class: middle, title-slide # Business Ethics — Ethics and Economics ## Justice and Economic Distribution ### Dennis A. V. Dittrich ### 2022 --- layout: true <div class="my-footer"> <span><img src="img/tcb-logo.png" height="40px"></span> </div> --- class:middle .row.col-7[ .question[ Can you give examples of just societies? Can you give examples of unjust societies? Why are they unjust? What criteria do you use in determining that a society is just or unjust? ] ] --- class:middle .row.col-7[ .question[ Suppose that you were shipwrecked alone on an island with no hope of rescue. Can you be said to act either in a just or unjust manner, given the fact that you are alone? Is it possible for you to act morally (or immorally)?] ] --- # Economic justice .row[.col-7[ Economic justice concerns a network of moral issues in our society. These issues are raised by society’s norms about distribution of wealth, income, status, and power. Justice is a subclass of morality in general and it has a social dimension because it concerns the proper distribution of social benefits and burdens. <br/> .question[ Should CEOs give themselves enormous salaries at the expense of stockholder profits and employee salaries? Should expensive medical procedures be available only to those who can afford them? ] ]] --- # The Nature of Justice .row[.col-6[ **Definitions of justice** Justice is related to morality as part to a whole, and is often specified in connection with concepts such as **fairness** , **equality** , **desert** or **rights** . It is one important aspect of morality. Talk of justice generally involves related notions of fairness, equality, desert, and rights. ] .col-6[ **Aristotle on justice as fairness** Treat similar cases alike except where there is some relevant difference **Mill on justice as a moral right** Justice implies something that is not only right to do, and wrong not to do, but something that an individual can claim from us as a moral right ]] --- ## Poverty, Inequality, and the Distribution of Income .row[.col-6[ | Society | Red | Blue | Green | Average Income| |:---|---:|---:|---:|:---:| |A| 100|100|100|100| |B| 150|100|50| 100| |C| 600|600|99| 433| |D|1096|102|101|433| ] .col-6[ .question[ 1. Just thinking about yourself, if you did not know in advance whether you were a Red, Blue, or Green person, would you rather live in society A, B, C, or D? Why? 2. Which society would you like least? Why? ] ]] --- # Five rival principles of distribution .row[.col-6[ Each an equal share Each according to individual need Each according to personal effort Each according to social contribution Each according to merit ] .col-6[ **Reconciling rival principles of distribution** Some philosophers argue that principles are applicable in some circumstances and not in others – but it is not always clear how to reconcile two or more rival principles in the same circumstances. **Michael Walzer’s approach** The idea that different distribution principles depend on implicit social norms. ]] --- # The Nature of Justice .row[.col-5[ .question[ The Alderson Federal Prison Camp in West Virginia housed domestic guru Martha Stewart... is the type of institution that has come to be known as a “country-club prison.” How is this sort of description likely to affect some people’s notion of just desert and equality of justice?” ]] .col-7[ ![](img/Shaw9e_PPT_Ch031.jpg) ] ] --- ## Poverty, Inequality, and the Distribution of Income .row[.col-7[ The BIG question: **What is a just distribution of income?** Three influential views: 1. Utilitarianism 2. Nozick’s entitlement theory of justice 2. Rawls’s maximin principle ] .col-5[ Theories of justice are much like **normative** theories of ethics. They are meant to be applied to our arguments when we want to know if an act is just or unjust. We can support or criticize theories of justice by showing that they are or aren't compatible with our considered moral beliefs—the same way we can support and criticize normative theories of ethics. ]] --- # Utilitarianism .row[.col-5[ The idea that the best society maximizes the sum of utility. * It tries to implement policy outcomes which bring the greatest sum of utility (or “happiness”) to society. .tip[ Does everyone value $1 equally? Or do the poor face a higher utility for each dollar of income than the rich? * If so, utility can rise by redistributing money from wealthy to poor. ] ] .col-7[ * Utilitarianism recognizes the role of incentives when redistributing income. * Taking money away from richer people decreases their incentive to earn, so more redistribution could reduce overall wealth enough to reduce total utility. * Additionally, giving dollars to poor people is not always the best way to improve their welfare. * Utilitarianism’s assumption about utility differences goes further than economic theory does: **There is no scientific measurement of utility.** However, most economists do support a “safety net” as insurance against job loss and other disasters. ]] --- # The Utilitarian View .row[.col-5[ **Reconciling rival principles of justice** Mill argued that rival principles of justice can be reconciled only on the basis of the principle of utility, such as through considerations of general well-being. Utilitarianism does not tell us which economic system will produce the most happiness. ] .col-7[ #### Deciding which system will promote most happiness depends on knowing 1. The type of economic ownership 2. The form of production and distribution 3. The type of authority arrangements 4. The range and character of material incentives 5. The nature and extent of social security and welfare provisions ]] --- # Distinctive utilitarian application .row[.col-7[ **Worker participation** In his **Principles of Political Economy** (1848), Mill argued for the formation of labor and capital partnerships promoting equality between workers and industrialists. **Greater equality of income** Utilitarians are more likely to favor equal income distribution on the basis of the so-called **declining marginal utility of money** . ]] --- # The need of the many... .row[.col-7[ <video controls controlsList="nodownload" style="width:100%; height: auto;"> <source src="pic/need.mp4" type="video/mp4" > Your browser does not support the video tag. </video> ] .col-5[ .question[ Suppose that 1 billion people are suffering from a moderately severe headache that will last a few hours. The only way to alleviate their headache is for one person to die a horrible death. Can the death of this one person ever be justified in a cost-benefit sense? ] ] ] --- # Application of utilitarianism .row[.col-6[ .question[ Is it unjust to sell broken TV sets without saying they are broken? ] Doing so would benefit the seller, but not the buyers. They are likely to be deceived and lose money as a result. The benefits of the few don't justify even greater harm done to others. Nowadays, assessing the quality of products requires expertise that buyers can't be reasonably required to have. ] .col-6[ .question[ Is it just for the government to stop businesses from polluting?] Sometimes, yes. Pollution is often beneficial to the buyer and seller, but it can harm many others. Willingness to pollute can save the buyer and seller some money for a transaction, but it could cost someone else a lot if they get sick from the pollution. The benefits of the few don't outweigh greater costs others are likely to suffer. The government might need to limit the amount companies are allowed to pollute to keep similar situations from occurring. ] ] --- # The Libertarian View .row[.col-6[ **The principle of liberty** Libertarians refuse to restrict individual liberty even if doing so would increase overall happiness. **Nozick’s theory of justice** Nozick developed an influential statement of the libertarian position in his book **Anarchy, State, and Utopia**, based on the idea of negative and natural rights borrowed from the writings of the British philosopher John Locke (1632–1704). ] .col-6[ **The idea of Lockean negative and natural rights** The idea amounts to (1) non-interference with the way others choose to live or act, and (2) the ownership of those rights prior to any social and political institution. ]] --- # Nozick’s entitlement theory ## AKA the libertarian theory of justice .row[.col-7[ Nozick maintains that people are entitled to their holdings (that is, goods, money, and property) as long as they have acquired them fairly. The distribution of income in a society is just if property is justly acquired and voluntarily exchanged. * The income distribution is irrelevant, what matters is the process by which income is acquired. * If trades are voluntary, doesn’t that mean both trading partners are better off than before (even though over time income inequality may increase)? ] .col-5[ .your-turn[Nozick: “all capitalist acts between consenting adults should be allowed” ...provided they do not infringe on the rights of others ] ]] --- # Principles of Nozick’s entitlement theory .row[.col-6[ 1. A person who acquires a holding in accordance with the principle of justice in acquisition is entitled to that holding. 2. A person who acquires a holding in accordance with the principle of justice in transfer, from someone else entitled to the holding, is entitled to the holding. 3. No one is entitled to a holding except by (repeated) applications of statements 1 and 2. ] .col-6[ **Nozick’s Wilt Chamberlain example** * The player of a team is guaranteed $5 from the price of each ticket. * He is a favorite player and eventually ends up with far more than the average income. * Nozick argues that Chamberlain is entitled to his new wealth, and that any other theory of economic justice would inevitably fail to defend his entitlement. ]] --- # Distinctive libertarian ideals .row[.col-6[ **Liberty** Libertarians support economic laissez-faire and oppose any governmental economic activity that interferes with the marketplace, even if the point is to enhance the performance of the economy. **Free markets** Libertarians don’t contend that people morally deserve what they get in a free market, but only that they are entitled to it. Moreover, justice does not necessarily help those in need. ] .col-6[ **Property rights** For libertarians, property rights exist prior to any social systems and legislative acts, reflecting one’s initial appropriation of a product or exchange between consenting adults. #### Criticisms of libertarian property rights 1. Property includes more than material objects. It also has many abstract forms. 2. Property ownership is not a simple right but involves a bundle of different rights. ]] --- # The Libertarian View .row[.col-5[ .your-turn[ According to the libertarian theory of justice, the people that own the house in the background have no obligation to assist the homeless. The wealth that they have acquired is theirs to dispose of entirely as they wish. ]] .col-7[ ![](img/Shaw9e_PPT_Ch032.jpg) ] ] --- # Application of Libertarianism .row[.col-6[ .question[ Is it unjust to sell broken TV sets without saying they are broken? ] Selling the TV set usually implies that a functional TV is for sale that will do what TV sets are supposed to do. To sell a TV set that doesn't work ordinarily breaks an implied contract between buyer and seller. ] .col-6[ .question[ Is it just for the government to stop businesses from polluting? ] Sometimes, yes. Pollution can violate our right to noninjury. A company that pollutes can harm people, and we aren't allowed to harm others. When we do harm others, we are required to pay reparations. The government can legitimately protect people from being harmed and seek reparations for those who are harmed by pollution. ]] --- # Rawls’s Theory of Justice .row[.col-5[ John Rawls (1921–2002), one of the most influential contemporary social and political philosophers, suggests a social concept of justice in his ground-breaking work **A Theory of Justice** . Two important features of Rawls’s theory: 1. The hypothetical-contract approach 2. The principles of justice that Rawls derives through it ] .col-7[ **The original position** Rawls proposes a thought experiment – individuals are allowed to choose the principles of justice that should govern them prior to any existing political or social arrangement. **The nature of the choice** Each individual will choose the set of principles that will be best for him/herself (and loved ones). **The veil of ignorance** To avoid disagreement with others while pursuing one’s self-interest, all circumstances and conditions that can influence one’s choice of principles of justice (economic background, talents, privileges, etc.) ought to be removed. Once the basis for bias is eliminated, the groundwork for a choice of fair principles of justice is established. ]] --- # Rawls’s Theory of Justice .row[.col-7[ **Choosing the principles** Regardless of their particular interests, people in the original position will want more, rather than less, of the so-called **primary social goods** (income and wealth, rights, liberties, opportunities, status, and self-respect). **The maximin principle** Justice requires maximizing the benefits to society’s most disadvantaged group. People in the original position will choose conservatively, by trying to maximize the minimum that they will receive. They want to make sure that the worst that could happen to them is the least bad of the alternatives. ]] --- # Rawls’s Theory of Justice --- Two Principles .row[.col-5[ 1. Each person is to have an equal right to the most extensive total system of equal basic liberties, compatible with a similar system of liberty for all. 2. Social and economic inequalities are to satisfy two conditions: To be attached to positions open to all under conditions of fair equality of opportunity, and to give the greatest expected benefit to the least advantaged members of society. ] .col-7[ * The first principle takes priority over the second – it guarantees as much liberty to individuals as possible, compatible with others having the same amount of liberty. * The first part of the second principle articulates the familiar ideal of **equality of opportunity**. * The second part of the principle – called the **difference principle** – stipulates that inequalities are justifiable only if they benefit the least advantaged members of society. ]] --- # Rawls’s Theory of Justice .row[.col-7[ **Fairness and the basic structure** Rawls rejects utilitarianism because it could permit an unfair distribution of benefits and burdens. He rejects the economist’s idea of trade-offs, and concludes that the worst-off group should be the priority of all policy. Contrary to Nozick, Rawls believes that social justice concerns the basic structure of society, not transactions between individuals. **Benefits and burdens** According to Rawls, justice requires that the social and economic consequences of arbitrarily distributed assets (natural characteristics and talents) be minimized. ]] --- # Rawls’s Theory of Justice .row[.col-6[ | Society | Red | Blue | Green | Average Income| |:---|---:|---:|---:|:---:| |A| 100|100|100|100| |B| 150|100|50| 100| |C| 600|600|99| 433| |D|1096|102|101|433| <br/> Rawls would assert that Society A is more just than Society B because the worst off person in Society B (Green) has more income in Society A. ] .col-6[ .question[ To a Rawlsian, would the world be better off with and one additional billionaire but without the Harry Potter novels? ] ] ] --- # Rawls’s Theory of Justice .row[.col-6[ It is often believed that the maximin principle favors societies with a more equal distribution of income. Comparing Society A with Society D refutes this assertion. | Society | Red | Blue | Green | Average Income| |:---|---:|---:|---:|:---:| |A| 100|100|100|100| |B| 150|100|50| 100| |C| 600|600|99| 433| |D|1096|102|101|433| ] .col-6[ **Economists** (utilitarians?) argue that the maximin principle is inadequate for evaluating policy because it ignores _trade-offs_. A little bit less income to the worst off, for example, might be acceptable if it comes with a big enough gain to others. Or, lower average income might be acceptable if income is a little bit more equally divided. ] ] --- # Application of Rawls's Theory of Justice .row[.col-6[ .question[ Is it unjust to sell broken TV sets without saying they are broken? ] Rawls is likely to agree that sales and other business transactions involved implied contracts. Selling TV sets that don't work is deceptive unless they are explicitly stated to be broken. The policy to allow buyers to be deceived in this way is likely to harm the lesser advantaged people of society. ] .col-6[ .question[ Is it just for the government to stop businesses from polluting? ] Sometimes, yes. Pollution is likely to harm the lesser advantaged people of society. ]] --- class:middle .row[.col-7[ .question[ What answer would each theory of justice give to the following questions: 1. Why is it unjust to allow people to sell themselves into slavery? 2. Should the government give a huge bail out to big banks to keep them in business? ] <br/> .question[ Do we have any reason to prefer one theory of justice over the rest? What are the best objections to each theory of justice, and how could an advocate of the theory respond to the objection? ] ]]o