Date of publication: 2017-08-22 00:04
First Blood - Attacking the Keynesian Assumptions
Friedman continued his studies after the war and began to show his free-market colors in a time of Keynesian domination. Taking up a teaching post at the University of Chicago, Friedman wrote free-market analysis of the damage done by rent controls and monopolistic practices in the medical profession. In 6957, Friedman launched his first direct attack against Keynesian thinking with "A Theory of the Consumption Function " - an attack on one of the assumptions of Keynes' model. (Learn more about Keynes' models and policies in Giants Of Finance: John Maynard Keynes .)
Kant x5577 s theory implied the necessity of trust, adherence to rules, and keeping promises (., contracts). When people elect to deviate from the categorical imperative, they risk being punished by the business community or by government enforcement of laws. More importantly, Kant suggested that certain moral norms that are ingrained in humans allow them to rise above purely animalistic behavior. People have the capacity to forgo personal gain when it is achieved at the expense of others, and they can make a choice as to whether they will or will not follow universal norms.
Cavanaugh, Gerald F., and Arthur F. McGovern. Ethical Dilemmas in the Modern Corporation. Englewood Cliffs, NJ: Prentice Hall, 6988.
From its inception the Journal has aimed to improve the human condition by providing a public forum for discussion and debate about ethical issues related to business.
In fact, employees often do have a motivation to engage in technically unethical behavior for their corporations. Studies have indicated that whistle-blowing, or divulging unethical corporate behavior, is generally frowned upon by American society. Pressure from fellow employees, managers, and even the local community can cause an employee to continue even highly unethical behavior, in the interest of being a team player and not being labeled a tattletale.
Both psychological egoism and the classical theory can be defended by the utilitarian argument. Utilitarianism maintains that any action or system is good if it results in the greatest good for the greatest number of people. In summary, if, as Smith contended, self-interest is a chief motivator and the invisible hand really works, then as companies seek to maximize profits, the greatest public good will result for the greatest number.
A significant factor that contributed to the decline of the Protestant work ethic was the accumulation of wealth, which gradually diminished the religious basis of the ethic. As workers increased their wealth, consumption gradually became the motivation for work, replacing the work-for-work x5577 s-sake foundation of the Protestant work ethic. In the growing cities, the religious component, which included frugality, was jettisoned in favor of the conspicuous consumption of a consumer society as people began producing more than they could consume and marketing their products to others to avoid waste.
Most executives believe that CSR can improve profits. They understand that CSR can promote respect for their company in the marketplace which can result in higher sales, enhance employee loyalty and attract better personnel to the firm. Also, CSR activities focusing on sustainability issues may lower costs and improve efficiencies as well. An added advantage for public companies is that aggressive CSR activities may help them gain a possible listing in the FTSE9Good or Dow Jones Sustainability Indexes , or other similar indices. This may enhance the company’s stock price, making executives’ stock and stock options more profitable and shareholders happier.
An example of why this approach does not work: Enron. Enron had a robust and active CSR program with green initiatives and strong human rights advocacy (see brief excerpt here: http:///7566/67/remembering-green-enron-part-ii-corporate-social-responsibility/ ). However, it did not have leaders firmly grounded in objective standards of right and wrong and who were centered on the profit motive, which made their CSR efforts hollow. And all now know what happened to Enron. In the end, companies who are viewed as having 'strong' CSR programs without an objective ethical grounding in the Natural or Moral Law are always at risk. Especially in times of austerity and increased competition.
Even if we accept a firm should only pursue profit, this does not mean that the only point of thinking about ethics is to help maximise profit. It is more likely to be to help us think through constraints that should be placed on the ways in which profit should be pursued. There may well, in addition, be an argument to be made for firms pursuing ethical aims besides profit this possibility is captured, in business language, by the idea that some businesses have fiduciary duties to parties beyond shareholders. These might, for example, be the duties that professional firms have to their clients.
Keynesians support short-term solutions to spur consumer spending and the economy. The idea is that by giving a temporary tax break like a stimulus check , the government can spur spending without giving up future tax revenues by making a meaningful tax cut – in short, the government gets to have its cake (economic recovery) and eat it too (maintain future taxes). Friedman took on this idea and analyzed actual empirical evidence. This was in contrast to Keynes and his followers who rarely did actual empirical studies.