Hostname: page-component-cd9895bd7-gxg78 Total loading time: 0 Render date: 2024-12-25T18:52:07.356Z Has data issue: false hasContentIssue false

Ethics for Capitalists: A Systematic Approach to Business Ethics, Competition, and Market Failure, by Joseph Heath. Altona, MB: FriesenPress, 2023. 276 pp.

Review products

Ethics for Capitalists: A Systematic Approach to Business Ethics, Competition, and Market Failure, by Joseph Heath. Altona, MB: FriesenPress, 2023. 276 pp.

Published online by Cambridge University Press:  25 July 2023

Sareh Pouryousefi*
Affiliation:
Toronto Metropolitan University, Canada
Rights & Permissions [Opens in a new window]

Abstract

Type
Book Reviews
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of the Society for Business Ethics

One could be forgiven for thinking that the normative debate over capitalism in business ethics is one-sided. A cursory overview of the literature reveals a majority of interventions positioned in opposition to basic tenets of capitalism, such as efficiency and competition. Normative defenses of capitalism, in contrast, are hard to come by. Stepping forward as “the lodestar for ethical reflection” (93) in this sparsely populated camp, Joseph Heath’s Ethics for Capitalists offers a general theory of business ethics that will be of interest to scholars of political economy, philosophy, and management. In a departure from what he calls the “ad hoc and unmotivated” (203) state of the business ethics field, Heath’s book offers to help us think “systematically, reasoning on the basis of fully articulated principles” (2). Along the way, proponents of Kantian universalization, Christian charity, act-consequentialism, the multifiduciary stakeholder approach, and luck egalitarianism (among others) are criticized and baited for replies. This book is a must-read for anyone interested in business ethics, perhaps especially for those who do not find themselves on Heath’s side of the debate.

Heath has been writing about the market failures approach (MFA) to business ethics for two decades (Heath Reference Heath2014). This book is in large part dedicated to demonstrating that the MFA captures not just the implicit morality of markets, as established in Heath’s previous work, but also of firms. When all is said, the MFA is supposed to offer a framework for thinking about “the moral obligations of economic actors in both intrafirm and interfirm contexts” (7). In the first four chapters, Heath outlines the groundwork and justification for his approach to jus ad mercatum—the justification of the market economy. The chapters on competition and capitalism then set the stage for Heath’s approach to jus in mercatu—justice within economic and legal market institutions. Next, Heath fleshes out the implications of his view through a discussion of dishonesty before offering a stance on the firm, ownership, the moral obligations of individuals within firms, as well as labor relations more broadly. The book’s final chapter lists a catalog of issues that the MFA is not sufficient to deal with. Most of the book’s philosophical work is done by Heath’s setup of the argument—the way he conceives of jus ad mercatum and jus in mercatu and the way he divides up the burden of proof among market proponents and critics. There is a great deal of detailed, clever argumentation in the book, which cannot be fully summarized in this review. I offer a selective glimpse of some important features before raising three questions about Heath’s argument.

Heath’s justification for the market economy involves a “minimally controversial contractualism” (5), a prioritarian formula that trades off efficiency gains against equality losses, and vice versa, and can be reasonably accepted by market participants. To achieve certain valued principles (greater efficiency), Heath believes that we accept a dramatic curtailment on the satisfaction of other principles (equality). This stance, he claims, “is a consequence of our acceptance of competition as the central governance mechanism for the determination of prices and through that the organization of the division of labor” (5) in society. In the background of Heath’s argument is a reconstructive take on competition as a functional requirement of the market system (Habermas Reference Habermas and McCarthy1987, 227), whereby markets are a way of organizing the division of labor in society and prices appropriately fulfill the function of economic actors’ preferences (Matthews Reference Matthews1981, 291, 295–97; McMahon Reference McMahon2012, 117–22). Heath does consider alternative approaches to institutionalizing the division of labor through directly cooperative methods, but argues that competitive markets face less significant compliance problems and create better alignment between individual production and needs. These benefits are highlighted as a motivating factor for accepting markets despite their corresponding moral compromises (e.g. justice and equality).

Systematic approaches to morality generate unequivocal judgments about permissible, obligatory, or forbidden conduct using a fixed set of clearly delineated principles. In contrast, the MFA is not a traditional high theory or a “perfectly general” (25) approach. Rather, Heath starts with a “deontological-liberal theory of justice” (28), then suggests that “the deontologist take up the rule-consequentialist suggestion that normative principles are different in different institutional contexts” (27). Heath’s prioritarian framework for the justification of the market economy (jus ad mercatum) is, thus, general but not committed to “domain independence” (27). This same framework and "the constraints that flow from it" (5) provide orientation for questions about justice within economic and legal market institutions (jus in mercatu). Crucially, Heath believes jus ad mercatum and jus in mercatu should be addressed at the same “level of idealization” (6). This amounts to holding interactions within firms to a standard of behavior that is no stricter than the moral standards in the market institutions within which firms operate. Put simply, a normative approach to the firm, according to Heath, should not be more demanding than the system of justice that guides cooperative arrangements in the market economy.

A key component in Heath’s position is a claim about the “scope” (92) of ethical theory: morality in capitalist markets and firms differs from everyday morality. Heath is keenly aware of the market’s principled conflict with considerations of justice, equality, and desert. He is cognizant of the interpersonal norms of business that violate duties of benevolence, principles of universalization, and prohibitions on harm and exploitation. It is with these normative features in mind that Heath’s account offers “selective exemption” (68) from the constraints of conventional morality, within a “general account of what could render capitalism, despite its various flaws, morally permissible” (2). He describes this approach to compromise as an “adversarial” (28) morality, because he thinks the competitive market structure, which is a necessary feature of its efficiency-promoting function, creates an adversarial context that frees us from the “everyday obligation to act cooperatively” (67).

Throughout the book, Heath offers detailed arguments for the connection between empirical reality and morality. The structure of competitive markets; the institution, ownership, and hierarchical structure of firms; indifference to social welfare in markets; the hierarchical authority of “bosses” within firms; and the appropriation of profits by providers of capital—each of these arrangements is shown to “maximize the benefits of cooperation” and involves a moral compromise to which we might agree to in order to “obtain the larger cooperative surplus” (206) conferred by the competitive determination of prices through a decentralized system of exchange. The “efficiency logic of different economic institutions,” in each instance, is followed by an “analysis of moral obligations and permissions that they generate” (206).

Heath’s reliance on economics is noteworthy. Transaction cost economics and game theory play a pivotal role in the MFA. In business ethics, as in economics, there has been a sizable movement over the past few decades to update social scientific assumptions and instruments, for example, in light of the phenomenon of bounded rationality, which questions the assumption of rational action as necessarily opportunistic. Heath, in contrast, chooses to stick with vintage social science. The idea is to use pessimistic assumptions as a cautionary tale to show that, even when presuming the worst about people’s opportunistic intentions, it is possible to put forward a comprehensive approach to business ethics that is internally coherent and can effectively guide cooperative, mutually beneficial arrangements. Philosophically, this move is familiar to anyone who takes the concerns of the skeptic seriously. The notion that “people are wicked” matches exactly to rational choice theory’s assumptions: “The condition of man,” wrote Hobbes ([1665] Reference Hobbes and Curley1994, 14.4), “is a condition of war of everyone against everyone.” From this premise, self-interested individuals can be motivated to follow rules of morality because each is vulnerable to the opportunism of others and each stands to benefit from cooperative arrangements (Gauthier, Reference Gauthier1986).

It is an important achievement of the MFA to show that business ethics does not need to be in the business of telling people to stop being wicked and that markets, firms, labor—the whole system of political economy and business ethics—need not rely on, or hope for, altruistic behavior. The MFA produces a set of beyond-compliance moral constraints that lay the basis for cooperative arrangements, using the same arguments used by economists to justify regulations in markets. Crucially, Heath’s moral constraints do not rely on a “moralized” (38) conception of ethics that asks us to be saints. “Moralizing condemnations of corporate conduct are both platitudinous and ubiquitous” (1), Heath reminds us. This brings to mind the oft-repeated biblical story of the Fall, which laments the original sin and imagines an ideal state of light and purity that can be reachieved by rejecting the darkness and impurity of temptation. The MFA is an argument against purity as a guiding force in business ethics. (A modified detail from the painting Temptation (1880) by William-Adolphe Bouguereau appears on the book’s dust cover, depicting a woman holding an apple from the tree of knowledge, which presumably, in this context, is meant to symbolize the temptation of capitalism.) The question is just how far Heath lands from the light given his stance on adversarial morality.

Not too far, according to Heath. Indeed, he believes that the MFA is able to “plot the middle course” (117) between two common views—the “anything goes” (14) view (no room for ethics in business) and the “nothing goes” (22) view, which imposes overly demanding moral constraints on market exchange (McMahon Reference McMahon1981; Pouryousefi Reference Pouryousefi2013, 200). The “nothing goes” view, resembling the “ethical principles preached in churches” (9), strives for the purity and light that was lost in the Fall. The “anything goes” view sees markets granting us a “carte blanche to ignore morality” (16) and indeed a license to dwell in darkness. Heath’s account rejects the latter stance because, if generalized, it “would impede the ability of market actors to realize mutually advantageous exchanges” (117). In this manner, Heath identifies “the specific deviations from conventional morality that are rendered permissible by the market context” (117)—these are short of “anything goes,” but not quite as demanding as “nothing goes.” He concedes that the notion of justice that corresponds with this middle ground is “extremely thin” (37). But he insists that this is a middle ground and a necessary consequence of taking empirical institutional reality seriously. This bifurcated moral thread runs through every part of Heath’s argument, including his theory of the firm, his discussion of occupational ethics, and his charming chapter on dishonesty (including an analysis of Donald Trump as a prominent “profligate liar” [109]). All this is supposed to stand on the shoulders of widespread agreement over the MFA’s framework including, crucially, its underlying empirical assumptions.

My first criticism pertains to this notion of agreement. Heath claims that “we accept” (5, 207) the system of justice that underlies capitalist markets and firms. Indeed, his prioritarian approach to justice at the basis of jus ad mercatum is said to be much more “commonly felt” than “thicker (or ‘perfectionist’)” (37) moral views of markets offered by, for example, Marx or MacIntyre. If not self-evidently correct, Heath takes the fact of common feeling to require little in the way of supporting argument. This is surprising given Heath’s idiosyncratic approach to moral justification: in an effort to make philosophical sense of the “counterintuitive moral context” (92) in business ethics, Heath is meticulous about articulating norms in light of empirical social scientific research. This is a consequence of his rejection of the moral philosophical tendency to rely on intuitions about “what feels right” (2), divorced from a functional understanding of the relevant social domain. But justification for Heath’s claims about widespread agreement over empirical and normative points of contention is sparse in the book. This is acute with respect to the oft-criticized rational choice theoretic assumption about “wicked” economic agents, as well as Heath’s universal and static characterization of “capitalism” and competition in “markets”. The MFA appears trapped in the cautionary tale thought experiment, contrary to its domain-dependent ambitions.

Heath briefly notes that if his arguments for a contractualist framework “fail to produce general conviction” (207) and widespread agreement, then the MFA has a perfectly fine “fallback position” as a “species of rule-consequentialism” (208). In other words, even if the contractualist features of the MFA do not pan out, this general theory of business ethics can be justified through a rule-consequentialist framework. At present, however, every feature of the book’s systematic argument pursues a minimally controversial conception of justice that is “more moderate” (36) than a Rawlsian theory of justice but nonetheless decidedly prioritarian and in “the Rawlsian style” (204). In any case, Heath himself tells us that consequentialist moral theories “fail to offer a perspicuous articulation of the moral tensions that markets give rise to for most people.” (207). This is why Heath opted to offer a liberal egalitarian perspective, where ends do not automatically justify the means. I have argued that the chips are down on general conviction. More needs to be said here, notably about whose voices contribute to “general” conviction, but unplugging widespread agreement from the MFA’s “liberal democratic, and thus, pragmatically deontological” (207) justification is likely to be costly.

I would also register a second concern, regarding the notion of role morality in mercatu. The philosopher’s role morality in business ethics is quite minimalist, according to Heath. As he puts it, “business ethics is the particular responsibility of economic agents, and of firm managers in particular, and cannot be the responsibility of state officials (much less philosophers)” (103). If business ethics is not the responsibility of philosophers, then what exactly is their role? Their “primary” role, Heath tells us, is “merely to articulate the normative implications of the institutional context in which [business ethics] judgment is exercised” (142). Well, I think this stance needlessly keeps philosophers out of work. There is much to be said about philosophical engagement with practice within a more reflexive, bilateral understanding of institutional morality. At minimum, in conjunction with top-down systematic components, systematic theory can be revised and informed through practice. The MFA’s structure confidently closes the door on the possibility of or need for such a revision. This is a missed opportunity. An empirical, fallible stance on the MFA would have much more to say about contextual philosophical judgment or “phronesis” (a term mentioned twice in passing in the book). Such an approach would be concerned not only or primarily with systematicity but also (and tilted toward) empirical efficacy and usefulness in practice.

Furthermore, I believe that placing the responsibility for business ethics on Heath’s “economic agent”—a person or firm depending on context—is at once overly burdensome and ironic. This book is a model of normative engagement with social scientific research. Heath weaves various disciplines into his philosophical argument (mostly economics but also law, history, anthropology, urban studies, and agriculture) in an effort to outline the norms that contribute to the development of market institutions in cooperative societies. Notably, the study of business scholarship, practice, or policy is largely left out. Practitioners are the foot soldiers ordered to the battlefield while philosophers shout normative implications of institutional contexts safely from the sidelines. Further up the chain of command, philosophers get a seat at the table over the decision to go to war or adopt capitalism in the first place, albeit with due respect to an economic characterization of the functional essence of market institutions. There is no room at the table for a (practitioner) view from the field.

The MFA’s disciplinary and hierarchical structure (economist > philosopher > practitioner) may thus appear peculiar to some business ethicists, especially for those less well versed in economic theory and advanced debates on prioritarianism, given the book’s technical discussions and the relatively uncommon nature of this style of scholarship in business ethics. More fundamentally, the theory’s stability and usefulness merit attention given the MFA’s stance on common feeling, empirical features of modern markets, and the relevance of practice.

As a systematic general approach that at the same time seeks to be sensitive to empirical reality, the MFA is philosophically distinctive. Most philosophers fail to take business ethics seriously or to exhibit sufficient sensitivity to institutional specifications. Disciplinary snobbery, especially on the topic of filthy lucre, can be a further barrier. Heath’s approach is uncommon also in business ethics. In recent years, as more social scientists have contributed to business ethics, a wealth of empirical knowledge has become available about various features of organizations and markets, and yet comparatively little effort has been made to make sense of the new findings alongside each other as a theoretical approach to political economy and business ethics, let alone one that offers a coherent normative stance. Serious, considered philosophical work on business ethics is thus needed and indeed long overdue. Nonetheless, perhaps we should pause to ask why systematic theories are rare in business ethics. Is a bric-a-brac or mosaic approach to mid-level theorizing more appropriate for making sense of the practice-oriented problems of business ethics? Does the prevalence of what looks like antitheoretical, practice-oriented tendencies suggest that a top-down approach to business ethics is untenable? Either way, it is important to be more explicit about our field’s theoretical tendencies and about the usefulness of systematic business ethics theorizing. Heath’s book offers a wonderful opportunity to do so. It is a testament to Heath’s accomplishment that his latest statement of the MFA is a fruitful business ethics exercise in spite of the questions I raise here about limits to its systematicity.

Sareh Pouryousefi () is an assistant professor in the Law and Business Department, Ted Rogers School of Management, Toronto Metropolitan University. Her research examines the normative foundations of business ethics, and she carries out this work in close engagement with empirical, social scientific research. Her current projects are about trust, pragmatism, and the professions.

References

REFERENCES

Gauthier, David. 1986. Morals by Agreement. Oxford: Clarendon Press.Google Scholar
Habermas, Jürgen. 1987. Theory of Communicative Action. Vol. 2. Translated by McCarthy, Thomas. Boston: Beacon Press.Google Scholar
Heath, Joseph. 2014. Morality, Competition, and the Firm. New York: Oxford University Press.CrossRefGoogle Scholar
Hobbes, Thomas. (1665) 1994. Leviathan: With Selected Variants from the Latin Edition of 1668. Edited by Curley, E.. Indianapolis, IN: Hackett.Google Scholar
Matthews, R. C. O. 1981. “Morality, Competition and Efficiency.” The Manchester School 49 (4): 289309.CrossRefGoogle Scholar
McMahon, Christopher. 1981. “Morality and the Invisible Hand.” Philosophy and Public Affairs 10 (3): 247–77.Google Scholar
McMahon, Christopher. 2012. Public Capitalism. Philadelphia: University of Pennsylvania Press.CrossRefGoogle Scholar
Pouryousefi, S. 2013. “A Normative Model of Professionalization: Implications for Business Ethics.” PhD diss., University of Toronto.Google Scholar