| > Whether or not businesses have a concept of 'ethics', they can be forced to act as if they do, which amounts to essentially the same thing. Ah excellent point! But your hypothetical offers an external market correcting force. Another external market force would be government regulation (take for example the recent government laws forcing retirement investors to put their clients first). The lines get pretty gray when you try to figure out what should be considered part of the market and what should be considered external to it. Personally, I would consider public perception outside of a traditional "market" model...but like I said, I am by no means an economist. I also wanted to mention that most companies think in the short run and therefore often make self-harmful decisions to themselves. This relates to your comment: > ...pricing in the risk-adjusted expected future costs? Companies can only sell products to people that can afford them, so by keeping wages low, they are actually pricing themselves out of the market. A classic and oft referenced counter-example to this is when Henry Ford payed his factory workers well-enough that they could afford to buy the cars they were assembling. Anyways, I obviously like to philosophize about economics far too much and don't want to bore anyone :) I am also NOT an economist so I have a rather limited perspective. |
No worries, and thanks for responding.
> Personally, I would consider public perception outside of a traditional "market" model...but like I said, I am by no means an economist. Another external market force would be government regulation (take for example the recent government laws forcing retirement investors to put their clients first).
Speaking as an economist, I'd say it's pretty standard for economists to consider public perception (brand value) to be part of the decision-making model. In fact, it's essential - plenty of decisions can't be explained rationally unless you account for intangible assets and revealed preferences.
Likewise, it's common for non-economists to think of government regulation as an exogenous force, but from an economic perspective, government action is very much a component of the market - it exists as part of the market, not outside it.
> Companies can only sell products to people that can afford them, so by keeping wages low, they are actually pricing themselves out of the market.
This is a common talking point among advocates of wage floors (e.g. 'minimum wage'), but you'd be hard-pressed to find an economist who agreed with that statement as written, even if you're looking only at economists who already advocate for wage floors. (There are some economists who advocate for wage floors, but rarely using that line of reasoning). Labor economics is a complex subfield, though, (not to mention politically charged these days), so I'll just say that companies do price in risk-adjusted expected future costs (just not always with complete or accurate information, or with the outcomes one might like), and leave it at that.