Making Decisions on Behalf of Others: Who or What Do I Select as a Guide? A Dilemma: - My boss. - The shareholders. - Other stakeholders

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1 Making Decisions on Behalf of Others: Who or What Do I Select as a Guide? - My boss - The shareholders - Other stakeholders - Basic principles about conduct and its impacts - What is good for me - What is good for society A Dilemma: - If I believe that markets produce the best outcomes, all my decisions should be based on consumer sovereignty -- what is best for market participants, e.g., buyers and sellers. - If I believe that benefit to owners, i.e., shareholders, is the primary criterion, then I may make decisions that maximize profit but which may not be best for consumers of my product (e.g., the Rezulin case). Hence the conclusion: When owners have sovereignty, consumers may not. - If I choose any other stakeholder to serve (e.g., workers, environmentalists, the local community, etc.), then the same logic will apply -- free market choice, which we call consumer sovereignty, fails. - Conclusion: Firms under owner or other sovereignty violate the values of the market, i.e., consumer sovereignty. Thus market ideology is a poor guide for behavior in firms. What should I do?

2 Immanuel Kant The Categorical Imperative - No exceptions; it is a binding demand to be moral. - How tell a moral principle: 1. Universalizability: It applies to and is moral for every person. 2. People are ends not means: Rational beings - people - must be treated as ends not tools to achieve one s self-interest. 3. People must be able to choose what to do freely; they have autonomy. Moral choice is not imposed by others. Notice that the categorical imperative does not tell you what to do -- it does not specify what is moral or right. But it does tell you what conditions a moral principle that guides behavior should satisfy.

3 A dilemma: There are lots of moral principles. How can I pick the best one? Kant won t tell me the one to pick. So if Kant can t who can? John Rawls Died 11/24/02 at age 81.

4 What if you did not know where in society you would be after the condition of justice is determined? Assume you choose under a veil of ignorance. Rawls s Principles of Justice 1. Each person has an equal right to a fully adequate scheme of equal basic liberties which is compatible with a similar scheme of liberties for all. 2. Social and economic inequalities are to satisfy two conditions. First, they must be attached to offices and positions open to all under conditions of fair equality of opportunity; and second [the difference principle] they must be to the greatest benefit of the least advantaged members of society.

5 This begins to tell us how to design our principles because it gives us some boundaries to the content: guarantee equal access; ensure that they benefit the least advantaged. This tells us something about justice, but does not tell us how to make everyday decisions. There are no absolute, comprehensive, uniform guides to making decisions on behalf of others. Yet decisions are made all the time. Philosophers like Kant and Rawls tell us how to set up decisions so they will be recognized as moral, and as just. But we use many guides from many sources to give real, contentful, guidance to making such decisions.

6 Four sources of guiding values: Legal regulation: - Respect for liberty and rights of others - The importance of acting in good faith - The importance of exercising due care - The importance of honoring confidentiality - Avoidance of conflicts of interest Professional codes of ethics Organizational codes of ethics Individual values How do I know that I am doing the right thing? 1. Because of my history, context, or status with respect to others. 2. Because of how I behave or what I become. 3. Because I am following absolute, independent guides that direct me to do what is right. 4. Because I look at the effects of what I am doing and judge its merit based on those outcomes.

7 1. Because of my history, context, or status with respect to others. - Divine right - Social status - Ethnic purity - Social Darwinism (Herbert Spencer) 2. Because of how I behave or what I become. - Virtue ethics: What kind of person should I be -- what virtues (e.g., truthfulness, benevolence) should I possess? What should my character be? If I acquire the socially-supported virtues of everyday life, I can be sure that the good, the right life will flourish. - Law-abidingness: We follow the law, whether or not we believe in it, and so we will do the right thing -- because there is a rule of law and we must follow it, like it or not.

8 3. Because I am following absolute, independent guides that direct me to do what is right. - Deontological governance: I follow whatever absolute values, norms, or religious prescriptions tell me is the only right thing to do; I perceive no alternative except these guides, and I do not ask what the consequences will be -- only that when I act, I will be following these directives. Kant s categorical imperative reflects this perspective. When I see an ethical dilemma I make reference to these absolute guides, and they help me choose what to do. -- Legal reverence: We do what the law says because we believe in the law, not just because we have to do it. The law is wise and will tell us the right thing to do. 4. Because I look at the effects of what I am doing and judge its merit based on those outcomes. - Utilitarianism; consequentialist analysis: I assess the consequences from taking an action based on its effects and the net, combined value of those effects on all involved. I look at the costs and benefits and see what the net benefit is. I choose whatever course of action produces the best net benefit. But, consider:

9 How in the world do you figure out what makes you better off -- that provides a net benefit???? Don t you need some means of picking things that you prefer more than others??? When you act in a utilitarian manner, aren t you saying that you are applying a principle that values some kinds of outcomes over others??? Shouldn t we recognize that when we choose we consider both outcomes and principles at the same time?? Justice: I assess the outcomes based on a comparison -- it may make a difference who is affected, how they are affected, and how much they are affected, in comparison to others. Hence, justice considers outcomes. But in order to weigh the outcomes, I may apply a criterion drawn from a deontological analysis. The criterion determines the key balance of outcomes. Thus I may decide which outcome distribution is fair, or equitable, i.e., just.

10 Some types of justice: - Distributive Justice: What is the just way to distribute benefits? - Retributive Justice: What are just punishments for actions of injustice? - Compensatory Justice: If harms are done, what are just ways to compensate the victims? - Procedural Justice: As we make decisions, which procedures are just ways of conducting our decision making? Justice here does not relate to the outcomes of or guides for the decision itself, but the method of reaching it. How in the world do we choose which ethical approach to use -- which one??? Deontology (relying on principles alone) vs. Utilitarianism or Consequentialism (relying on outcomes alone) vs. Virtue ethics (relying on guides for behaviors alone) vs. Justice (applying principles to outcomes)

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