures like economic value added (EVA) completely miss a point that Welch articulated so well. Namely, increased “shareholder value” is a result, not a strategy.

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Why unethical conduct in business is so common at this time in our history? Why is business ethics almost irrelevant?


Why unethical conduct in business is so common at this time in our history? Why is business ethics almost irrelevant?

It is now about four years since the catastrophe on Wall Street wrought destruction on this country’s economy. In those three years, the lives of much of the population have become much more difficult while the lives of those who created the disaster seem to have changed but little.

How did we get here? How did doing financial speculation amounting to little more than gambling become respectable? How did the idea of a responsibility to the other citizens of a nation become amusing to the elites?

There are several factors. The first was the advent of the baby boomers to power and authority replacing the Depression and the World War Two Generations. Probably the best date for this transfer would be 1976 when Jimmy Carter became President. He was the first President to not have served in the Second World War since Truman. The significance of this was huge. The previous generation had solid memories of the failures of financial sector and the long hard times that resulted. The difference between study and experience are dramatic. It’s even worse when it’s collective experience. The new generation had stories, movies and television to remind them of the pain of those years, but it didn’t carry the power of the emotions involved, the collective helplessness of more than fifteen years when everything that generation knew was in peril.

The second factor I point to is the advent of the Chicago School of Economics and the doctrines of Milton Friedman. I point in particular to Friedman’s 1970 article in the New York Times Magazine, The Social Responsibility of Business is to Increase its Profits. This is my favorite quote.

But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a “fundamentally subversive doctrine” in a free society, and have said that in such a society, “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

I want you to understand that it appears to me that included in “the doctrine of social responsibility” is duty, honor, religion and patriotism, to name a few. (I like to tell my ethics class that the no religion agrees with this doctrine that doesn’t practice human sacrifice.) Here we have a rejection of those values that constitute Western Civilization. From Wikipedia:

The concept of western culture is generally linked to the classical definition of the Western world. In this definition, Western culture is the set of literary, scientific, political, artistic and philosophical principles which set it apart from other civilizations. Much of this set of traditions and knowledge is collected in the Western canon.

These things that make us human, these things that convey the values – the principles, that are the result of thousands of years of human experience are swept away in a simple doctrine that justifies any action within “the rules of the game.”

I want to point out one more thing: notice that the principles of “within the rules of the game” and “open and free competition without deception or fraud” are in many ways contradictory. If you can make or influence the rules why should you compete? Now get a load of this: Friedman tells businessmen that they are free of any restraint, every limitation of conduct, but they are supposed to hold to the duty of engaging in open and free competition without deception or fraud: Do whatever is necessary to make a profit but be good boys and compete.

The third element is the gradually increasing wave of deregulation which begins in a small way in 1971 when the Nixon Administration recommends the rail and trucking industries be deregulated. By the time, Jimmy Carter is elected the doctrine has gained enormous strength and much wider application. The basic implication that government regulation damages business success hampered any attempt at new regulation no matter what happened. This attitude is critical to what happens next.

The fourth element can be dated roughly as beginning 1981. Hostile takeovers and corporate raiding become regular parts of the business news. The basic significance of this is that it is a war. A war fought between manufacturing and finance, with manufacturing losing at every turn. The secondary effects were only a little less worse. You could make money at it. Not little money like people made from developing new products and making things, big money. T. Boone Pickens, one of the major corporate raiders of the period is worth three billion dollars and is rated currently as the 117th richest man in the world. Now let us add in a related development, the financing of these takeovers. Drexel Burnham Lambert paid Michael Milken 550 million dollars a year during its heyday. What did Michael Milken do to merit this: he created high yield bonds, junk bonds. The era of “financial innovation” begins here. Continuing to the present day, more and more bizarre mathematical creations will be used for investment, financing and speculation.

Now, let’s combine them. Those Americans familiar with the pain of the results pass on the reins of power to a new generation. The Chicago School of Economics will provide the philosophical basis for discarding societal responsibility. The government reacts with deregulation which makes it exceptionally difficult to re-regulate industries. The financial industry begins destroying manufacturing in its search for profits.

All the elements are now in place for what has happened and continues to happen. The American population without previous experience of the fruits of financial speculation have no common idea of what should be done. The ethic of the business world is converted from a complex set of factors motivated by religion, philosophy, the myriad other factors that tie us to one another as a people to one of profit as the only value. The government accepts this philosophy and applies it, making deregulation and not regulating pretty much the official doctrine of the government. The financial industry begins destroying healthy companies making hundreds of millions of dollars for what might kindly be described as little effort. The government does not intervene to stop this, which is a clear demarcation line in history that the power of that part of American that makes things is eclipsed by the power of the deal makers, the part of American society that moves money.

Out of this history we grew a generation of Americans who knew with certainty (and unfortunately with accuracy) that going into the financial industry, taking risks, and pushing the boundaries of the rules could make one a multi-millionaire in short order. The most capable of the students at the great universities many of them Ivy League schools went into finance. Those individuals were supposed to be a wide variety of things especially the keepers of the flame, the torch that is passed from one generation to another, the moral standards, the courage, the willingness to sacrifice for their country and their fellow man so that all can prosper. It is difficult to maintain a system of morals when the rewards are so extreme. My understanding is that ivy leaguers can start at a Wall Street firm for as much as $350,000 in salary. And after that if you are willing to do “what it takes,” the path to being a mere millionaire is quick and easy. These people were supposed to be crusading attorneys, publishers, politicians, administrators – all those things that make societies function. There is an ancient precept that nations succeed based on the wisdom of the learned, the courage of their soldiers and the efforts of the workers. Our best and brightest don’t go there. They go to make money in a moral vacuum.

We are going to pay for this for a long time. When the basic doctrine, the ethos of a country becomes devoted to the acquisition of wealth with not even a tiny lip service to virtue you get unethical conduct on a broad front across the business world. Everything that has happened since then, has grown out of these events that I described. The Savings and Loan Etc. (I was going to list them but you know as well as I do what they are and I find it too depressing to make such a list just at the moment) are all explainable out of these elements.

Now we have the demonstrations on Wall Street that are rapidly forming a counterpoint to the story,  I told above.

Is this the beginning of a brand new story or a small and insignificant chapter in the global rise of financialization?

I am hoping for a new story.

James Pilant

From around the web.

From the web site, 3M Health Information Systems.

http://3mhealthinformation.wordpress.com/2013/07/24/why-unethical-behavior-goes-unchecked/

I’m interested in why people don’t report to their companies if they observe unethical, illegal, or just wrong behavior. Most large companies provide training on their Code of Conduct, ethics, legal issues, and harassment. Is it that it takes effort and a bit of risk in order to report someone else’s wrongdoing? That appears to be case. In the same survey mentioned above, they found that 69 percent of respondents thought the company would not investigate the issue properly if it was reported and 23 percent feared a negative consequence, including retaliation. It appears that more training on the topic of reporting suspected wrongdoing is needed as well as efforts within companies to honor their commitments to address any report of suspected wrongdoing and keep the employee safe from harm.

Who is in a position to help companies promote more reporting of misconduct? Once again, I think the middle manager is the key to the solution. Middle managers are well positioned to see what happens with those who report to them as well as what happens with their own senior managers. Their perspective within the organization cannot be matched. Additionally, the middle manager often has sufficient information about the company and its policies to know when the issue is bad behavior or an honest mistake versus unethical or illegal actions. Encouraging employees to report directly to their manager (when the issue does not include their manager) may help to weed out the misunderstandings from the misconduct and do so at a level that feels safer to the employee.

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Some Opinions on Preference Utilitarianism!


 

John Stuart Mill
John Stuart Mill

Some Opinions on Preference Utilitarianism!

A Basic Justification for Preference Utilitarianism | Life, philosophy, and a whole lot else

Preference utilitarianism bases itself on the idea used in classical utilitarianism, that the principle of utility is the most important basis of moral decision-making. This principle is about maximising pleasure/happiness or preventing pain/suffering, as Bentham says. Preference utilitarianism retains this but simply modifies it to be subjective, that people’s preferences should be maximised, not pleasure over pain. This is a simple way to be personal, allowing everyone their own say rather than simply assuming pleasure is always desirable (since it is not, e.g. eating a bar of chocolate when morbidly obese, as a simple example), or that pain is not (common in religious life, or secularly the opposite of before – exercising). So this is a simple upgrade of utilitarianism.

It could be argued that people are irrational, they do not always have the right preferences or are not in a position to have one. But we can surely not assume that people are alwyas irrational. If we were to do so, then the ethical system could simply not be applied since people would use it illogically or misinterpret it. For classical utilitarianism, we would be saying that pleasure is desirable but some people (since they are irrational) would not desire it. It is similar in economics – we have to assume people act rationally, even if in practice it is unlikely to always be the case.

A Basic Justification for Preference Utilitarianism | Life, philosophy, and a whole lot else

This is the first statement of preference utilitarianism I found with a web search. I thought I would look around the web and see what other web sites had on the issues. This is an important concept in business ethics. People choose their greatest happiness by making decisions based on their preferences. It’s very free market. Milton Friedman would find a lot in this to like.

James Pilant

From around the web –

From the web site, Mike Vernon: Philosophy and Life Blog:

However, it was on the last issue that the conference demonstrated real philosophical interest too. Singer admitted that his brand of utilitarianism – preference utilitarianism – struggles to get to grips with the vastness of the problem of climate change. Further, there is an element that comes naturally to Christian ethics which his ethics might need in order to do so. It has to do with whether there are moral imperatives that can be held as objectively true.

Climate change is a challenge to utilitarianism on at least two accounts. First, the problem of reducing the carbon output of humanity is tied to the problem of rising human populations. The more people there are, the greater becomes the difficulty of tackling climate change. This fact sits uneasily for a preference utilitarian, who would be inclined to argue that the existence of more and more sentient beings enjoying their lives – realising their preferences – is a good thing. As Singer puts it in the new edition of his book, Practical Ethics: “I have found myself unable to maintain with any confidence that the position I took in the previous edition – based solely on preference utilitarianism – offers a satisfactory answer to these quandaries.”

Second, preference utilitarianism also runs into problems because climate change requires that we consider the preferences not only of existing human beings, but of those yet to come. And we can have no confidence about that, when it comes to generations far into the future. Perhaps they won’t much care about Earth because the consumptive delights of life on other planets will be even greater. Perhaps they won’t much care because a virtual life, with its brilliant fantasies, will seem far more preferable than a real one. What this adds up to is that preference utilitarianism can provide good arguments not to worry about climate change, as well as arguments to do so.

From the web site, AlevelRE.com: (This is a teaching site with a great deal of useful and well-written content on Utilitarianism. I strongly recommend it. You should go to the site and read more of the content.)

Preference Utilitarianism
This form of Utilitarianism is most commonly associated with Australian philosopher, Peter Singer.
His modern take on the greatest happiness principle focuses on the impact an action will have on
the preferences of those directly affected. In achieving the greatest happiness, Singer argues that
we should act in a way that satisfies people´s preferences—in other words, what people prefer or
would most like to happen.
Like Utilitarians before him, Singer emphasises that peoples’ preferences count equally—my
preference for something is no more important simply because it is my preference. This requires an
impartial perspective is taken when considering the correct moral action. In identifying the right
thing to do, we must consider all those affected by an action and aim to act in accordance with
the majority´s preferences.
This is different from the hedonism of Jeremy Benthem since Singer is considering a more
sophisticated view of what maximises happiness. Where for Benthem, actions are considered in
terms of pleasure and pain, Singer recognises that different people have different preferences and
it is best to act in the best interests of those concerned. Take the story of the Blacksmith & the
Baker—Bentham would argue that the execution of the innocent baker maximises the happiness of
the community, despite his protestations. However, Singer would not allow this as the action goes
directly against the preferences of the person most affected, ie the Baker´s preference for
continued existence.

From the web site, Philosopher in a Phonebox:

I am slightly puzzled by Preference Utilitarianism. This post is an attempt to tease out that puzzlement as much as anything else.

Preference Utilitarianism is a form ofConsequentialism, a moral system in which the rightness of an action is judged based on its consequences. The original form ofutilitarianism put forward by Bentham argued that whatever increased pleasure and minimised pain was right. Preference Utilitarianism instead says that whatever satifies preferences is right.

The Stanford Encyclopedia of Philosophygives a few problematic preferences in criticism of Preference Utilitarianism but it seems to me some miss the mark. A preference to torture children would be counterbalanced by the children’s preference to not be tortured which is likely to be stronger. A preference to drink acid in mistake for a cool beer is not really a preference to drink acid but a preference for beer directed in error at the acid (being told the drink is acid will not remove the desire for beer, merely change the person’s belief that the drink is beer). Preferring to write very small may seem trivial – but to some, so might ivory carving, or discovering the Higgs Bosom.

From the pdf file: http://lawrencetorcello.files.wordpress.com/2011/08/peter-singer-encyclopedia-of-global-justice-penultimate-draft3.doc

Peter Singer (b. 1946)

The work of Peter Singer spans the entirety of major applied ethics topics. It is no coincidence that the development of Singer’s career runs parallel to the development and growing prominence of the aforementioned discipline. Singer’s work both helped to define the range of concerns in applied ethics, as well as to elevate the standard of intellectual rigor in the field. Singer has made major and lasting contributions on issues of bioethics, environmental ethics, and global poverty. Part of Singer’s effectiveness as a philosopher, as well as his influence outside of the academy, rests on the fact that his most powerful arguments require only that one accept a seemingly innocuous set of premises, most of which his readers are likely to hold implicitly (e.g. suffering and death from lack of proper nutrition and medical care is bad; if one can prevent something bad from happening without compromising something of similar moral significance, then one ought to do so). Following from these established premises, Singer then leads his readers through their logical and practical implications, to a conclusion he hopes will impact their behavior. All of Singer’s principal insights are consistently grounded in utilitarian considerations.

 

 

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Doug Guthrie addresses Business Ethics


Doug Guthrie addresses Business Ethics

Business Ethics and Social Responsibility – YouTube

I listened to this video and enjoyed it, particularly the discussion of Adam Smith and Milton Friedman early in the lecture.

Dean Guthrie’s background in Chinese studies is particularly interesting to me, since I also have a great interest in the nation’s culture. I am less sanguine about that nation’s prospects than he is. China’s long term geographical and political ambitions are not compatible with continued economic cooperation with the United States.

James Pilant

The glacier like movement of business ethics
The glacier like movement of business ethics

From around the web –

From the web site, Capitalism and Friedman:

There’s no way to appreciate fully the contributions of Nobel Prize-winning economist Milton Friedman (1912-2006), who would have turned 99 years old this weekend, to the growth of libertarian ideas and a free society.

This is the man, after all, who introduced the concept of school vouchers, documented the role of government monopolies on money in creating inflation, provided the intellectual arguments that ended the military draft in America, co-founded the Mont Pelerin Society, and so much more. In popular books such as Capitalism and Freedom and Free to Choose, written with his wife and longtime collaborator Rose, he masterfully drew a through-line between economic freedom and political and cultural freedom.

From the web site, Lisa Richards, Rock and Roll Politics:

The federal government appears to be under the impression Wall Street CEO’s are better at managing the United States Treasury than trained economists.[26] [27] [28]  America has over two centuries of proof that bankers and legislators cannot be trusted with the people’s money,[29] yet, despite forewarnings from Adam Smith to Milton Friedman, Washington ignores the experts and continues helping itself to the Treasury. 

     America has gained and lost many times,[30] learning repeated lessons the central government continues committing: monetary stupidity.  In truth it is useless to wonder why Washington continues creating and wreaking economic havoc when it is obvious that human nature has proven those with power will continue doing harm[31] as long as mankind exists.  It is for this reason economics was invented, is practiced and taught: too often, lack of common sense has been in charge of money and the need for fiscally wise minds analyzing trade and industry is cost effective to society overall.  That being said, financiers tend not to listen to the money-wise discussed here: men who forewarned disaster if certain fiscal policies were not implemented, and devised solutions to resolve and repair monetary failure.  

And finally, from the web site, UNLADTAU:

To all fellow men and women out there who may have deep fondness for the liberal capitalist model of economic adaptation, I hope that you can make some adjustments in your cognitive banks. Capitalism is not a permanent facet of human life, but merely one among various epochs that will come to pass. Only impermanence is sacrosanct in the cosmos, so please refrain from singing hallelujah to a world system that is on its death knell as I articulated in a previous article.

And please refrain from swallowing hook-line-&-sinker the contentious propaganda of Francis Fukuyama about the ‘end of history’, that accordingly history had concluded with the galvanization of liberal capitalism, that history makes no more sense. Fukuyama’s theory is a slapstick narrative of hyper-valuation of the ‘mad economics’ of late capitalism and hypo-statization of reality that has no relation at all to the real in the world out there. Fukuyama had taken as ‘real’ what is actually ‘virtual’, and froze time much like unto a fairy tale of timelessness, of history-less Nietzschean moment that is fit more for infants than for adult humans. 

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Make as Much Money as Possible–Typical Business Rule?


029-1Do businesses have ethical obligations beyond what the law and shareholders require? | The CQ Researcher Blog

“In a free-enterprise, private-property system,” Friedman wrote, “a corporate executive is an employee of the owners of a business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom.”
In this view, going beyond those basic requirements — for instance, as Friedman wrote, spending more to reduce pollution than “the amount that is in the best interests of the corporation or that is required by law” — amounts to improperly spending money that belongs to the shareholders.
The U.S. concept of free-market capitalism is not, of course, universally accepted. Karl Marx, the intellectual father of communism, saw profit as the result of capitalist exploitation of workers. Socialist and communist systems assert that some or all of business profits rightfully belong to society.
But among those who embrace capitalism, many say ethical obligations go well beyond simply making a profit.
A survey of business executives from around the world by consulting firm McKinsey & Co. found that only a minority wholeheartedly embraced Friedman’s view. Sixteen percent of respondents agreed that business should “focus solely on providing the highest possible returns to investors while obeying all laws and regulations.” But 84 percent said the role of large corporations should be to “generate high returns to investors but balance [that] with contributions to the broader public good.” [Footnote 14]

Do businesses have ethical obligations beyond what the law and shareholders require? | The CQ Researcher Blog

Does business believe in the absolute pursuit of profit to the exclusion of all other goals? A study by McKinsey and Co. indicates otherwise. This is an unexpected result based on my perceptions but, of course, I live in the Southern United States where free market worship is one very short step below the more traditional forms of worship.

I hope the study is correct. We need business leaders willing to be valuable members of our communities. Without their participation, the ties that bind us together as a people, a civilization, weaken.

James Pilant

From around the web.

From the web site, Business Talk.

http://businessadministrationblog.wordpress.com/2012/01/29/goal-of-the-firm-maximize-profit-maximize-shareholder-wealth-stakeholder-wealth/

Wealth maximization is long term process. It refers the value of the company generally expressed in the value of the stock.

Value maximization says that managers should make all decisions so as to increase the total long run market value of the firm. Total value is the sum of the value of all financial claims on the firm- including equity, debt, preferred stock and warrants.

Here, the executives undertake investing in new projects, maximizing profits from existing products and services, controlling cost, and adding value to the company through process, which reflects in the price of the stock, but always in the increase in Net Asset Value and Equity Per Share.

The wealth of corporate owners is measured by the share price of the stock, which in turn is based on the timing of returns (cash flows), their magnitude and their risk. Maximizing share price will maximize owner wealth.

Cash flow and risk are the key decision variables in maximizing owner wealth.

When investors look at a company they not only look at dollar profit but also profit margins, return on capital, and other indicators of efficiency. Profit maximization does not achieve the objectives of the firm’s owners; therefore wealth maximization is better option than profit maximization.

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Why unethical conduct in business is so common at this time in our history? Why is business ethics almost irrelevant?


It is now about three years since the catastrophe on Wall Street wrought destruction on this country’s economy. In those three years, the lives of much of the population have become much more difficult while the lives of those who created the disaster seem to have changed but little.

How did we get here? How did doing financial speculation amounting to little more than gambling become respectable? How did the idea of a responsibility to the other citizens of a nation become amusing to the elites?

There are several factors. The first was the advent of the baby boomers to power and authority replacing the Depression and the World War Two Generations. Probably the best date for this transfer would be 1976 when Jimmy Carter became President. He was the first President to not have served in the Second World War since Truman. The significance of this was huge. The previous generation had solid memories of the failures of financial sector and the long hard times that resulted. The difference between study and experience are dramatic. It’s even worse when it’s collective experience. The new generation had stories, movies and television to remind them of the pain of those years, but it didn’t carry the power of the emotions involved, the collective helplessness of more than fifteen years when everything that generation knew was in peril.

The second factor I point to is the advent of the Chicago School of Economics and the doctrines of Milton Friedman. I point in particular to Friedman’s 1970 article in the New York Times Magazine, The Social Responsibility of Business is to Increase its Profits. This is my favorite quote.

But the doctrine of “social responsibility” taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collectivist doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a “fundamentally subversive doctrine” in a free society, and have said that in such a society, “there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

I want you to understand that it appears to me that included in “the doctrine of social responsibility” is duty, honor, religion and patriotism, to name a few. (I like to tell my ethics class that the no religion agrees with this doctrine that doesn’t practice human sacrifice.) Here we have a rejection of those values that constitute Western Civilization. From Wikipedia:

The concept of western culture is generally linked to the classical definition of the Western world. In this definition, Western culture is the set of literary, scientific, political, artistic and philosophical principles which set it apart from other civilizations. Much of this set of traditions and knowledge is collected in the Western canon.

These things that make us human, these things that convey the values – the principles, that are the result of thousands of years of human experience are swept away in a simple doctrine that justifies any action within “the rules of the game.”

I want to point out one more thing: notice that the principles of “within the rules of the game” and “open and free competition without deception or fraud” are in many ways contradictory. If you can make or influence the rules why should you compete? Now get a load of this: Friedman tells businessmen that they are free of any restraint, every limitation of conduct, but they are supposed to hold to the duty of engaging in open and free competition without deception or fraud: Do whatever is necessary to make a profit but be good boys and compete.

The third element is the gradually increasing wave of deregulation which begins in a small way in 1971 when the Nixon Administration recommends the rail and trucking industries be deregulated. By the time, Jimmy Carter is elected the doctrine has gained enormous strength and much wider application. The basic implication that government regulation damages business success hampered any attempt at new regulation no matter what happened. This attitude is critical to what happens next.

The fourth element can be dated roughly as beginning 1981. Hostile takeovers and corporate raiding become regular parts of the business news. The basic significance of this is that it is a war. A war fought between manufacturing and finance, with manufacturing losing at every turn. The secondary effects were only a little less worse. You could make money at it. Not little money like people made from developing new products and making things, big money. T. Boone Pickens, one of the major corporate raiders of the period is worth three billion dollars and is rated currently as the 117th richest man in the world. Now let us add in a related development, the financing of these takeovers. Drexel Burnham Lambert paid Michael Milken 550 million dollars a year during its heyday. What did Michael Milken do to merit this: he created high yield bonds, junk bonds. The era of “financial innovation” begins here. Continuing to the present day, more and more bizarre mathematical creations will be used for investment, financing and speculation.

Now, let’s combine them. Those Americans familiar with the pain of the results pass on the reins of power to a new generation. The Chicago School of Economics will provide the philosophical basis for discarding societal responsibility. The government reacts with deregulation which makes it exceptionally difficult to re-regulate industries. The financial industry begins destroying manufacturing in its search for profits.

All the elements are now in place for what has happened and continues to happen. The American population without previous experience of the fruits of financial speculation have no common idea of what should be done. The ethic of the business world is converted from a complex set of factors motivated by religion, philosophy, the myriad other factors that tie us to one another as a people to one of profit as the only value. The government accepts this philosophy and applies it, making deregulation and not regulating pretty much the official doctrine of the government. The financial industry begins destroying healthy companies making hundreds of millions of dollars for what might kindly be described as little effort. The government does not intervene to stop this, which is a clear demarcation line in history that the power of that part of American that makes things is eclipsed by the power of the deal makers, the part of American society that moves money.

Out of this history we grew a generation of Americans who knew with certainty (and unfortunately with accuracy) that going into the financial industry, taking risks, and pushing the boundaries of the rules could make one a multi-millionaire in short order. The most capable of the students at the great universities many of them Ivy League schools went into finance. Those individuals were supposed to be a wide variety of things especially the keepers of the flame, the torch that is passed from one generation to another, the moral standards, the courage, the willingness to sacrifice for their country and their fellow man so that all can prosper. It is difficult to maintain a system of morals when the rewards are so extreme. My understanding is that ivy leaguers can start at a Wall Street firm for as much as $350,000 in salary. And after that if you are willing to do “what it takes,” the path to being a mere millionaire is quick and easy. These people were supposed to be crusading attorneys, publishers, politicians, administrators – all those things that make societies function. There is an ancient precept that nations succeed based on the wisdom of the learned, the courage of their soldiers and the efforts of the workers. Our best and brightest don’t go there. They go to make money in a moral vacuum.

We are going to pay for this for a long time. When the basic doctrine, the ethos of a country becomes devoted to the acquisition of wealth with not even a tiny lip service to virtue you get unethical conduct on a broad front across the business world. Everything that has happened since then, has grown out of these events that I described. The Savings and Loan Etc. (I was going to list them but you know as well as I do what they are and I find it too depressing to make such a list just at the moment) are all explainable out of these elements.

Now we have the demonstrations on Wall Street that are rapidly forming a counterpoint to the story,  I told above.

Is this the beginning of a brand new story or a small and insignificant chapter in the global rise of financialization?

I am hoping for a new story.

James Pilant

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Business Ethics Roundup 10/11/2011


1. The Ethics Sage has a new post on the civility movement at Harvard  entitled –

Harvard University Jumps on the Civility Bandwagon

Here’s a key paragraph:

The fact is administrators at Harvard are pressuring the Class of 2015 to do something no other student class has ever been asked to do in 375 years: Sign a civility pledge. The “Class of 2015 Freshman Pledge” was presented to students before an opening convocation last month. The message serves as a kind of moral compass for the education Harvard imparts. In the classroom, in extracurricular endeavors, and in Harvard Yard and Houses, students are expected to act with integrity, respect, and industry, and to sustain a community characterized by inclusiveness and civility. The “Pledge” idea seems a bit odd to me. Is Harvard saying its students have not acted civilly up until now? Has Harvard ignored civic virtue in its teachings?

It’s a good article. Certainly, I think a few more pledges in the direction of civility and morality are merited. The current American ethos seems to be heavily drawn from Milton Friedman and Gordon Gekko, in equal parts.

2. Professor Chris MacDonald writing in the Business Ethics Blog has an article intriguingly entitled –

Bullying in Pursuit of the Public Good

This would be my preference for the key paragraph – not as lively as some of the others but it contains the heart of the message – Don’t assume one side is right all the time.

Now most people are generally not very worried about major corporations, or large institutions of any kind, being bullied. And it’s easy enough to understand why. We’re usually more worried about corporations having too much power, rather than too little. But to uniformly celebrate victories of NGOs over corporations is to assume that NGOs are always right. And that’s a mistake. It’s also a mistake to assume that NGOs are in any important sense democratic, or automatically representative of the public interest.

3. Lauren Bloom writing in her blog has a new article called –

A Loving Tribute to Steve Jobs

This is the best paragraph –

But the thing that keeps coming to my mind as I think about Steve Jobs was his dedication to creating extraordinary products that inspired unprecedented customer devotion. Everyone uses cell phones, computers, and other portable electornic devices these days, but if I hear someone say they “absolutely love” one of those devices, more often than not it turns out to be an Apple product. And while cartoons aren’t everyone’s cup of tea, film buffs who enjoy animation typically love Pixar movies. One might disagree on which of Pixar’s films is the best (my personal favorite is Ratatouille but my brother lobbies hard for The Incredibles), but to my recollection, there’s been something to love about every movie Pixar has ever produced.

4. Josephson on Business Ethics and Leadership has an article called –

Hunger and Poverty: Consequences of deregulating food markets

Millions of poor people are starving in famines right now because the U.S. has relaxed regulations on commodities trading over the past 10 years. Into the breach have rushed financial companies like Goldman Sachs that poured millions of dollars into food commodities trading, in pursuit of short-term profits. In the process, they’ve created artificially soaring food prices that affect the whole world.

As went tech stocks in the 90s, and housing prices in the 00s, the price of food is now set on a financial bubble.  And human agony and death is the result.

I wish the author had developed the topic in more detail. I fell like I was in the middle of a good strong read and then was cut off in the middle.

James Pilant

 

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My response to Andi’s Questions


Andi concluded his comments on my last post by asking me these questions, which I will now try to answer.

Whether protests are morally right or wrong, is difficult. What do you think about the following questions?:

Can a protest really influence decisions that there are fair outcomes for everybody? Or is it only a way to highlight unfair procedures?

I have no utopian vision of a world where everyone has a just outcome. It’s not going to happen. Life is messy and many things unfair. However, governments and economies are man made creations and there is no natural law governing them only numerical limitations, so if outcomes are produced by men those outcomes can be changed by men.

Income inequality only reached this level over many years and as a result of many changes both international and purely domestic. So, what can be changed in one direction can be moved into another.

Change is possible.

Now, can the protestors generate any change in the philosophy of the marketplace. Yes,

Over the last 150 years two basic philosophies have run through American Business. The first set is based on Christianity. It’s most pure economic form is the Social Gospel. This continues to the modern day with parallel visions like Marxism which is essentially an economic religion.

The second set is Social Darwinism. Herbert Spencer will be its prophet and it may very well have culminated philosophically with Milton Friedman. Edmund Spencer took the survival of the fittest concept from Darwin. Milton Friedman added Darwin’s concept of natural selection, that is, the process of evolution must not be interfered with to favor the weak.

These have fluctuated in power and influence. Currently, the debate leans very heavily in the direction of free market fundamentalism, the Chicago School of Economics.

What effect can the Wall Street Protests have?

First, they shift the discussion. For most of the previous year, the public was assailed with tales of the dangers of deficit spending, a discussion focus of the American beltway elites but a subject with precious little importance to the great mass of Americans.

Second, it makes the wealthy and the beltway elites uncomfortable. The disdain and over reactions from the right wing media are palpable. You have to understand that in this country, the wealthy are insulated from virtually any criticism. Over the last forty years wealth has become a sign of virtue in many circles. They live in world where the media idealizes them, where the government is an ally which takes their needs seriously and where the lower classes are discussed as overpaid, lazy, fat and lacking initiative. To hear a contrary dialogue is to them astonishing. Let them be astonished.

Third, and most critical, the movement is laying the groundwork for groups of citizens to follow, a template for action. This means that in the future when there is a policy placed before the public, these groups spawned by this political action will be able to present alternatives or start initiatives of their own. Policy battles that have been one-sides will become disputes where more than one point of view is heard.

James Pilant

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