Saturday, February 03, 2007

Business and Money

Tibor R. Machan

On a recent trip to a college in Louisiana I was in a discussion with some academic philosophers one of whom advanced the idea that business isn’t guided by ethical principles since its purpose is to make money. A 1961 essay by the late Milton Friedman, a Nobel Laureate in economics, from The New York Times Magazine and reprinted in many business ethics readers, seems to give support to this idea. Friedman argued that the social responsibility of corporate managers is to earn a profit. And this does appear to mean that nothing other than making money hands over fist should motivate those in the profession of business.

Actually, Friedman made clear that while people in business ought to strive to make money, they need to do so while adhering to "the rules of the game," as it were. And these rules include the criminal law as well as basic ethical principles such as truthfulness, keeping promises, etc. Still, Friedman’s essay left the impression that all business is about is making money. And if this is so, one might ask—as the professor I spoke with did—why bother with any standards other than whether one’s professional decisions lead to making money.

But, of course, business isn’t just about making money, anymore than medicine is just about advancing health. A doctor who would attempt to advance the health of a patient by deceit—say, by failing to fully disclose what’s amiss to the patient—or by theft—say, of someone else’s vital organs—and so forth would not be carrying on professionally. Such a doctor would engage in malpractice. A manager of a firm who would produce shoddy goods so as to make a quick buck would be no different.

Indeed, properly understood, businesses are highly varied, some involved in producing products, some services, some investing in other firms—all aiming for prosperity, yes, but not at any price. Any profession could be corrupted by failing to heed the standards of producing what it is about. So an educator, for example, who seeks to impart knowledge by means of deception or taking advantage of the naiveté of students would be engaged in misconduct. It is not only when the teacher becomes a preacher that he or she misbehaves. And it is not only when someone in business fails to heed the bottom line that there’s malpractice.

Indeed, business is never just about making money—even when it seems to be so. For making money even while managing money requires adherence to certain standards of conduct based on the simple fact that one is a human being making money by dealing with other human beings. In the employment relationship, for instance, it is wrong to hire and promote on the basis of factors irrelevant to the business at hand. This is why racial or sexual discrimination, nepotism and such, are deemed violations of business ethics even though they do not directly involve neglecting the bottom line.

In any profession one can carry on badly while seeming to pursue the ends that define the profession. A journalist could obtain an interview on false pretenses, gain information dishonestly and even steal it, in which case the job of producing information for his or her clients would be mishandled.

One reason that my academic pal may have maintained the perverse thesis that nothing else matters in business but making a buck is that some economists actually advocate this idea, just as the late Milton Friedman appeared to (although, once fully understood, didn’t, in fact). Economists have for centuries argued that the best explanation of how people act in the market place is that they are driven by the profit motive. This wasn’t actually an idea that came from economists, originally, but from a 16th century philosopher, namely, Thomas Hobbes. Hobbes held that we are all driven to behave as we do because we seek power, because we are afraid of death. For Hobbes right versus wrong conduct amounted to no more than doing what felt right versus what didn’t. And that itself could be explained by how we are made to feel good by improving our changes of survival.

This idea was derived form the more basic notion of Galilean physics that everything moves ineluctably until it is stopped by some force. It introduced mechanistic determinism as a way to understand human behavior. Economists tended to adept this to their efforts to make sense of how markets work. Morality was excluded from the picture, especially since so many moral theorists believe that self-interested conduct is unethical. Going the mechanical route avoided having to contend with these moralists. And it still does, to a large extent.

In fact, however, market conduct, as any other conduct, is governed by ethical principles. That includes, of course, the vigilant pursuit of profit—but not at any cost.

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