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Moving Beyond Market Failure: When the Failure is Government’s
... Peter Jaworski (2013) has objected that Heath incorrectly classifies rent seeking as a market failure when it should properly be understood as a government failure: ...
... Peter Jaworski (2013) points to the importance of taking government failure into consideration in the business ethics literature. Though not a representative of the position described here, Jaworski argues that analysing government failure "will help us to turn our critical gaze on government actors and the role they play in generating socially non-optimal outcomes" (2013: 5). ...
This chapter examines the different ways in which the appropriate role of business in a modern economy has been understood, and the implications for business ethics, the appropriate scope and nature of government regulation, and the legitimacy of rent seeking. We propose a new two-by-two typology of regulation and business ethics, based on different perspectives on the motivation of firms and whether market or government failure is considered most detrimental to the economy. Business ethics and regulation are then linked to rent seeking and the question of whether businesses should seek to shape regulation in accordance with their own interests.
... This last point lines up with my earlier comments about the need for corporations to refrain from polluting the public sphere if they are to get anything meaningful out of it. As with my comments, this does not necessarily imply any practical departure from to the MFA, which already features a strong prohibition on lobbying (Jaworski, 2013(Jaworski, , 2014Néron, 2016). ...
Managers often have discretion in interpreting their ethical requirements, and they should seek democratic guidance in doing so. The undemocratic nature of managerial ethical discretion is shown to be a recurring problem in business ethics. Joseph Heath’s market failures approach (MFA) is introduced as a theory better positioned to deal with this problem than other views. However, due to epistemic uncertainty and conceptual indeterminacy, the MFA is shown to allow a much wider range of managerial discretion than initially appears. The paper explores how this range can be narrowed down with democratic input, comparing models based on formal state institutions and on the informal public sphere. A case study from the pharmaceutical industry illustrates the merits of the informal public sphere approach.
... If one needs further evidence of reducing "public" to mean little more than preservation of sector boundaries and responding to market failures, there are plenty of other places to look (see Johnson 2015 for a historical overview). Indeed, some scholars contend that market failure criteria are much too generous in according a role to government and non-market actors (e.g., Aktan 2015;Jaworski, 2012;Tullock et al. 2002). ...
This response to George Frederickson’s retirement speech on the meaning of “public” in public administration highlights Frederickson’s intellectual influence, both on this author and, especially, the entire field of public administration theory. The current paper argues that both the empirical and normative meanings of public are vital and that the interaction of the two helps frame not only public administration theory but also the practice of public administration. By treating “public” as little more than a sector label, a stereotype, it is easy to march in lockstep with those who misguidedly marginalize public administration as little more than a means of addressing market failure.
... Five, I am aware that the approach defended here is rather demanding and would lead to radical changes in the patterns of corporate political behaviors. Critics of my reading of the market failures approach, such as Jaworski, for instance, would certainly see it as being too demanding for corporate managers when thinking about their organizations' political activities (Jaworski 2013(Jaworski , 2014. 32 As Heath mentions, from the standpoint of current business practices, the implications of this approach are almost utopian (2014, p. 203). ...
The aim of this paper is to provide some insights for a normative theory of corporate political activities (CPAs). Such a theory aims to provide theoretical tools to investigate the legitimacy of corporate political involvement and allows us to determine which political activities and relations with government regulators are appropriate or inappropriate, permissible or impermissible, obligatory or forbidden for corporations. After having explored what I call the “normative presumption of legitimacy” of CPAs, this paper identifies three different plausible strategies to criticize and object to corporate political involvement: the “egalitarian” strategy, the “corporate citizenship” strategy, and the “market failures” strategy. It constitutes an attempt to develop the market failures approach to reflect on CPAs. My main claim is that within such an account, the idea that corporations have a license to operate considerably limits their right to engage in political activities.
p>According to the Market Failures Approach to business ethics, beyond-compliance duties can be derived by employing the same rationale and arguments that justify state regulation of economic conduct. Very roughly the idea is that managers have a duty to behave as if they were complying with an ideal regulatory regime ensuring Pareto-optimal market outcomes. Proponents of the approach argue that managers have a professional duty not to undermine the institutional setting that defines their role, namely the competitive market. This answer is inadequate, however, for it is the hierarchical firm, rather than the competitive market, that defines the role of corporate managers and shapes their professional obligations. Thus, if the obligations that the market failures approach generates are to apply to managers, they must do so in an indirect way. I suggest that the obligations the market failures approach generates directly apply to shareholders. Managers, in turn, inherit these obligations as part of their duties as loyal agents.
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Mass incarceration is an approach to managing public safety that emphasizes detention over other means. It is also neoliberalism’s quintessential political and economic project because it mobilizes a prison industrial complex to generate revenue. We highlight rent‐seeking, the pursuit of extra‐budgetary revenues by carceral agencies, because it inflicts financial harm on incarcerated consumers and their supporters. Carceral agencies leverage government’s authority to set the conditions of detention. However, when they also leverage government’s market‐making authority to seek rents from incarcerated persons we characterize that as a government failure. To understand it, we depart from a focus on corruption by specific actors to highlight features of institutions that enable unethical behavior. We join activists and elected officials who call for an end to mass incarceration, but we also highlight more immediate reforms that can help restrain rent‐seeking and enable greater public scrutiny of the carceral state.
The growth of global value chains (GVCs) and the emergence of novel forms of value chain governance pose two questions for normative business ethics. First, how should we conceptualize the relationships between members of a GVC? Second, what ethical implications follow from these relationships, both with respect to interactions between GVC members and with respect to achieving broader transnational governance goals? We address these questions by examining the emergence of transnational eco‐labeling as an increasingly prominent form of GVC governance that is redefining the relationship between nominally independent firms. On the first question, we argue that GVCs occupy a middle ground between intrafirm and interfirm transactions, thereby posing a challenge to theoretical frameworks that attempt to apply ethical standards based on transaction types. On the second question, we argue that this unique institutional status leads to a range of novel ethical considerations and dilemmas for GVC members. Lead firms, their suppliers, and third‐party standard‐setters all confront new ethical quandaries when third‐party eco‐labeling is introduced to a GVC. The nature of these quandaries means that, while GVCs may be well‐positioned to serve as instruments of transnational governance, they are frequently not well‐oriented to do so. Our analysis marks an initial attempt to map the ethical considerations that apply to members of a GVC, and in doing so, places the literature on normative business ethics and transnational governance in a closer conversation.
In this address, I outline a “back to basics” approach to specifying the responsibilities and role of business in relation to society. Three “basics” comprise the approach. The first is arguing that basic principles of ordinary morality, such as a duty not to harm, provide an adequate basis for specifying the responsibilities of business managers. The second is framing the role of business in society by looking to the values realized by the basic building blocks of contemporary economic activity, i.e., markets and firms. The third is making explicit the basic institutions that structure the background against which business operates. The aim is to develop a plausible framework for managerial decision making that respects the fact of value pluralism in a global economy and that fosters meaningful criticism of current business practices while remaining sufficiently grounded in contemporary circumstances so as to be relevant for managers.
According to the market failures approach to business ethics, beyond-compliance duties can be derived by employing the same rationale and arguments that justify state regulation of economic conduct. Very roughly, the idea is that managers have a duty to behave as if they were complying with an ideal regulatory regime ensuring Pareto-optimal market outcomes. Proponents of the approach argue that managers have a professional duty not to undermine the institutional setting that defines their role, namely the competitive market. This answer is inadequate, however, for it is the hierarchical firm, rather than the competitive market, that defines the role of corporate managers and shapes their professional obligations. Thus, if the obligations that the market failures approach generates are to apply to managers, they must do so in an indirect way. I suggest that the obligations the market failures approach generates directly apply to shareholders. Managers, in turn, inherit these obligations as part of their duties as loyal agents.
Of the many developments in business ethics that Thomas Donaldson has helped pioneer, one is the application of social contract theory to address questions about the responsibilities of business actors. In
Corporations and Morality
, Donaldson develops one of the most sustained and comprehensive accounts that aims to justify the existence of for-profit corporations and to specify and ground their responsibilities. In order to further our understanding about the purpose and responsibilities of productive organizations, and as a contribution to the scholarship on Donaldson’s thought, this paper gathers together the critical responses to Donaldson’s account along with Donaldson’s replies to his critics. The paper argues that we would do well to continue engaging with Donaldson’s account because of its distinctive and challenging conception of the purpose and responsibilities of productive organizations, but that many of the insights to be gained come from reframing the role played by social contract theory.
Joseph Heath lumps in quotas and protectionist measures with cartelization, taking advantage of information asymmetries, seeking a monopoly position, and so on, as all instances of behavior that can lead to market failures in his market failures approach to business ethics. The problem is that this kind of rent and rent seeking, when they fail to deliver desirable outcomes, are better described as government failure. I suggest that this means we will have to expand Heath’s framework to a market and government failures approach. I then try to defuse objections that as a government failure, rent seeking may not appear relevant to what managers ought to do. Solving this conceptual issue will also give us an excuse to revisit a separate conceptual issue: the normatively thick conception of “rent” and rent seeking behavior that some use. This normatively thick conception is problematic, I argue, and I offer the beginnings of a novel, normatively neutral conception that is useful for our purposes in making the ethics of rent and rent seeking behavior more than a merely trivial exercise.
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