By James R. Otteson
- Adam Smith's Marketplace of Life (2002)
- Honorable Business; A Framework for Business in a Just and Humane Society (2019)
- The Essential Adam Smith (2019)
- What Adam Smith Knew; Moral Lessons on Capitalism from Its Greatest Champions and Fiercest Opponents (2014)
What Honorable Business has to offer:
- Responses to central worries and objections raised to business and commercial society, including inequality, unfairness, negative externalities, and exploitation;
- An explanation of the connection between honorable business and the historically unprecedented growth of worldwide prosperity over the last two centuries;
- A newly proposed "Code of Business Ethics" that incorporates an original conception of business professionalism;
- An articulation and defense of a new conception of "honorable business"
Business has a bad name for many people. It is easy to point to unethical and damaging behavior by companies. And it may seem straightforward to blame either indivuduals or, more generally, ruthless markets and amoral commercial society. In Honorable Business, philosopher and political economist James R. Otteson argues that business activity can be valuable in itself. The primary purpose of honorable businesses is to create value-for all parties. They look for mutually voluntary and mutually beneficial transactions, so that all sides of any exchange benefit, leading to increasing prosperity not just for one person or for one group at the expense of others but simultaneously for everyone involved. Done correctly, honorable business is a positive-sum activity that can enable flourishing for individuals and prosperity for society.
Otteson connects honorable business with the political, economic, and cultural institutions that contribute to a just and humane society. He builds on Aristotle's conception of human beings as purposive creatures who are capable of constructing a plan for their lives that gives them a chance of achieving the highest good for humanity, focusing on autonomy and accountability, as well as good moral judgment. This good judgment can enable us to answer the why of what we do, not just the how. He also draws on Adam Smith's moral philosophy and political economy, and argues that Smithian institutions have played a significant role in the remarkable increase in worldwide prosperity we have seen over the last two hundred years.
Honorable Business also offers a pragmatic Code of Business Ethics, linked to a specific conception of professionalism, and defends this Code on the basis of a moral mandate to use one's limited resources of time, talent, and treasure to provide value for oneself only by simultaneously providing value to others.
The result is well-articulated parameters within which business can be an acceptable-perhaps even praiseworthy-activity.
Richard Morrison on Competitive Enterprise Institute wrote:
"Otteson is a renowned Adam Smith scholar, so it is no surprise that he builds his positive case for the goodness of business on a Smithian foundation. He explains three specific arguments in Smith: the economizer argument, the local knowledge argument, and the invisible hand argument. Taken together, these form the core of Smith’s argument for what he called 'the obvious and simple system of natural liberty.' They also form the analytical core of Otteson’s case for honorable business. [...] Honorable Business is an admirably brief book that contains an important and underappreciated argument. I hope to see it adopted widely by business schools and liberal arts programs, and I hope it helps generations of students and scholars see how they live good, flourishing lives—and help others do the same—by practicing Honorable Business."
Caleb Bernacchio on Business Ethics Quarterly wrote:
"The book’s author, Professor James Otteson [...] is writing primarily for the people he teaches—young people studying for, and looking forward to, a career in business. He writes that the book 'can give a coherent meaning and purpose not only for what business ethics classes should be about but also for why people should go into business in the first place.' Otteson goes beyond just providing guidelines for ethical business, however, and ends up tackling a series of increasingly ambitious goals: describe what counts as honorable business practice, convince students and current business people to embrace that ideal, and justify the ways of a market economy to a presumably skeptical public. The basics will be familiar to those interested in Western political philosophy and classical liberal economics. [...] Otteson repeatedly emphasizes that business transactions should be positive-sum and benefit all involved parties, but stops short of putting an affirmative responsibility on each of us to make sure that actually happens for the other parties. [...] A lot of Otteson’s argument for negative-rights small government hinges on the importance of local knowledge, subjective value, and opportunity cost. [...] These are all legitimate concerns, and ones frequently heard in right-of-center political discussions, but as an excuse for why governments should play no role whatsoever in redistribution or social welfare, they seem unlikely to be persuasive to most readers. [...] it seems like “Honorable Business” might be better broken into two volumes. The first would be the existing well-reasoned explanation of the ethical basis and moral value of voluntary transactions (the book for business students and businesspeople) and the second a vociferous defense of classical liberal political theory (for philosophy and government students, and anyone interested in small government advocacy). I fear that the latter, though well-written and tightly reasoned, might drive the audience for the former in the opposite direction as intended. In any case, Otteson deserves high marks for taking on this project and presenting a reasonable, humane defense of business as a moral enterprise."
"By focusing on the purpose of business, Otteson seeks to avoid an applied ethics approach to business ethics, arguing that business is already an inherently moral activity. For this purpose, the author draws upon a range of philosophers—Adam Smith and Aristotle being the most prominent—to elaborate the goals, norms, and virtues that are latent within the practice of business. Though Aristotle was skeptical of the role of virtue within commerce, Otteson draws upon his under-standing of agency as directed toward a final end to explain the place of business practice in a “just and humane society.” Likewise, by elaborating on this account of the purpose of business, and thereby an account of business ethics, Otteson goes to great length discussing political questions concerning the role of the state in relationship to the market. Many readers who are otherwise sympathetic to the book’s compelling account of the purpose of business are likely to raise questions about the extent to which the notion of honorable business is tied to libertarian political theory. [...] Otteson’s code amounts to a minimalist approach to business ethics, since he does not identify or defend any duties or obligations of businesspersons beyond pursuing profitable business through mutually beneficial exchanges. Otteson argues that CSR is inefficient, and that honorable business, involving mutually beneficial exchange, is the best way to promote increasing pros-perity. But this view does not account for situations where political institutions are inadequate or lacking, for negative externalities, or for cases of urgent need where specific firms may have a unique ability to benefit stakeholders. [...] Otteson’s account of honorable business is based upon the idea of freedom, and he suggests that only insofar as governments refrain from interfering with free exchange can persons be free. But Otteson does not raise the question of the social conditions needed for free agency. [...] A final objection that I would raise concerns the book’s underlying metaethical framework. Otteson asks the question of why one ought to refrain from opportunistic behavior even when it is sure to be undetected (57). But his answer is that we should promote a culture where this does not happen. While this might be true, it fails to provide a normative basis for rejecting opportunism since Otteson’s question con-cerns the reasons why someone ought to adhere to the norms of such a culture. At other key points, Otteson adopts a similar approach suggesting that sympathy (62) and reputation (63) can provide an answer to this question but they clearly cannot. [...] This problem is ultimately linked to the fact that while Otteson discusses rules and virtues, his account is essentially a form of utilitarianism (131), specifically a mixture of rule and motive utilitarianism where such norms are justified in terms of their beneficial consequences for individuals and society. But when cases arise in which the individual can benefit from dishonesty while causing harm that is widely distributed throughout society (57), it is not clear that Otteson’s framework can provide an adequate reason to reject dishonesty. [...] Despite these criticisms, Otteson’s core claim that the purpose of business is a mutually beneficial exchange is a powerful idea that has been surprisingly ignored by other perspectives in business ethics, which often seem to assume that business is in need of redemption, typically by appeal to some extrinsic ethical principle. Otteson rightly reminds us that honorable business is an inherently virtuous activity aimed at mutually beneficial exchange. [...] Otteson’s book could helpfully inform other work in business ethics and will likely further reinforce the need to understand business on its own terms as a morally salient activity that is in need of guidance but not redemption."
- "Finding the Honor in Business with James Otteson" - interview with Otteson (26 June 2019) by The Institute for Humane Studies, George Mason University
About James R. Otteson
James R. Otteson is is the Thomas W. Smith Presidential Chair in Business Ethics, Professor of Economics, and Executive Director of the Eudaimonia Institute at Wake Forest University in North Carolina. He is also Senior Fellow at the Fraser Institute [a libertarian think tank] and a Senior Scholar at The Fund for American Studies in Washington, D.C., a Research Professor in the Freedom Center and Department of Philosophy at the University of Arizona, a Research Fellow for the Independent Institute in California, and a member of the Board of Directors of Ethics and Economics Education of New England. He specializes in political economy, business ethics, the history of economic thought, and political philosophy.
Table of Contents of Honorable Business
Chapter abstracts have been copied from the book's pages on Oxford Scholarship Online.
- Introduction - The term “honorable business” will strike many as counterintuitive. Many are suspicious of business, as the widespread notion that business, or businesspeople, should “give back” to society—perhaps to atone for their sins—suggests. Honorable Business argues that there is a way of understanding business activity such that it is beneficial and even morally praiseworthy, and thus not in need of atonement. The introduction to Honorable Business outlines the elements of the book’s argument, including the content of each chapter, but it also places the book’s argument in its proper context: who its audience is, and why its argument is necessary.
- The Purpose of Business - Chapter 1 addresses the central importance of asking the why of everything we propose to do, not only the how. This is as important in business as in any other walk of life. This issues from the fact that human beings are essentially purposive creatures, that is, creatures who create and pursue ends, goals, and purposes. The final or ultimate goal of human life is, as Aristotle argued, eudaimonia—“happiness,” “well-being,” or “flourishing.” If that is our ultimate end, then all our activities should be deliberately ordered to help us achieve it. That includes business, and the political and economic institutions in which business operates. This chapter argues that business should contribute to and reflect our pursuit of eudaimonia. It closes with questions that this conception of human purposiveness suggests should be investigated, pointing the path forward for the rest of the book.
- The Proper Context of Business - Chapter 2 investigates the explanation Adam Smith gave in his famous Wealth of Nations (1776) for why some places are wealthier than others, and what political, economic, and other social institutions are required for increasing prosperity. The chapter discusses the conception of “justice,” as opposed to “beneficence,” that Smith offered The Theory of Moral Sentiments (1759), as well as Smith’s economizer, local knowledge, and invisible hand arguments from his Wealth of Nations that form the basis of his political economy. We look at the duties of government implied by Smithian political economy, including both what he argues government should do and what it should not do. We also look at empirical evidence to answer the question of whether Smith’s predictions on behalf of his recommendations have come true in the intervening centuries.
- A Code of Business Ethics - Chapter 3 argues that the ultimate purpose of business is to create value—for all parties, simultaneously. It explains what the purpose of a firm is, and, on that basis, it offers a proposal regarding what should be part of any firm’s mission statement. It then proposes a code of business ethics that captures the duties of the individual businessperson, and goes on to articulate a conception of honorable business that allows business to achieve its main purpose of the creation of value. This code enables the individual to navigate the inevitable dilemmas that arise in business, which are in important respects not dissimilar to dilemmas that arise in other walks of human life. It also describes a conception of professionalism that connects to business’s purpose and the “hierarchy of moral value” of which it forms a part.
- Markets and Morality - Chapter 4 raises the question of how markets and morality go together, and how our conception of honorable business might deal with some of the leading objections critics have raised to markets and business. It looks at and offers initial responses to a several worries, including inequality, unfairness and luck, externalities, low worker pay, price gouging, manipulation of consumer desires and choices, and profit-seeking. It also explores the notion of corporate social responsibility (CSR), and the extent to which there can be such a thing as “honorable profit.” Finally, the chapter suggests that the field of political economy, which informs the argument of this chapter and the book, is an exercise not in ideal theory but rather in practical, second-bests—and, as such, should aim at steady and widespread improvement if not perfection.
- From Business to a Just and Humane Society - Chapter 5 completes the argument on honorable business by specifying a “hierarchy of moral value” linking the individual businessperson’s activities to the purpose of a firm within a properly functioning market economy that is itself part of a just and humane society. If these relationships have been correctly described, the individual businessperson should be able to give an account of his or her professional activities that connects them all the way up the chain of moral purpose to the kind of society in which we should all want to live. The chapter also looks at the increase in material prosperity the world has experienced since approximately 1800 and connects that prosperity to the “hierarchy of moral value.” The chapter considers the role of government and regulation in the creation of prosperity and explores the extent to which the present argument connects to ethical theories of deontology, utilitarianism, and virtue ethics.
- Obstacles to Achieving the Purpose of Business - Chapter 6 looks at several problems businesses can face in the achievement of their proper goal within a market economy. These include Karl Marx’s notions of “alienation,” lying, and exploitation, the extent to which markets and commercial society can conflict with some of our deep-seated and possibly pretheoretic intuitions, and problems associated with asymmetries of knowledge and so-called rational ignorance. This chapter outlines how businesses should deal with such worries and address them in good faith. It also articulates a claim about the proper scope of business’s moral obligations, which will go some way toward helping businesses focus not only on what they can do but on what they should do.
- Honorable Business and Treating People the Right Way - Chapters 7 and 8 look more carefully at a series of worries about, and objections raised to, business, markets, and commercial society generally. Chapter 7 looks specifically at concerns about how we should treat people and whether markets and business are, or can be, consistent with proper relations among people. It examines the inequality to which markets can lead, considering in this connection G. A. Cohen’s famous “camping trip” scenario and his argument for “socialist equality of opportunity.” In contrast to Cohen’s “camping trip,” this chapter offers a “shipwrecked on an island” scenario, from which conclusions different from Cohen’s may be drawn. The chapter also examines the seeming unfairness of some of the outcomes of business activity, including in particular the undeserved luck involved. Finally, it explores the instability and displacement inherent in the “creative destruction” (in Schumpeter’s famous phrase) of markets, including its effects on human community.
- Honorable Business and Valuing What We Ought - Chapter 8 looks at several more worries about, and objections raised to, markets and business. This chapter focuses specifically on concerns raised about how markets can induce us to misvalue things—valuing some things too highly, valuing other things not enough. Chapter 8 argues that it is not things but rather people and their choices that should be valued. It also argues that one can advocate both liberty and virtue, that is, respecting people’s right to choose while retaining the moral authority to criticize—though not interfere with—their choices. It argues that working for wages is not plausibly similar to slavery and hence, contrary to some critics’ claims, should not be described as such. Finally, the chapter discusses tragedies of the commons and explores the ways that honorable business might address and mitigate some, if not all, of them.
- Why Business? - Chapter 9 brings the threads of the previous chapters together to develop an integrated picture of honorable business. It first argues that there is such a thing as honorable business, and it articulates its core elements, linking them to the conception of moral agency, hierarchy of moral value, and code of business ethics developed in earlier chapters. It also describes what dishonorable business is. It articulates the “negative” duties of business—the “don’ts—as well as its positive obligations—the “dos”—and argues that the “don’ts” require our attention first, but that the “dos” nevertheless can generate obligations as well. Chapter 9 suggests that honorable business not only provides material prosperity but also enables and encourages proper moral relations among people based on the mutual respect that our inherent dignity requires. Seen in the proper light, this conception of honorable business could actually be a moral calling.