Business Ethics and the Austrian Tradition in Economics

Hardy Bouillon

• Publisher: Routledge
• Year: 2011
• Print ISBN: 9780415600255
• eBook ISBN: 9781136812354
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Stakeholder value, corporate social responsibility and sustainability: Are these, and similar, concepts sufficiently clear for fruitful research in business ethics? What is the benchmark to prove their utility? Business Ethics and the Austrian Tradition in Economics is a treatise on the fundamental questions of business ethics and addresses significant shortcomings in the field. It is the result of correlating reflections on phenomena, resulting from an intersection of ethics, economics, methodology, and political and social philosophy. Sparked by the business ethicists' tendency to consider certain areas outside their field and accept others unquestioningly, this book provides answers in the tradition of Austrian Economics and, in particular, of Hayek and Popper.

Through detailed examination and reflection, this book presents the thesis that many themes in business ethics are discussed either unduly intensely, unbalanced or rarely, measured against what business ethics as a science should deliver. It does so by offering an answer to one of the most crucial questions in business ethics, namely that of justice in moral economic actions. Bouillon develops an original definition of morally just economic action in the course of three chapters, and subsequently uses it as yardstick, from which, in chapter four, he reads which of the relevant concepts and topics in business ethics ask for restatement. As a side-product Bouillon discloses logical inconsistencies in prominent political philosophies, and the consequences of these inconsistencies for maldevelopments in business ethics.

Business Ethics and the Austrian Tradition in Economics illustrates and analyses the business etchics' peculiarities particularly within German literature, providing the reader with a focus rarely found elsewhere. This book should be of interest to economics postgraduates and researchers looking at business ethics, economic theory, and social and political philosophy.

1. Ethical preliminaries

1.1 Preliminaries – what for?

For a better understanding of the ideas on the relation between economics, ethics, and justice presented here, it is advisable, first, to extensively elaborate the assumptions mentioned in the preface and, second, to explain some effective habits and rules of grammar in ethics, which can be used fruitfully throughout business ethics. The latter applies in particular regarding the relation of ethics and morals.

1.1.1 ‘Ethics’ and ‘morals’ – and other rules of grammar

The concepts ‘ethics’ and ‘morals’ are often used interchangeably in ethics (and in business ethics). This holds for propositions in everyday language as well as for those in professional jargon. Nevertheless, within the German speaking community, it is still common practice to reserve the concept ‘ethics’ for the philosophical discipline or to denominate a certain ethical school¹ and by ‘morals’ to mean their subject (or content).² Following this tradition, several mistakes and misunderstandings can be avoided. Therefore, and unless severe reasons for deviance are given, this tradition is kept up throughout the book.

Linguistically induced misinterpretations in ethics and business ethics have other reasons as well. Occasionally in literature, authors talk of immoral behavior (action),³ while it is not revealed to the reader what meaning the author intends to give to his amphiboly.⁴ A demeanor can be called immoral if it has no moral dimension at all. Since the distinction between a moral behavior (action) and a behavior (action) that is not moral at all is of utmost importance for this study, we name a demeanor or action ‘immoral’ mainly when we intend to say that the behavior or acting in question has no moral dimension. We do so despite the fact that in ordinary language as well as in professional jargon ‘immoral’ or ‘unethical’ is used to denounce a behavior or action that – vis-à-vis the reference system of morals in question – is treated as vicious or evil.

Occasionally, a behavior or an action that an author rates as evil is labeled either ‘amoral’ or ‘unmoral’ or even uses these labels interchangeably. This in turn gives rise to much confusion, among other reasons, because the two concepts are often understood as being different. The concept of ‘amorality’ is often used to express either the thesis that the distinction between good and evil actions is not possible at all, or that morality is nothing but a chimera.

Be this as it may, to escape misunderstandings, which derive from the ambiguities of the concepts ‘immoral’ and ‘unmoral’, we will prefer the phrase ‘not moral’ to denounce an action or behavior that has no moral dimension at all.

In general, as a guideline it might help to bear in mind the categorical relationships between ethics and morals, morals and moral judgments and, finally, moral judgments and virtues, respectively vices. Ethics comprise statements about morals, while morals represent the category that includes moral judgments. Ultimately, moral judgments can be split into those which call moral actions either morally good or evil, while these two categories comprise all possible judgments concerning virtues and vices. To put it differently, the rules of grammar supposed here are developed along the categorical relations of ethics, morals, and moral judgment. Consequently, concepts like ‘ethical’ and ‘unethical’ are not utilized to replace adjectives in one of their subsequent subcategories. Hence they are neither used to replace ‘moral’ or ‘immoral’, nor to substitute ‘morally good’ or ‘morally bad’ – and vice versa. Non-synonymity holds also for the pairs of concepts ‘moral’/’immoral’ and ‘morally good’/‘morally evil’.

1.1.2 Reference-morals and moral dimension

In the previous section two notions were repeatedly used, which ask for further elucidation, namely reference-morals and the moral dimension as an accidental quality of an action.

He who wants to morally judge an act or an act of omission may go back to a huge reservoir of diverse schools of morals. He may make use of ‘virtue ethics’, ‘Kantian ethics’, ‘Christian morals’, ‘utilitarianism’, or any other morals. Whatever his choice may be, he cannot but willy-nilly refer identifiably to a moral position, or a mix of several moral positions, unless he does not care that his judgment will be rated as purely arbitrary. Resorting to morals, documents the criterion (criteria) on which his judgment rests. If in no way he documents the criterion (criteria) used, then his judgment remains unreferential to the external observer. At best, one can assume that the judgment is based on a moralizing intention, however, not on which one.

Hence, the sentence, ‘Corruption is an evil’, is a proposition that formally corresponds to a moral judgment, but it is left unsaid on which criterion the author’s discretion is founded. If, instead, the author extends his proposition by adding ‘Corruption is an evil because it is against Christian principles’, then he reveals his criteria that underlay his judgment; then his proposition can be used for academic ethical discussion.

In a case like this, in which an author calls a spade a spade, the identification of the morals, i.e. reference-morals, is rather easy. In the case in question, we can conclude that the Christian morals serve as reference-morals. Of course, the sentence, ‘Corruption is an evil’, could have any other reference-morals. Important, if not indispensable for the ethical discussion of moral judgment, is the fact that these judgments have reference-morals. Desirable in terms of improved clarity is that the reference-morals is sufficiently precisely and unambiguously ascertainable.

The role of a criterion, which all morals share when it comes to moral judgments, indicates the function that the concept ‘reference-morals’ is going to play in this treatise. The term ‘reference-morals’ mainly will be a placeholder, representative for all possible morals to which moral judgments can refer.

Moral judgments, with a well documented criterion of judgment, express two things: first, they signify that an action is morally rated; second, they voice how an action is morally valued (for instance ‘good’ or ‘bad’). The latter implies the first. To put it differently, each moral judgment of an action implies the assertion that the evaluated action (supposedly) has a moral quality at all. Alongside our reflections on the constitutive characteristics of moral action,⁵ actions are not moral actions per se. It is not until after the application of moral norms that they become moral actions. The notion ‘moral dimension’ means – to use a Lockean term – a secondary quality of human action, a quality that may or may not fall upon our actions.

1.1.3 Analytic, empirical, and normative propositions

As it is in many other sciences, in business ethics analytic, empirical, and normative propositions play significant roles. As mentioned in the preface, the thesis, that these types of propositions clearly are distinguishable, is a fundamental assumption. Many of the theses, introduced in this book, stand and fall with this assumption. The subsequent reflections are devoted to the function, confusion, and distinguishability of analytic, empirical, and normative propositions.

1.1.3.1 Theory and practice – a preliminary remark

Each acquiescent husband knows that the sentence ‘Darling, the garbage can is full’ is more than a descriptive proposition. In it, he recognizes the tacit wish of his wife to take out the garbage can, and usually he is prepared to meet her request. In daily life, examples, like this one, in which a sentence serves empirical as well as normative functions, is common practice. In fact, it is part of the charm of every language that with each function, which a proposition can fulfill, ‘language games’ and, hence, misunderstandings are possible. This is so if, for example, a sentence, which formally is a descriptive one, is used in a context in such a way that the recipient can (or even should) allege a prescriptive meaning. If the abovementioned husband were to react to the implicit incitement of his wife, to carry out the garbage can, simply by saying ‘yes’, without showing the slightest inclination to do so, then this easily could breed ill blood in an otherwise happy marriage because the wife could be tempted to assume that her husband was unwilling to meet her wish and ignored the ‘real’ meaning of her statement.

Be this as it may, the fact, that such misunderstandings are possible, rests on the possibility that propositions can fulfill different functions at the same time, a possibility which we tend to make use of when we want to send hidden messages, for instance requests; when we replace normative propositions of the form ‘Please Darling, take out the garbage can’ by descriptive ones (‘Darling, the garbage can is full’). (Hidden messages require the presence of several conditions. One of them is that the sender as well as the recipient know the ‘real’ meaning of a proposition, despite its formal characteristics.)

An effective option, to avoid such misunderstandings, is to reconcile the content and form of a message. In daily life, it is difficult to abide with such a practice – let alone desirable. Things are different in academic disputes. Here a violation of the rule, to present propositions – at least the core propositions of a theory – in a form that is sufficiently unambiguous, is not only an impediment in the process of scientific progress, but also – in cases of deliberate acts of omission⁶ – a blatant transgression against intellectual honesty. Those who care about the preservation of intellectual honesty, prefer to express their messages by propositions that convey their meanings as precisely as possible.

Elucidations, like these, may look like truisms in the daily course of science. However, the fact, that – as we are going to see – in much of the literature in business ethics and adjacent disciplines we can observe a pretty careless commitment to the common rules of grammar in science, asks us to go into details here. It is one of the most important theses of this treatise that most of the misleading theories in business ethics go back to a confusing, if not abusing, use of language.⁷

1.1.3.2 Analytic propositions and definitions

Analytic propositions,⁸ above all definitions, play an important role not only in philosophy, but also in empirical sciences. They express the meaning that certain concepts and propositions of a language S have. They can be true or false, but only with reference to S. If, as Gerard Radnitzky has put it, we assume that in a language community, who use language S,

‘Bachelor’ means ‘unmarried man’, then the proposition that asserts this identity of meanings, namely the proposition ‘A bachelor is an unmarried man’ (D), is analytic in S. That is to say, D has no empirical content, it owes its truth not its logical form, but only the circumstance that the definition, that introduces ‘bachelor’ as an abbreviation for ‘unmarried man’, is accepted or valid in the normal speech of language S.⁹

Consequently, a definition names only those criteria that need to be fulfilled so that a concept, that is given to the object or fact in question, is given to it for good reasons. Whether or not Peter justly is called a bachelor is an empirical question. The definition of a bachelor cannot answer that question. It only states the criteria that need to be given, so that in language S Peter rightly can be called a bachelor. It does not indicate how to discern whether Peter meets the criteria. Generally speaking, a definition does not state how to prove whether the attribution of a concept to an object or fact is correct or not.

In view of this, we might say that analytic propositions owe their truth value definitional and logical arrangements alone.¹⁰ Unlike empirical propositions, they do not say anything about reality. It goes without saying that neither can the truth value of an analytic proposition depend on the relation of its content to reality, nor can any conclusion be drawn from the truth or falsehood of an analytic proposition to the truth or falsehood of an empirical one.¹¹

In the face of this, there are many tasks definitions can have in empirical sciences. Among these is the task to provide practical abbreviations, without which scientific writings and work would be difficult to exercise.¹² According to this task, a definition should allow for an abbreviatory expression (definiendum) that replaces a cumbersome long sequence of symbols (definiens), which in turn gives the definiendum its precise meaning.

Definitions that meet this purpose are usually the result of several interactions in a given language community. How successful a definition is in its language community depends largely on the chosen definiens. A definiens has to be sufficiently clear and should take recourse to self-evidences, or else it can contribute little to the elucidation of the definiendum. The rule for successful definitions could run as follows: ‘Formulate your definitions as clearly as possible, and make your assumptions, which are necessary for the understanding of your definition, explicit!’

Of course, the possibility to resort to what is self-evident sets limits to definitions. One could not possibly define all concepts sufficiently clear, even if one wanted to. Moreover, it would not be for the better of a science to look at definitions as a perennial task. One has to set limits to the formulation of analytic propositions in science, not least because a scientist should formulate above all empirical propositions. Defining the right borderline here is a subject one easily could debate forever. Nevertheless, the following two rules seem to ease the efforts of defining the key terms of a science.

The first rule runs as follows: ‘Define at least the concepts in the center of your discipline, and theories, and start defining them before going on to define others.’ The second rule demands: ‘Define the key concepts of your discipline and theories as precisely and unambiguously as necessary for the testing of those theories in which they are applied.’

Both rules serve objectives that are quite obvious. The first objective is to provide for a sufficient measure of intelligibility and understanding for scientific dispute. The second objective is to avoid the preference of scientific theor...

Table of contents

• Cover
• Title
• Copyright
• Contents
• Preface
• Acknowledgments
• Introduction
• 1. Ethical preliminaries
• 2. Economics
• 3. Justice
• 4. Business ethics
• 5. Concluding remarks
• Notes
• Bibliography
• Index