FoundationsofBusinessEthics

Considerationsonthemethodologyofbusinessethics
andtherolesofphilosophyandeconomicswithin

ChristianU.Becker
DepartmentofPhilosophy
ThePennsylvaniaStateUniversity

November2011
Abstract
The paper discusses the subject matter and approach of business ethics, and
reflects on the roles of philosophy and economics in this field. I argue that, although established economics and ethics seem to be obvious reference points
for business ethics, the methods of business ethics cannot just be based on both.
Neither a simple reference to the concepts of modern economics nor a simple
application of established ethical theory is sufficient for the analysis of ethical
issues of modern business and the modern global economy. Established economics offers a rather specific understanding of the economy and, moreover,
entails an implicit inherent ethics, neither of which is appropriate to the complex ethical challenges of current business. Traditional philosophical ethics, on
the other hand, is not equipped to fully recognize and analyze the specific
ethical dimension and the ethical challenges of the modern economy. Business
ethics must strive for an enhanced understanding of the economy, identify the
specific ethical challenges of modern business, and develop a distinctive ethical
approach if it is to adequately analyze the ethical dimension of modern business
and to provide a fruitful normative framework for the economy of the future.
Philosophy is challenged by the ethical dimension of modern business to contribute to the development of such an encompassing business ethics within an
inter- and transdisciplinary discourse with economics, other social sciences, and
practitioners.
Keywords
Business Ethics, Methodology, Philosophy, Economy, Philosophy of Economics
Contact
The Pennsylvania State University, Department of Philosophy, 240 Sparks
Building, University Park, PA 16802, USA, phone: +1 (814) 865-3046, fax: +1
(814) 863-7986, email:cub20@psu.edu
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Electronic copy available at: http://ssrn.com/abstract=1773174

1.

Introduction

The relationship between ethics and the economy is not a recent topic of study. Rather, it is
as old as the history of economic and philosophical thought. Economic and philosophical
thought were originally closely related fields, and it was not until the neoclassical economics of the late 19th and 20th century that economic analysis and ethical reflection have
been strictly separated.1 However, since the 1970s discussions regarding the ethical aspects
of business have once again intensified and these discussions have led to the establishment
of the modern field of business ethics.2
The rise of the modern field of business ethics has mainly been motivated by societal issues
and concerns about business. A series of spectacular scandals and collapses in the business
world, e.g., the Lockheed bribe scandal in the 1970s, the Bophal disaster, the Enron bankruptcy in 2001, and the recent financial crisis, have led to a steadily increasing societal
demand for ethical reflection on and normative orientation of business activities.3 This has
led, in particular, to an increasing request for academics to provide research and teaching of
business ethics. It is of no surprise that the discipline of philosophy has specifically been
asked for assistance with this research and education, as ethical questions have been a traditional subject of philosophical thought.
Philosophy has responded to this increasing demand for business ethics and has particularly in the US been substantially involved in the development of business ethics education and research. A common and intuitive approach has been the application of philosophical tools already available, i.e., the application of established ethical theories to the field
of economic action.4 This method of addressing ethical aspects of modern business is a
simplified applied ethics, i.e., an applied ethics that takes the approaches and, to a large
extent, also the subject matter as given.5 While this kind of applied ethics can produce some
fruitful results, it does not recognize and address the ethical dimension of business in all its
aspects and does not fully develop the potential of philosophy to contribute to business
ethics.
One particular shortcoming is the lack of explicit reflection on basic methodological questions of business ethics, which must be primary concerns of philosophical inquiry: What
exactly are the issues and questions of business ethics? What are the characteristics of the
ethical subject matter, and what would be the adequate way of approaching it? Are there
systematic ethical specifics of business, and if so, what are they? Or are the ethical issues
that arise in the field of economic action not distinct from ethical issues in other areas of
life and action? In the latter case, one would not need to define business ethics as a distinct
field of applied ethics but could address ethical issues in the world of business with the
same approaches used for any general ethical issue.

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4

See, e.g., Weber [1918](1988) and Robbins (1935) for two prominent contributions to the idea of
separating economics and ethics.
See De George (2006) for an overview over the history of American business ethics, and Liedekerke
& Dubbink (2008) for the recent history of European business ethics.
See also De George (2006).
For a more detailed discussion of such approaches see, e.g., Audi (2010) and Green & Donovan
(2010).
Examples of such an applied business ethics would be the Kantian business ethics by Bowie (1999)
or the Utilitarian approach of business ethics by Gustafson (2008).
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Electronic copy available at: http://ssrn.com/abstract=1773174

The first crucial question for the foundation of business ethics as a distinct field of applied
ethics therefore is: Are there specific ethical issues that are systematically related to the
economy and require a specific analysis? If the answer is yes, the second question is: Can
the specific ethical issues of the economy be analyzed by established ethics, or do we need
new methodical instruments for their analysis? What are the requirements for an adequate
approach? The third question is: Which disciplines can contribute to business ethics and in
what ways? Particularly, what roles do philosophy and economics have in business ethics?
These methodological questions are at the core of a foundation of business ethics, which I
will discuss in this paper. I aim at a definition of the subject matter of business ethics and at
a definition of criteria for adequate approaches. I discuss requirements to the method of
business ethics with regard to specific characteristics of its subject matter, i.e., with regard
to the specifics of the ethical issues of business. I argue that the ethical issues of modern
business are, in part, new issues and cannot be fully understood by referring to established
ethics and economics, although both disciplines seem to be intuitive methodological reference points.6 Rather, we need to develop an integrative, inter- and transdisciplinary type of
business ethics, which critically refers to economics and ethics but also to other social sciences, the history of economic thought, heterodox economics, the philosophy of economics,
and the insights of practitioners.
With this, my paper is a contribution to the methodology of business ethics that, similar to
the methodologies of many recent, socially inspired fields of research, is still unsettled and
controversial.7 The paper also promotes stronger integration of business ethics and philosophy of economics, both of which are highly relevant to the ethical discussion of modern
business but often operate in isolation.8 By addressing the relationship between ethics and
economics, the paper contributes to the discussion on the methodology of economics.
Finally, the paper helps to understand the importance of philosophy in the analysis of crucial societal issues and particularly clarifies the role that philosophy can play in business
ethics beyond a simplified applied ethics.
2.

The question concerning the economy

To determine the subject matter of business ethics, one first needs to identify the specific,
ethically relevant characteristics of the field of economic action. This means that one needs
to answer the following questions: What is the economy? and What are the specific ethical
challenges of the economy? Two aspects of the answers to these questions are of particular
relevance for the foundation of business ethics.
First, it is important to recognize that the economy is not a value-free realm that receives
values and norms merely through external ethical considerations and external ethical rules.

Sen (1987) and Hausman & McPherson (2006) are two prominent calls for relating ethics and economics, which argue that such a relationship will be fruitful for both. I agree that relating both fields is
promising, but argue in this paper that some crucial ethical issues of modern business can not be recognized and analyzed on the mere basis of established ethics and economics.
See, e.g., the methodological papers of Audi (2010) and Green & Donovan (2010), as well as Cortina
(2008) and Bowie (2000).
See particularly Sen (1987) and Hausmann & McPherson (1993; 2006) for an overview of the ethical
relevant issues related to economic theory. For a general overview of the philosophy of economics
see Hausman (1994) and the Journal Philosophy and Economics.
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The economy already entails an inherent ethics implicit norms, values, virtues, and judgments of actions and attitudes as right or wrong.9 The inherent normative and evaluative
elements of the economy are mostly implicit and tacitly given, and must be identified and
determined to become objects of further explicit ethical reflection. The implicit inner normativity of the field of economic action is one specific ethical characteristic of the economy
to which any encompassing approach of business ethics must refer. I will discuss this
aspect later in more detail.
The second crucial aspect of the above-mentioned questions concerning the economy is the
seemingly already existing answer to these questions. If we ask questions about the economy, it seems obvious for us to refer to the discipline of economics. Academic and political
discussions as well as business ethical considerations indeed usually refer to concepts and
explanations of modern economics to discuss various aspects of business. With this, modern economics has an important impact on the present views of the economy. Crucial economic concepts, such as efficiency, are important for the public awareness and public discussions of economic matters. These concepts have been constructed within the specific
frameworks of modern economics, and public discourse refers to, draws upon, and thereby
largely understands the economy through the lens of these conceptual, ontological, and
normative frameworks.
However, an uncritical reference to modern economics is problematic for at least two reasons. First, modern economics has developed a rather specific and limited conception of the
economy, which does not capture all aspects of the economy and, particularly, not all ethically relevant aspects of modern business. One may even say that modern economics does
not primarily focus on the economy as its subject matter, but rather on the analysis of a specific kind of rational decision making.10 Second, modern economics implicitly entails a
rather specific understanding of the inherent normativity of the economy. It entails a simplified inherent ethics that does not cover the actual complex ethical characteristics and challenges of the modern economy in all its aspects. I will discuss this point in more detail by
referring to the development of modern economics since Adam Smith and to the main theoretical basis of current mainstream (neoclassical) economics: general equilibrium theory.
3.

The economy and modern economics

The modern conception of the economy has been substantially influenced by Adam Smith
and his eminent work Wealth of Nations, published in 1776. Smiths economic thought is
rather complex and is embedded into his philosophical thought on the functioning of society. However, a specific, isolated part of his economic conception has become particularly
notorious and influential in the development of modern economics and the modern concept
of the economy.11 This is the consideration and combination of two basic principles: First,

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11

The inherent normativity of the economy has specifically been discussed by Ulrich (1997) and also
by Solomon (1991) and Hausman & McPherson (2006), among others.
See, e.g., Kirchgssner (1991) for such a remark.
This means that, within the further development of modern economics, Smiths economic thought
has been reduced and its broader (philosophical) context neglected. One may say that, due to this
simplification, Adam Smith has broadly been misunderstood (see, e.g., Dierksmeier 2011: 265f;
Young 2009). Nevertheless, it is the simplified reception of Smith that has been particularly relevant
to the development of modern economics. A reconsideration of Smiths thought may provide impor4

Smith recognizes individual self-interest and self-love as original motive forces of economic actions.12 Second, in contrast to many other philosophers, Smith considers self-interest and self-love not as ethically problematic or dangerous forces to society that may easily
lead to chaos or social destruction.13 Rather, he argues that self-interest and self-love can be
positive forces. In the sphere of the economy, if properly framed, self-interested actions
systematically result in overall social welfare.14
Smith assumes that there exists a systematic ordering function of the economy, an invisible
hand, which leads the various self-interests to common welfare, at least if the economy is
designed properly as a market economy. With this, Smith introduces the idea of a systemic
rationality that has become crucial to the modern conception of the economy.15 This basic
idea of systematic rationality of the economy has underpinned the further development of
modern economic thought toward a mathematically based science and is at the core of neoclassical economics, which is the dominant paradigm of contemporary economics. The
economic system is understood as a rational system, i.e., it has a foreseeable, calculable
order. This view of the economy at the same time entails a specific inherent systemic ethics:
within the economy, the crucial element for realizing social welfare is the proper design of
the system the framework of action and not individual morality.
Modern neoclassical economics is based on specific assumptions about human beings and
their decisions and actions. Subjective wants and preferences are considered to be the primary motivators of individual actions and are considered as given. Economics does not deal
with the origins, content, or justification of individual wants and preferences. However,
economics assumes certain patterns of behavior that all individuals are thought to have in
common. In established economic theory, it is generally assumed that every individual acts
as a homo economicus,16 i.e., as a self-related, rational utility-maximizer. Self-related
means that the individual preferences are independent from, i.e., not influenced by, the
preferences of other individuals. Rationality means the ability of each individual to order
her wishes completely and in a consistent way.17 Utility maximizer means that the individual is able to calculate the optimal realization of all her wishes under the given restrictions
of her means. Usually this is formalized by maximization of the individuals utility function
under given budget restrictions.
Most analyses and insights of modern economics are based on these assumptions. A main
result of general equilibrium theory is that, under certain additional conditions, interaction

12
13

14
15
16

17

tant inspiration for reconsidering modern economics and the modern economy (Dierksmeier 2011;
Manstetten et al. 1998).
Smith [1776]2000: i.ii.2.
A prominent example for such a negative view is Hobbes [1651](2008), who also understood humans
as being driven by egoistic motives but concluded that this would result in social destruction if not
regulated and controlled by a strong sovereign.
Smith [1776]2000: iv.ii.6.
See Hayek (1967).
For encompassing discussions of the view of the human being in economic thought, see Kirchgssner
(1991) and Manstetten (2000).
This usually is more precisely determined by the following formal assumptions: (i) The assumption
of completeness of preferences: The individual is able to say about any pair of alternatives from its
entire wishes, which alternative it prefers against the other. (ii) The assumption of transitivity of preferences: If an individual prefers A against B, and B against C, then it also prefers A against C. For
more details see e.g. the standard textbook on microeconomics by Mas-Colell et al. (1995: 5-16).
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of the homines economici in a free market leads to a socially optimal state in terms of
Pareto-efficiency. This means that the market interaction leads to a state in which it is not
possible to make any individual better off without making another one worse off. In short: a
market-equilibrium is Pareto-efficient.18 With this, Adam Smiths idea of systemic rationality of the market economy his invisible hand mechanism reoccurs in modern economics in a mathematically precise and provable version.
Modern neoclassical economics entails ethically relevant assumptions about individuals
and their interactions, and (implicitly) introduces these assumptions by economic analyses
and expertises into political and public discourses. Individuals are considered to be selfrelated rational utility maximizers, Pareto-efficiency becomes a crucial, sometimes even
dominant social norm, and markets and competition are recognized as the preferred instruments of coordinating social interactions because they seem to guarantee efficient social
states. The economic perspective ultimately shifts the focus from the individual to the systemic aspects of social interaction and, with this, from individual to systemic ethics. The
design of the framework of actions is considered to be more relevant than individual morality to the implementation of preferred social states i.e., typically Pareto-efficient states.
The specific inherent normativity of modern economics has a substantial impact on many
fields of political discussion and decisions, particularly as it is inherent in most economic
consulting for politics and government. Economics specific assumptions about the human
being implicitly impact environmental politics, social politics, healthcare politics, education
politics, etc. Efficiency becomes the dominant norm, market failures are identified and
deplored, and market instruments are propagated.
4.

Neoclassical economics as a reference point for business ethics

There have been several attempts to refer to the inherent ethics of modern neoclassical economics to develop an explicit theory of business ethics.19 Such approaches generally adopt
the assumptions economics makes about the human being and concentrate on the systemic
aspects of the economy. The basic version of these approaches is an explicit systemic ethics
that considers the role of individual morality in the world of business to be more or less
insignificant. Ethical issues of business are considered to be primarily issues of the proper
design of the economic system and its rules, not issues of individual morality. The only
requirement for the individual is to act as a homo economicus within the system and to
respect the rules of that system.20 The requirements for the rules are to be in accordance
with the basic conditions of the economic system and, in particular, not to generate inefficient situations.
However, a systemic business ethics that is solely based on modern economics runs into
practical, ethical, and methodical problems. A mere systemic regulation of economic
actions does not work for the current economy, particularly not with the assumption of the
18
19
20

See, e.g., the ground-breaking works of Arrow (1951) and Debreu (1959).
For example, by Homann (2002) and Suchanek (2001).
One may argue that there is a minimum morality of the homo economicus required, at least to follow
the rules and respect the right of property, etc. (Kirchgssner 1991). However, it seems to be more in
accordance with the concept of the homo economicus that following the rules is established by sanctions that impose a potential loss of utility on individuals breaking the rules or violating property
rights (see, e.g., Becker 1978).
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homo economicus. Todays economy is a global, complex and dynamic system that cannot
be fully controlled by designing rules and systemic conditions for individual actions. If all
agents were to act as mere self-interested rational utility-maximizers, they might always
find loopholes for which no appropriate rules exist and take personal advantage of them.
The complexities and dynamic changes occurring within modern business generate many
new situations and opportunities for action to which no previously existing rule may apply,
and the process of designing new rules cannot keep up with the speed of the markets.
Focusing primarily on the systemic aspects of business may lead to an overall attitude of
careless and egoistic behavior and the shifting of responsibility to others in society or politics, who are considered to be responsible for designing and enforcing the rules. It may
become a convenient excuse for escaping the burden and challenge of individual morality.
This may negatively impact the self-identities of business people and their willingness and
capacity for moral decision making. The result may be a reduction of the economic actor,
with negative consequences for the individual, society, and business itself. There is a
danger of actually reducing the economic actor to a homo economicus, a mere rule
follower, and an uncritical and amoral being. However, the most crucial ethical cases are
often those for which there is no rule, and it is these cases in which individual morality
the ability for moral judgment and responsible action is most important. One has to
consider in how far specific knowledge, information, and positions in the world of business
imply specific individual responsibilities, duties, or virtues. In the highly specialized world
of financial business, for instance, a few experts may have full knowledge of new specific
financial products that are not yet known to others and have not yet been recognized by the
appropriate authorities, and this knowledge determines the specific individual ethical
responsibility they have as experts.
Such a specific individual morality must have its place in business ethics. This is not to say
that individual morality is sufficient and should be the exclusive focus of business ethics.
Systemic ethical aspects regarding how to properly design the economic system remain a
crucial issue of business ethics. However, individual ethics and systemic ethics belong
together and need to be considered simultaneously in an encompassing business ethics. In
an ideal case, individual morality and systemic ethics would mutually support and enforce
one another.
However, modern economics offers no sufficient basis for developing an individual ethics
immanent to business. The homo economicus can have any set of preferences, and leaves
room for any type of values, virtues, or norms. This conception does not provide a theoretical basis for the systematic justification of certain values, virtues, or norms. However,
although the homo economicus seems to be morally arbitrary with regard to single norms or
values, it is not neutral to or compatible with any type of established ethical theory. If we
refer to the homo economicus as the main anthropological understanding of the human
being, most established ethical approaches would actually lose their basis: deontology, virtue ethics, and utilitarianism could not be developed and justified based on the narrow
rationality of the homo economicus. These ethical approaches require the underlying
assumption of a more substantial ethical rationality, such as practical wisdom (phronesis)
defined by Aristotle21 or practical reason defined by Kant.22 Moreover, established ethical
theories are largely in conflict with the homo economicus and his self-related character and
21
22

Aristotle (2000).
Kant [1788](1998).
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specific technical rationality. For instance, the homo economicus usually involves the
assumption of the substitutionability of preferences, which is not compatible with the idea
of absolute binding duties or guiding personal virtues. Thus, any unexamined combination
of economic theory and ethics would be methodologically problematic. One cannot just
implement a simple division of labour and add ethical analysis to economics, but needs to
carefully analyze the theoretical compatibility between the assumptions of economics and
the ethical theory chosen.
The request for an explicit orientation of business ethics towards the specific ethical characteristics and challenges of the economy cannot simply be met by referring to modern
economics in an unreflective way. Business ethics needs to consider the specific ethical
relevance of the concepts and assumptions of economic theory. In this regard, economics is
not only a tool or reference point for business ethics but also part of the subject matter of
business ethics. Business ethics should, however, not restrict itself to a critical examination
of and discussion with modern economics. In doing so, business ethics would rely too
heavily on the very specific understanding of the economy and the inherent ethics provided
by modern economics. Business ethics must also reflect on the phenomenon of the modern
economy and its various ethical aspects and challenges beyond the perspective and concepts of conventional modern economics. Business ethics must go beyond the patterns of
economic thought established by modern economic theory and develop a broader perspective on the economy and its ethical issues.23 This is necessary to gain an encompassing and
adequate definition of the subject matter of business ethics and is a prerequisite for a discussion on the appropriate methods of business ethics.
5.

Ethical aspects and challenges of the current economy: An enhanced perspective

Business ethics needs to develop an extended view of the modern economy and its ethical
challenges. I will outline some elements of such a view to demonstrate the complexity of
the specific ethical aspects of the modern economy and to determine the challenges of an
encompassing business ethics. I particularly want to demonstrate that the economy has an
inherent ethical dimension that is far more complex than mainstream (neoclassical) economics suggests. At the same time, I want to demonstrate that modern business raises ethical
questions that are new and beyond the scope of established ethics, as well. To develop an
encompassing perspective, I will distinguish and consider three important levels of the
economy: (i) the level of the individual involved in various ways in economic structures
and processes, (ii) the level of economic organizations such as companies, corporations and
banks, and (iii) the level of the economy as a whole, as a complex, global system.24

23

24

This critique includes Ulrich (1997). Although Ulrich (1997) has recognized and analyzed the inherent normativity of modern economics in detail, he did not develop an enhanced perspective on the
modern economy. He argues on the basis of a rather abstract instrumental view of the economy
(Ulrich 1997: 210ff), which is too elemental and not adequate to the present complex and global
economy. Thus, the subject matter of business ethics remains partly undetermined. With this, a crucial methodological question remains open: one must ask whether discourse ethics, which Ulrich
chooses as ethical approach, is an adequate approach for business ethics.
This distinction of levels of business has also been used by Zimmerli & Alnder (2005) and Solomon (1991a).
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5.1

The individual in the context of the economy

One can broadly define the economy as the entirety of actions, institutions, and organizations dealing with the production, distribution, consumption, and disposal of goods and
services to satisfy human needs and desires in a rational way. With this, every individual
is, in various ways, involved in the economy. Many aspects of our daily life and actions are
related to the economy. However, economic theory and the concept of the homo economicus do not capture this economic dimension of human life and actions in all aspects. It is
well known, for instance, that many actions and interactions that would be classified as
economic ones by the above definition cannot be fully understood and explained based on
the homo economicus alone.25 This has been recognized within economics itself and has led
to new fields of research, such as behavioral economics, and to intense discussions about
the concept of economic rationality.26 Of particular interest for business ethics is the
observation that ethical principles of the individual are relevant to economic decisions and
actions. This has become evident, for instance, in experiments such as the ultimatum
game,27 in which principles of justice prove crucial to economic decisions, and it also
becomes evident in everyday business practices. For example, one can identify specific
business virtues such as leadership skills, professional integrity, and toughness in negotiations,28 or one can observe ethical principles in the consumption of fair trade or organic
products. Established neoclassical economics can recognize these virtues and principles
only as additional arbitrary aspects, but cannot consider such ethical aspects as systematically entailed in individual economic decision making and action.
The disregard for the role of individual morality in modern economic theory is an artificial
simplification related to the specific construction of the rationality of the homo economicus.
This specific concept of economic rationality is not inevitable; rather, it is an aberration in
the history of economic thought. From Aristotle to Adam Smith, economic rationality
always had an individual ethical component. From the beginning of systematic economic
thought, Aristotle explicitly defined economic rationality as the specific ability of the individual to apply ethical rationality (phronesis) to the particular situation of the economy
(oikonomia).29 Even Smith not only recognized the systemic rationality and inherent systemic ethics of the invisible hand but also acknowledged an individual economic rationality
that was related to the basic element of his moral philosophy: sympathy. This individual
economic rationality is the ability to recognize the self-interest of the other person and to
put oneself in the position of the other.30 It is a crucial precondition for understanding and
addressing the self-interest of the other, and for recognizing possibilities for bargaining.
One crucial theoretical challenge for business ethics is the proper reintegration of the ethical dimension of individual economic action and decision making into the analysis of the
25

26

27
28
29
30

A prominent example is the ultimatum game (see Gth et al. 1982 and Camerer et al. 2003). For additional examples see also Camerer et al. (2003).
For an overview of the field of behavioral economics, see Kahneman & Tverski (2000) and Camerer
et al. (2003); for the discussion of the concept of economic rationality, see Hargreaves-Heap (1989),
Dennis (1998) and Hausman & McPherson (2006). For the concept of bounded rationality, see also
Klaes & Sent (2005).
See Gth et al. (1982) and Camerer et al. (2003).
See Solomon (1991).
See Becker (2009).
Smith [1776]2000: i.ii.2.
9

economic actor. A key concept for this is the concept of individual economic rationality.
The challenge is the development of an enhanced concept of economic rationality that
would adequately incorporate the inherent ethical aspects of individual economic behavior
and would overcome the narrow and amoral rationality of the homo economicus.31 Such an
integrative ethical model of the human actor would particularly contrast with approaches
that uncritically accept the homo economicus as the core concept of individual economic
rationality and add additional types of rationality as a completion or correction to the homo
economicus. External completion or correction to the homo economicus could occur by
adding a systemic rationality to generate an ethical orientation of the economy, as discussed
above, or by adding additional levels of individual rationality, which provide ethical guidance for the economic actor, as is suggested by Ulrich (1997) drawing on Habermas (1981;
1983).32 All these approaches, however, are still too strongly based on the narrow construction of the homo economicus. As long as this is the case, the discussions remain focused on
the ideas of external correction and ethical guidance of economic actions and decisions, and
fixed to a conflict between ethical and (individual) economic rationality. This conflict,
however, is largely artificial, as it is mainly a result of the theoretical and technically motivated construction of the homo economicus.33
5.2

The level of economic organizations

Although the individual actor has been the main reference point of modern economic theory, one crucial phenomenon of modern business has been the emergence of various economic organizations, such as corporations, stock markets, banks, etc. These organizations
have specific characteristics and play a crucial societal and global role that does not fit into
traditional schemes of individuals and nations. These organizations particularly exhibit a
range of systematic - partly new - ethical aspects. The methodological question is to what
extent one can use established theories to analyze modern economic organizations and their
ethical aspects.34 Some characteristics seem to be beyond the scope of both economic theory and established ethics. I will demonstrate the methodological challenges with the
example of the corporation, a particularly important type of organization in the present
economy.
Corporations, as companies in general, are structures of social interaction and as such, they
have an inherent system of values and norms a mostly implicit web of patterns of behaviour, forms, imperatives and taboos that has emerged over time. Profit maximization is
not the only motivation and purpose of a corporation and usually is not sufficient to support
the sustainable success of a corporation. Rather, long-term success also requires the proper
and explicit development of the inner system of values and norms. This ethical challenge
31
32
33

34

Becker (2009).
See also Becker (2009).
Also, such approaches run into difficulties with the integration of an amoral rationality of the homo
economicus with an ethical rationality and, in particular, into theoretical difficulties regarding the
incompatibility of both (see Section 4).
See, e.g., Phillips & Margolis (1999), who argue for the need of a distinct ethics of organizations to
adequately refer to the specific purpose and power of organizations such as corporations. See also
Hartman (2001), Moriarty (2005), and Heath, Moriarty & Norman (2010) for this discussion.
Moriarty (2005), in particular, provides a discussion of the potential input of political philosophy. See
also Wieland (1999) for the ethical implications of the global role of corporations.
10

for the corporation is, for instance, addressed by the implementation of codes of ethics. A
code of ethics provides an explicit framework of rules toward which all employees can and
should orientate their actions. A code of ethics may be considered a type of systemic ethics
that intends to provide a framework of rules for the organization as a whole. Again, it is
important to recognize that systemic ethics alone is not sufficient, but needs to be supplemented and supported by individual morality to become a fruitful ethical guidance. The
individuals within the corporation have to be willing and able to actualize the general and
abstract rules of the code of ethics in concrete everyday situations of action. This may be
best realized by participatory and democratic processes which explicitly foster and support
individual responsibility.
A further ethical aspect of corporations concerns their role within society. This has been a
dominant theme in recent business ethics, mainly discussed with regard to the concept of
Corporate Social Responsibility (CSR).35 The discussion of CSR exhibits a move away
from the idea that the functioning and societal meaning of a corporation is essentially
determined by profit maximization.36 A company is not merely an entity that increases
overall wealth by profit maximization, and a companys impact on society cannot fully be
captured in abstract terms such as contribution to GDP, job creation, or tax payment.
Through its various internal and external relations to social groups and actors, the corporation has a specific, concrete societal function. This aspect has prominently been addressed
by Edward Freeman with his stakeholder approach.37 Freeman uses the term stakeholder
for all groups and actors who are in some way related to a corporation and have some interest or stake in it groups and actors for whom the corporation is of particular relevance.
This can include employees, suppliers, customers, communities, and NGOs. Against the
theoretical background of the stakeholder approach, a CSR strategy is a managementinstrument for the active, proper development of all stakeholder relations of a corporation.
CSR addresses a specific ethical aspect of business. It addresses the societal embeddedness
of business and the specific responsibilities of a particular business entailed by its particular
type of stakeholders and relationships.
Moreover, a corporation has a concrete impact on societies through its specific products
and competencies, an impact that goes beyond its general contribution to overall societal
welfare through profit maximization. For instance, a bank is not just an arbitrary organization for generating profits. It also provides an important, concrete service to people and
societies through its core competence of accumulating, administering, and providing financial capital. A CSR strategy can help to specify and communicate the specific expertise a
corporation provides to society and the concrete role it plays in society by demonstrating its
expertise through voluntary additional contributions. This helps to build an internal identity
and external reputation and, with this, fosters both the long-term success of a business and
its ethical role in society and the global community. In the case of banks, for instance,
micro-credit programs in underdeveloped regions would be a successful CSR policy. This
would demonstrate and utilize the core competency of a bank in regions that need it most.
The specific methodological challenge at the level of the economic organization is the
development of an explicit organizational ethics that can adequately refer to the specific
ethical aspects outlined above. In particular, one would need to develop a consistent ethical
35
36
37

See, e.g., Liedekerke & Dubbink (2008).

This is the neoclassical view that, e.g., Milton Friedman (1970) held and communicated prominently.
Freeman (2010).
11

framework for the organizational values and norms that foster the internal integrity and
proper social and global embedment of the organization.
Both the individual and the organizational level of the economy must, however, be discussed against the background of a third level in which they are necessarily embedded, and
which exhibits some crucial ethical aspects and challenges of modern business and the
modern economy. This is the level of the economy as a complex, global system.38
5.3

The economy as a complex, global system

The modern economy is a complex, global system. We are faced today with a complex
worldwide interdependence of economic organizations, actors, and actions. This holds true
even for basic everyday actions of consumption. For instance, by buying and using a simple
product, such as clothing, food, or electronics, we take part in very complex global processes of production, distribution, and waste management and are related, in many ways, to a
large number of people around the world who are participating in these processes in their
own ways. Moreover, as these processes often impact the environment and the future, simple acts of consumption set us into various relationships with nature and future generations.
These relationships are mostly indirect and tacit relationships, that we are unaware of and
do not know in detail. Furthermore, the impact of the modern economy as a whole on
global relations, the environment, and the future is continuously increasing, and alters the
global natural environment and the living conditions of future generations in a substantial
way. Some examples include the increasing consumption of energy and resources, global
climate change, and the worldwide loss of biodiversity, which are all primarily caused by
global economic activities.
The specific characteristics of the modern economy involve specific ethical issues. Globality, complexity, and the power of the modern economy to impact the environment and future
generations all generate new ethical challenges. We need to consider the meaning of the
economy for global relationships, future generations, and nature in a new way. We need to
develop a theoretical framework for discussing the effects and further development of the
economic system as a whole in this respect. Neither mainstream economics nor established
ethics is fully suitable to approach and analyze these new challenges of the global economy.
Economic theory and economic methods have been developed to analyze the interaction of
individuals within a limited time horizon and have considered nature only parenthetically,
and in a very specific way, as being either one production factor, one good, or one side
condition among others.39 Likewise, established ethics has mainly focused on the interaction of persons in a temporally and spatially confined context. Our moral relationship
with nature or future generations was not a primary concern.
Economic instruments and the underlying inherent ethics of modern economics are, therefore, not applicable for analyzing and overcoming the new crucial challenges of the global
economic system. The concepts of Pareto-efficiency and market instruments fall short.
Nevertheless, this is the common way economics addresses the challenges and issues of the
current economy: it attempts to extend the instruments and methods at hand to new problems without critical reflection on whether these instruments are adequate for the new
38

39

See also Wieland (1999) for a detailed discussion of the ethical challenges and ethical meaning of
global corporations.
Baumgrtner et al. (2006); Becker (2008).
12

problems. With regard to the environment, for instance, environmental economics interprets
and frames environmental problems as market failures e.g. as external effects and
suggests market instruments, such as tradable emission-permits or ecological taxes, as
solutions. The main idea is to overcome market failures with economic instruments and to
establish a Pareto-efficient state. However, this approach is not fully suitable for many
global and long-term environmental issues, such as climate change or biodiversity loss.
Neither external effects nor Pareto-efficiency can be determined in a sensible way on a
global or long-term scale. Moreover, the economic understanding of nature is limited to an
indirect evaluation based on individuals preferences and underpinned by the idea of substitutionability. Other characteristics relevant to the economic dimension of the humannature relation, such as absolute scarcity of nature or basic human needs cannot be addressed within this theoretical framework.40
Similarly, as Hans Jonas had already stated with regard to an ethics of technology, the ability of established ethics to discuss ethical issues of the human-nature relationship and the
relationship with future generations is limited.41 For instance, Utilitarianism runs into difficulties when applied to our relationship with future generations due to the uncertainty of
long-term consequences of our (economic) actions; deontology has limits when referring to
nature, as it is based on a rather strict separation of human rationality and nature, which is a
strong precondition for approaching the human-nature relationship.42
Thus, the modern economy involves new, specific challenges that neither established economics nor established ethics can fully analyze. The ethical challenges of the complex
global economic system require the development of a new approach that can discuss the
meaning of the economy to global relationships, future generations, and nature in an adequate and encompassing way. Recent developments in applied ethics may help to address
some of the new ethical challenges of global business and may provide some methodological support for business ethics. For instance, global ethics and development ethics have
specifically discussed ethical aspects of global relationships, environmental ethics has discussed ethical aspects of the human-nature relationship, and sustainability ethics focuses on
the integrated ethical analysis of our threefold relationship with other contemporaries,
future generations and nature.43 Likewise, various approaches of heterodox economics have
referred to new challenges of todays global economy beyond the limited perspective of
mainstream economics. For instance, ecological economics has analyzed the interrelation
between nature and the economic system,44 social economics has addressed the complex
societal role of the economy,45 feminist economics has focused on gender issues of economic structures and development,46 and the importance of distributional issues on the
global and long-term scale has recently been reconsidered. Cooperation with various fields
40
41
42
43

44

45
46

See Baumgrtner et al. (2006); Becker (2008).

Jonas (1974).
See Becker (2011) for a more detailed discussion.
See, e.g., Gasper (2004) and Goulet (2006) for descriptions of the field of development ethics, Light
& Rolston (2003) for an overview of the topics of environmental ethics, and Becker (2011) for the
conception of sustainability ethics to which I am referring here.
See Costanza (1991) and Common & Stagl (2005) for an overview of the field of ecological economics.
See, e.g., Davis & Dolfsma (2008) for an overview of social economics.
See Seiz (2005) for a short overview of the development and state of feminist economics. In particular, see Ferber & Nelson (2003) for recent contributions.
13

of applied ethics and heterodox economics would substantially contribute to the ability of
business ethics to refer to the new challenges of the global economy. At the same time,
such cooperation could integrate the various (isolated) perspectives of these fields on various (ethical) aspects of todays complex and global economy into one encompassing perspective.
6.

The philosophical perspective

Philosophy can provide important support for an encompassing ethical discussion of business that integrates all three levels and the various ethical aspects of modern business
described above. The philosophical contribution to business ethics is neither limited to a
discussion of the specific role of ethics in the world of business nor to a mere instrumental
ethics, i.e., an ethics that serves as an instrument to stabilize and support business as it is.
Rather, philosophy can and should critically reflect on the current patterns of economic
thought and action. It should reflect on the current economy and its meaning for human life
in an encompassing way; it should discuss the meaning of modern business for individual
life and self-identity, society, global interrelations, nature, and future generations.
The subject matter of a philosophically informed business ethics is not only the ethical
issues that spring from the currently established conception of business and the actual complex realization of global economy, but also the current concepts of the economy and the
procedures of modern business itself. Business ethics must critically discuss modern concepts and practices of business and consider alternative ways of understanding and doing
business against the background of an ethical framework. Business ethics must discuss the
place of the economy in the overall context of human life and relations. This requires the
simultaneous development of two related lines of analysis: (i) one that discusses our understanding of the economy, and (ii) one that develops an ethical framework against which
alternative concepts and designs of the economy can be evaluated.
(i) A crucial first step of such a philosophically informed business ethics is a critical reflection on the current concepts and actual characteristics of the modern economy. This particularly entails a close examination of the concepts of modern economics, their underlying
normative assumptions, their presence in public and political discussions, and the various
ways they are combined with additional concepts, values, and norms, e.g., with a specific
idea of individual freedom or growth paradigms. Such a reflection requires an autonomous,
critical, and historically informed viewpoint that allows one to recognize the origins and
specifics of the current conception and design of the economy, and to identify the specific
ethical aspects of modern business against the background of the history of economic and
philosophical thought.
A critical examination of the current understanding and actualization of the economy is a
prerequisite to a well-informed ethical discussion about the economy and alternative economic conceptions. It is a prerequisite to an encompassing discussion about the question of
what would be a good economy. This question is not dealt with to its fullest extent in most
current discussions of the economy or business ethics, either because it is assumed to be
already answered or because the question is considered to be irrelevant, as the economy is
thought to be a given phenomenon following unchangeable laws. However, neither of these
is the case. Even if the economy we have developed thus far has been good and successful
in some sense, we need to recognize that we are facing new challenges, including global
environmental destruction and depletion of basic resources, and need to raise and discuss,
14

in a new way, the question of a good economy in light of these new challenges. Furthermore, business is a human doing, and as long as we assume that the human being is not
fully determined but free, we can, of course, change the economy.
(ii) The other reference point of a fundamental ethical reflection on the economy is a suitable philosophical framework against which one can analyze and judge the current understanding and situation of the economy and develop alternative economic conceptions. Such
a framework must be adequate to the current situation and capture the future challenges of
the economy. This can no longer be, for instance, the Aristotelian framework of an ideal
state (polis) and a good life within, against which Aristotle defined a good economy and
proper economic action.47 Rather, we need a new ethical framework to reflect the current
complex, dynamic and global economy and its challenges. A starting point for designing
such a framework might be new norms that have already been developed and discussed,
such as sustainability or concepts of global and inter-temporal justice or human security.
We may frame, for instance, an ethics that asks for a sustainable or a globally and intertemporally just economy. This would then lead to a reformulation of the philosophical
question about the meaning of the economy for human life in a way that can effectively
address the present situation.48
This task goes beyond a simple applied ethics. Such philosophically informed business
ethics would discuss the meaning of the economy for human life and nature in the long run
and would develop an ethical perspective for integrating the economic dimension adequately into an overall conception of life. It would integrate two lines of thought: a critical
discussion of the concept of the economy and the development of an adequate ethical
framework for a future economy.
7.

Conclusion: Methodological implications for business ethics

Business ethics cannot simply refer to established economics and established ethics. Neither a simple adoption of the concepts of economics nor a simple application of existing
ethical methods is adequate to the ethical aspects and challenges of the modern economy.
Established economics does not provide an understanding of the economy that entails all
relevant ethical aspects and inherent normative elements of the economy. Established ethics
cannot fully address the inner normativity of economic thought, and it cannot fully capture
or discuss all the specific ethical challenges of the current economy that I have outlined
above.
From the discussion thus far, it follows that an encompassing business ethics that could
fully address the ethical issues and challenges of todays economy would need to fulfill the
following six methodological requirements:
(1)

47
48

Business ethics needs the ability to critically examine modern economic theory, in
order to critically analyze the concepts, assumptions, and methodical instruments of
modern economics and to identify and discuss its normative assumptions and inherent
ethics.
Aristotle (1995; 2000); see also Becker (2009).
See, for instance, Becker (2011) for an ethical discussion of the modern economy against the background of sustainability ethics, and CHS (2003) and Gasper (2004; 2005) for a human security perspective. See also the prominent contribution by Nussbaum & Sen (1993) to the development of a
philosophical framework for discussing the modern economy.
15

(2)

Business ethics must analyze the impact of economic theory on society and politics,
and identify further values and norms that are added to economic theory such as
specific ideas of individual freedom or economic growth in order to develop an encompassing understanding of the currently dominant patterns of economic thought
and action, and their origins and mechanisms. This task also must also include an
analysis of the societal powers that foster and maintain these patterns of economic
thought and action and their dominance.

(3)

Business ethics must be well informed about the history of economic and philosophical thought particularly about the history of crucial economic concepts such as
economic rationality in order to understand the specifics of current economic concepts in light of their historical conceptual development.

(4)

Business ethics must generate its own encompassing perspective on the modern economy beyond the dominant interpretation and view of economics and must identify
ethically relevant aspects and ethical challenges beyond the perspective of established
economics.

(5)

Against the background of the requirements (1) (4), business ethics must develop an
encompassing ethical framework to discuss all ethical aspects and challenges of the
modern economy in a consistent way and to discuss basic philosophical questions
about the meaning of the economy for human life in a way that captures the current
situation and future challenges of the economy adequately.

(6)

Finally, altogether, business ethics must be able to critically discuss the current ethical aspects and challenges of the modern economy in a fundamental way. It must be
able to develop alternative, ethically informed conceptions of the economy and its
future development that solve current economic issues and provide a sensible integration of the economy into a general concept of human life and the future of humankind on earth. Elements of such a development of an alternative conception of the
economy are: (i) an extended concept of economic rationality, including the inherent
ethical moment of individual economic decisions and actions, (ii) a proper connection
between individual and systemic ethics, and (iii) an ethical framework that refers to
one of the main challenges of the current economy: its meaning for global relations,
future generations, and nature.

Regarding these requirements, business ethics is best defined and developed as an interand transdisciplinary type of research that includes several fields of study. In particular,
philosophy can play a leading role in such an inter- and transdisciplinary business ethics but
must meet the challenge of adequately adopting and utilizing its tools and abilities. Philosophy is crucial because it provides approaches and competencies relevant to all six
requirements listed above. Philosophy can analyse economics from a philosophy of science
perspective and examine the assumptions, concepts, and methods of economics. Philosophy
can critically reflect on current economic patterns of thought and action. It can provide a
crucial, historically informed perspective on economic concepts such as economic rationality. Through a phenomenological perspective, philosophy can contribute to the development of a broader perspective on the economy. Finally, philosophy can develop a broader
ethical framework for business ethics and a general perspective on the meaning of business
for human life. However, to be able to play such a role in business ethics, philosophy needs
to refer to various other academic disciplines and practitioners and be integrated in an
intensive discourse and collaboration with other disciplines and practitioners. Philosophy
16

particularly needs to develop the ability and willingness to enter such an intensive discourse
and needs to modify and further develop its concepts and approaches to become able to
address new (ethical) issues and challenges of the 21st century.
Economics can and should play a crucial role in business ethics, as well. First, we need a
critical dialogue between philosophy and economics to foster methodological and ethical
reflections on economic theory. Secondly, it would be fruitful for business ethics to refer to
specific recent fields of economic research beyond established (neoclassical) economics.
For instance, behavioral economics can provide important inspiration and insight for business ethics (see section 5.1), and research on the history of economic thought can help with
the reconsideration of the ethical dimension of the economy and understanding of the origin
and development of economic concepts. Additionally, recent heterodox economic approaches, such as ecological economics, social economics and feminist economics, can help to
recognize and better understand new or previously unrecognized (ethical) aspects of todays
economy, which are not sufficiently addressed in the history of economic thought or in
established mainstream economics (see section 5). An integrated dialogue with all fields in
current economic thought relevant to ethical aspects of the economy may also be important
for economics itself. Such a dialogue can support a critical reflection on the methods and
ends of economic research, and help to focus economic research more on current issues and
future challenges of the economy. Also, such a dialogue can foster broader methodological
considerations on the relationship between economics and ethics.
However, the above mentioned requirements for business ethics are to some extent beyond
the competencies of philosophy and economic thought and require cooperation with other
academic disciplines and even societal groups and business actors. A critical analysis of the
current patterns of economic thought and action and their functions in society needs to be
supported by sociology, psychology, and political science, among others. An encompassing
examination of the global economy and its impact on different cultures and intercultural
relationships requires cooperation with cultural studies or anthropology. Analyses of the
interrelation of economic and natural systems require cooperation with natural sciences.
Additionally, the development of a broader perspective on the economy requires substantial
input from business administration and from practitioners from various fields of business.
Some types of cooperation already exist to some extent. For instance, behavioral economics
has cooperated with psychology, ecological economics with natural sciences and social
economics with social sciences. Existing business ethics research often refers to concrete
business cases and issues of business actors. However, these types of cooperation are often
specific and focus on isolated (ethical) aspects. An inter- and transdisciplinary business
ethics needs to integrate such existing research into an encompassing discourse on the ethical issues and future challenges of the economy.
Forming an encompassing inter- and transdisciplinary business ethics is no easy task and
represents a particular challenge for philosophy and economic thought. However, such
business ethics would enable us to consider business in a new, encompassing way and to
think about its meaning for individual life and self-identity, social and global relationships,
nature, and future generations. It would refer in an encompassing way to the issues and
challenges of the current economy, critically examine the current situation and current economic patterns of thought and action, and substantially contribute to an ethical orientation
of the future design and development of the economy of the 21st century.

17

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