Business Ethics

Business Ethics 33

Slide 2: Government Involvement

Should governments impose restrictions on business activities, or should they allow businesses to pursue their own interests in free markets?

 Viewpoint 1

o Free markets and free trade are defective.

They cannot deal with business problems, such as unfair labor practices, sweatshops, unfair competition, and other ethical issues.

 Viewpoint 2

o Restrictions on business violate rights of freedom.

This leads to unfairness and society being worse off.

Slide 3: Types of Economic Systems

An economic system is the methods by which a society provides the goods and services to its people.

 Command economy

o Economic system based upon governmental authority to make decisions

 Market economy

o Economic system based upon private individuals to make decisions

Slide 4: Adam Smith’s Theory

According to Adam Smith, competition drives consumers to act in ways that serve society.

 Competitive markets will allocate resources efficiently.

 Government interference lowers public welfare

Slide 5: John Meynard Keynes’ Theory

According to John Meynard Keynes, government assistance is necessary.

 Government intervention allows for the demand to be high enough to absorb the supply.

 Takes into account monopoly companies that might persist

 Works around the fact that not all workers are motivated by profit

Slide 6: Local Regulations for Ethical Operations

Local government ethics programs have additional challenges as they deal with small towns or counties in which “everyone knows everyone.” Elements of an effective local government ethical program include the following:

 Clear code of conducts

 Availability and use of disclosure statements, allowing people to disclose their possible conflicts of interest

 Effective enforcement of codes of conduct and other regulatory procedures

 Whistle blower protection

Slide 7: Check Your Understanding

1. What is a command economy?

a. Economic system based upon governmental authority to make decisions

b. Economic system based upon private individuals to make decisions

c. Economic system that is based upon profit maximization

d. Economic system that relies upon local businesses to make decisions

2. What is a market economy?

a. Economic system based upon governmental authority to make decisions

b. Economic system based upon private individuals to make decisions

c. Economic system that is based upon profit maximization

d. Economic system based upon secret service intervention

3. Adam Smith’s theories are characterized by which of the following?

a. Competitive markets will allocate resources efficiently without government intervention

b. Competitive markets will not allocate resources efficiently and government intervention is necessary.

c. State governments need to be involved.

d. Efficiencies are best accomplished through local government intervention.

4. John Meynard Keynes’ theories suggest what about government intervention?

a. Competitive markets will allocate resources efficiently without government intervention

b. Competitive markets will not allocate resources efficiently, and government intervention is necessary.

c. Government intervention will stifle the process.

d. All levels of the government MUST be involved.

5. Local governments need to focus on which of the following?

a. Taking in enough money

b. Creating a local culture of ethical behavior

c. Ensuring that their local companies are the most profitable

d. Electing ethical officials