By Joseph Heath
Morality, Competition and the Firm:
- Provides a new approach to business ethics
- Is based on a sophisticated understanding of the modern theory of the firm, as well as contemporary economics
- Brings together some highly influential but difficult-to-find papers under one cover
"In this collection of provocative essays, Joseph Heath provides a compelling new framework for thinking about the moral obligations that private actors in a market economy have toward each other and to society. In a sharp break with traditional approaches to business ethics, Heath argues that the basic principles of corporate social responsibility are already implicit in the institutional norms that structure both marketplace competition and the modern business corporation. In four new and nine previously published essays, Heath articulates the foundations of a 'market failures' approach to business ethics. Rather than bringing moral concerns to bear upon economic activity as a set of foreign or externally imposed constraints, this approach seeks to articulate a robust conception of business ethics derived solely from the basic normative justification for capitalism.
The result is a unified theory of business ethics, corporate law, economic regulation, and the welfare state, which offers a reconstruction of the central normative preoccupations in each area that is consistent across all four domains. Beyond the core theory, Heath offers new insights on a wide range of topics in economics and philosophy, from agency theory and risk management to social cooperation and the transaction cost theory of the firm."
Andrew Gustafson on Notre Dame Philosophical Review wrote:
"What separates Heath’s work from much of the previous business ethics literature is his extensive use of economic theory to justify a much more demanding set of ethical norms for business. [...] Heath’s book is essential reading for scholars and students interested in new ways of thinking about the foundations of business ethics."
Jason Brennan on Kennedy Institute of Ethics Journal wrote:
"This is an engaging book. In nearly every essay, Heath provides provocative, thoughtful criticisms, which tend to take the road less travelled, and show why the common paths of thought are problematic and fallacious. Heath's arguments are clear but detailed, and for those not well versed in economic theory some sections will take substantial effort, but the fruit of that effort is well worth it. [...] the book is well worth engaging by anyone interested in economics, agency theory, fiduciary concerns, public policy, corporate governance, and of course, business ethics. Heath is to be commended for this provocative book, explaining a provocative approach to business ethics (market failures approach) that sees as its guiding star the always elusive Pareto-optimal market conditions. I know it has informed my own approach to how I will teach stakeholder theory, theory of the firm, and competition in future courses."
Rosemarie Monge on Business Ethics Quarterly wrote:
"Before Heath, much of the debate in the field was between two major theories - stockholder and stakeholder theory. Both of these theories are either false, or vacuous and empty, depending on the interpretation. Heath has to some degree rescued the field by providing what is perhaps the only good general theory of business ethics, which Heath calls the Market Failures Approach. [...] In the end, Morality, Competition, and the Firm is a rich anthology. It’s a tour-de-force of political economy, corporate governance, and business ethics. It contains powerful critiques of virtue ethics and the misuse of moral psychology by other business ethicists. It is valuable reading for anyone interested narrowly in business ethics, but also more broadly in political philosophy or the intersection of politics, philosophy, and economics."
Marc A. Cohen and Dean Peterson on Journal of Business Ethics wrote:
"While perhaps controversial in scholarly business ethics circles, there is little doubt that the market failures approach is likely be rhetorically powerful for reaching students and practitioners of business, as it appeals to an intuition that most of them already hold: that the point of market capitalism is efficiency in the production and allocation of goods, and, to the extent that profit maximization contributes to that end, profits should guide business decision-making. It may also surprise business ethicists and practitioners alike that such a minimalist principle should produce rather demanding normative standards of conduct in business. However, if one believes that the end of capitalism is something else, or that market actors ought to balance efficiency with other important values, then one may not be entirely convinced. Nevertheless, the arguments for the market failures approach deserve to be engaged by the business ethics community, if only to further elucidate an alternative to the now prevalent normative conceptions of capitalism, markets, and business conduct."
"Joseph Heath defends competitive markets and conceptualizes business ethics with reference to Pareto efficiency, which he takes to be the “implicit morality of the market.” His justification for markets is that they generate Pareto efficient outcomes, meaning that markets optimally satisfy consumer preferences. And, for Heath, business ethics is the set of normative constraints—regulation and beyond-compliance norms—needed to preserve that outcome. The present paper accepts Heath’s claim that the economic justification for markets is ethical, in that satisfying consumer preferences is a good. But, contra Heath, the ethical consideration at work is a consequentialist one; and acknowledging this consequentialism exposes limitations of Heath’s “market failures” approach to business ethics. We suggest two limitations, and we expect many will accept our argument that Heath’s conception of business ethics is too narrow. The present paper outlines two broader implications. First, acknowledging that the justification for markets is ethical eliminates the apparent—and false—conflict between purportedly amoral economic activity on one hand and ethical considerations on the other; instead, business ethics is a matter of weighing the consequentialist ethical benefit of economic activity and markets against other moral arguments/other ethical considerations. Second, Heath restricts business ethics to the constraints needed to protect the market’s ability to efficiently satisfy consumer preferences, constraints he calls “efficiency imperatives”; this restriction (inadvertently, perhaps) supports the widespread tendency to think that all social problems are economic; and, a business ethics so-conceived diminishes the perceived importance of noneconomic values—this attitude is dangerous."
About Joseph Heath
Joseph Heath is a Professor in the Department of Philosophy as well as the School of Public Policy and Governance at the University of Toronto. He is the author of numerous scholarly works, including Communicative Action and Rational Choice (2001) and Following the Rules; Practical Reasoning and Deontological Constraint (2008). In 2012 he was appointed a fellow of the Trudeau Foundation.
Table of Contents
Part 1: The Corporation and Society
- 1. A Market Failures Approach to Business Ethics
- 2. Stakeholder Theory, Corporate Governance and Public Management (with Wayne Norman)
- 3. Business Ethics Without Stakeholders
- 4. An Adversarial Ethic for Business: or, When Sun-Tzu met the Stakeholder
- 5. Business Ethics and the 'End of History' in Corporate Law
Part 2: Cooperation and the Market
- 6. Contractualism: Micro and Macro
- 7. Efficiency as the Implicit Morality of the Market
- 8. The History of the Invisible Hand
- 9. The Benefits of Cooperation
Part 3: Extending the Framework
- 10. The Uses and Abuses of Agency Theory
- 11. Business Ethics and Moral Motivation: a Criminological Perspective
- 12. Business Ethics After Virtue
- 13. Reasonable Restrictions on Underwriting