ETHICS IN THE MARKET – Theories and Definitions

PERFECT COMPETITION:

A free market in which no buyer or seller has the power to significantly affect the prices at which goods are being exchanged.

PURE MONOPOLY:

A market in which a single firm is the only seller in the market and which new sellers are barred from entering.

OLIGOPOLY:

A market shared by a relatively small number of large firms that together can exercise some influence on process.

MARKET:

Any forum in which people come together for the purpose of exchanging ownership of goods or money.

EQUILIBRIUM POINT:

The point at which the amount of goods buyers want to buy exactly equals the amount of goods sellers want to sell, and at which the highest price buyers are willing to pay exactly equals the lowest prices sellers are willing to take.

DEMAND CURVE:

A line on a graph indicating the most that customers would be willing to pay for a unit of some product when they buy different quantities of those products.

SUPPLY CURVE:

A line on a graph indicating the prices producers must charge to cover the average costs to supplying a given amount of a commodity.

PRINCIPLE OF DIMINISHING MARGINAL UTILITY:

Each additional item a person consumes is less satisfying than each of the earlier items the person consumed.

PRINCIPLE OF INCREASING MARGINAL COSTS:

After a certain point, each additional item a seller produces costs more to produce than earlier items.

POINT OF EQUILIBRIUM:

The point at which the supply and demand curves meet, so amount buyers want to buy equals amount suppliers want to sell and price buyers are willing to pay equals price sellers are willing to take.

Perfectly Competitive Free Markets are characterized by the following 7 features:

1. There are numerous buyers and sellers, none of whom has a substantial share of the market.
2. All buyers and sellers can freely and immediately enter or leave the market.
3. Every buyer and seller has full and perfect knowledge of what every other buyer and seller is doing, including knowledge of prices, quantities, and quality of all goods being bought and sold.
4. The goods being sold in the market are so similar to each other that no one cares from which each buys or sells.
5. The costs and benefits of producing or using the goods being exchanged are borne entirely by those buying or selling the goods and not by any other external parties.
6. All buyers and sellers are utility maximizers. Each tries to get as much as possible for as little as possible.
7. No external parties(such as government) regulate the price, quantity, or quality of any of the goods being bought and sold in the market.

MORAL OUTCOMES OF PERFECTLY COMPETITIVE MARKETS:

• Achieve a certain kind of justice.
• Satisfy a certain version of utilitarianism.
• Respect certain kinds of moral rights.

MONOPOLY MARKET CHARACTERISTICS:

• One Seller
• High Entry Barriers
• Quantity below Equilibrium
• Prices above equilibrium and Supply Curve
• Can extract monopoly profit.

OLIGOPOLISTIC COMPETITION:

IMPERFECTLY COMPETITIVE MARKETS:

Markets that lie somewhere between the two extremes of the perfectly competitive market with innumerable sellers and the pure monopoly market with only one seller.

HIGHLY CONCENTRATED MARKETS:

Oligopoly markets that are determined by a few large firms.

HORIZONTAL MERGER:

The unification of two or more companies that were formerly competing in the same line of Business.

PRICE FIXING:

An agreement between firms to set their prices at artificially high levels.

MANIPULATION OF SUPPLY:

When firms in an oligopoly industry agree to limit their production so that prices rise to levels higher than those that would result from free competition.

EXCLUSIVE DEALING ARRANGEMENTS:

When a firm sells to a retailer on condition that the retailer will not purchase any products from other companies and/or will not sell outside of a certain geographical area.

TYING ARRANGEMENTS:

When a firm sells a buyer a certain good only on condition that the buyer agrees to purchase certain other goods from the firm.

RETAIL PRICE MAINTENANCE AGREEMENTS:

A manufacturer sells to retailers only on condition that they agree to charge the same set retail prices for its goods.

PRICE DISCRIMINATION:

To charge different prices to different buyers for identical goods or services.

UNETHICAL PRACTICES IN OLIGOPOLY INDUSTRIES:

• Price – Fixing
• Manipulation of supply
• Exclusive dealing arrangements
• Tying Arrangements
• Retail Price Maintenance Agreements
• Price Discrimination

PRICE LEADER:

• The firm recognized as the industry leader in oligopoly industries for the purpose of setting prices based on levels announced by that.

TRUST:

An alliance of previously competitive oligopolists formed to take advantages of monopoly powers.

MAIN VIEWS OF OLIGOPOLY POWER:

• Do-Nothing View
• Anti trust View
• Regulation View

ETHICAL PRINCIPLES IN BUSINESS – Various Definitions

ETHIC OF CARE:

An ethic that emphasizes cring for the concrete well being of those near to us.

ETHIC OF VIRTUE:

An ethic based on evaluations of the moral character of persons or groups.

UTILITARIANISM:

A general term for any view that holds that actions and policies should be evaluated on the basis of the benefits and costs they will impose on society.

UTILITY:

The inclusive term used to refer to any net benefits produced by an action.

UTILITARIANISM:

• Advocates maximising utility.
• Matches well with moral evaluations of public policies
• Appears intuitive to many people
• Helps Explain why some actions are generally wrong and others are generally light.
• Influenced Economics

COST BENEFIT ANALYSIS:

A type of analysis used to determine the desirability of investing in a project by figuring whether its present and future economic benefits outweight its present and future economic costs.

EFFICIENCY:

Operating in such a way that one produces a desired output with the lowest resource input.

NONECONOMIC GOODS:

Goods such as life, love, freedom,equality, health, beauty, whose value is such that no quantity of any economic good is equal in value to the value of the noneconomic good.

INSTRUMENTAL GOODS:

Things that are considered valuable because they lead to other good things.

INTRINSIC GOODS:

Things that are desirable independent of any other benefits they may produce.

JUSTICE:

Distributing benefits and burdens fairly among people.

RIGHTS:

Individual entitlements to freedom of choice and well being.

EVALUATING UTILITARIANISM:

• Critics say not all values can be measured.
• Utilitarians respond that monetary and commonsensee mesures can measure everything.
• Critics say utilitarianism fails with rights and justice.
• Utilitarians respond that rule – utilitariansim can deal with rights and justice.

LEGAL RIGHT:

An entitlement that derives from a legal system that permits or empowers a person to act in a specified way or that requires others to act in certain ways toward that person.

MORAL RIGHTS:

Rights that human beings of every nationality possess to an equal extent simply virtue of being human beings.

CHARACTERISTICS OF RIGHTS:

• A right is an individual’s entitlement to something.
• Rights derieved from legal systems are limited by jurisdiction
• Moral or human rights are based on moral norms and are not limited by jurisdiction.

SUMMARY OF MORAL RIGHTS:

• Tigthly correlated with duties.
• Provide individuals with autonomy and equality in the free pursuit of their interests.
• Provide a basis for justifying one’s actions and for invoking the protection or aid of thers.

NEGATIVE RIGHTS:

Duties others have to not interfere in certain activities of the person who holds the right.

POSITIVE RIGHTS:

Duties of other agent to provide the holder of the right with whatever he or she needs to freely pursue his or her interests.

KINDS OF MORAL RIGHTS:

• Negative rights require others leave us alone
• Positive rights require others help us
• Contractual or special rights require other to keep agreements.

CATEGORICAL IMPERATIVE:

The requirement that everyone should be treated as a free person equal to everyone else.

MAXIM:

The reason a person in a certain situation has for doing what he or she plans to do. 

UNIVERSALIZABILITY:

The person’s reasons for acting must be reasons that everyone could act on atleast in principle.

REVERSABILITY:

The person’s reasons for acting must be reasons that he or she would be willing to have all others use, even as a basis of how they treat him or her.

KANT’S CATEGORICAL IMPERATIVE FORMULAS:

• Never do something unless you are willing to have everyone do it.
• Never use people merely as means, but always respect and develop their ability to choose for themselves.

CRITICISMS OF KANT:

• Categorical Imperatives are unclear
• Kant’s rights can conflict
• Kant’s theory implies some mistaken moral conclusions

LIBERTARIAN PHILOSOPHERS:

• Believe that freedom from human constraint is necessarily good  and that all constraints imposed by others are necessarily evil except when needed to prevent the imposition of greater human constraints.

TYPES OF JUSTICE:

• Distributive Justice: Just distribution of benefits and burdens
• Retributive Justice: Just imposition of punishments and penalities.
• Compensatory Justice: Just compensation for wrongs or injuries.

DISTRIBUTIVE JUSTICE:

Distributive society’s benefits and burdens fairly.

RETRIBUTIVE JUSTICE:

Blaming or punishing persons fairly for doing wrong.

COMPENSATORY JUSTICE:

Restoring to a person what the person lost when he or she was wronged by someone.

EGALITARIANISM:

Every person should be given exactly equal shares of a society’s or a group’s benefits and burdens.

POLITICAL EQUALITY:

Equal participation in, and treatment by, the political system.

ECONOMIC EQUALITY:

Equality of income, wealth and opportunity.

PURITAN ETHIC:

The view that every individual has a religious obligation to work hard at his calling (the career to which God summons each individual).

WORK ETHIC:

The view that values individual effort and believes that hard work does and should lead to success.

PRODUCTIVITY:

The amount a person produces.

PRINCIPLE OF EQUAL LIBERTY:

The claim that each citizen’s liberties must be protected from invasion by others and must be equal to those of others.

DIFFERENCE PRINCIPLE:

The claim that a productive society will incorporate inequalities, but takes steps to improve the position of the most needy members of society.

PRINCIPLE OF FAIR EQUALITY OF OPPORTUNITY:

The claim that everyone should be given an equal opportunity to qualify for the more privileged positions in society’s institutions.

ORIGINAL POSITION:

An imaginary meeting of rational self interested persons who must choose the principles of justice by which their society will be governed.

VEIL OF IGNORANCE:

The requirement that persons in the original position must not know particulars about themselves which might bias their choices such as their sex,race,religino,income,social status etc.,

PRINCIPLES OF DISTRIBUTIVE JUSTICE:

• Fundamental: Distributive benefits and burdens equally to equals and unequally to unequals.
• Egalitarian: Distribute equally to everyone.
• Capitalist: Distribute by Contribution
• Socialist: Distribute by need and ability.
• Libertarian: Distribute by Free Choices
• Rawls: Distribute by equal liberty, equal opportunity, and needs of disadvantaged.

ETHIC OF CARE:

An ethic that emphasizes caring for the concrete well being of those near to us.

• Claims ethics need to be impartial.
• Emphasizes preserving and nurturing concrete valuable relationships.
• Says we should care for those dependent on and related to us.

COMMUNITARIAN ETHIC:

An ethic that sees concrete communities and communal relationships as having a fundamental value that should be preserved and maintained.

Objection to Care Approach to Ethics:

• Charge: Ethic of care can degenerate into favoritism.
• Response: Conflicting moral demands are an inherent characteristic of moral choices.
• Charge: Ethic of care can lead to “burnout”
• Response: Adequate understanding of ethic of care will address the need to care for the caregiver.

The Basis of Moral Judgements:

• Evaluations of social costs and benefits.
• Respect for individual rights.
• Just ditribution of benefits and burdens.
• Caring for those in concrete relationships.

MORAL VIRTUE:

An acquired disposition that is valued as part of th character of morality good human being and that is exhibited in the person’s habitual behaviour.

THEORIES OF MORAL VIRTUE:

• Aristotle: Habits that enable a person to live according to reason.
• Aquinas: Habits that enable a person to live responsibly in this world and be united with God in the next life.
• MacIntyre: Disposition that enables a person to achieve the good at which human”practices” aim.
• Pincoff: Dispositions we use when choosing between persons or potential future selves.

VIRTUE THEORY:

The theory that the aim of the moral life is to develop those general dispositions called moral virtues, and to exercise and exhibit them in the many situations that human life sets before us.

VIRTUE THEORY CLAIMS:

• We should exercise, exhibit, and develop the virtues.
• We should avoid exercising, exhibiting, and developing vices.
• Institutions should instill virtues not vices.