[rayiner]

The Keynes quote made me think of something. We have in the U.S. what is probably best described as an ethical system based on profit. It's literally pervasive. "The only purpose of corporations is to maximize shareholder profit." "We should have economic policies that grow the pie." All of these statements are couched in a normative principle: that the singular pursuit of profit will lead to maximization of the pie, and thus the greatest overall welfare.

This normative principle was defensible in the 18th century, though Adam Smith never took it to quite the extremes that we have today, but is pretty solidly indefensible based on what we know about economics in 2011. And that's something I don't think even most economists would dispute today.

Yet, our ethical system is beholden to that principle, though we know it is based on assumptions we know to be wrong.

What MBA programs need to teach, and I think it is happening recently to some extent, is that "social responsibility" is not a dirty word. Considering the social impact of business decisions, something that is considered irrelevant under the current ethic because of the premise that profit-maximization == welfare maximization, is not only not a bad thing, it is an indispensable obligation of doing business in civilized society.

[DenisM]

>"The only purpose of corporations is to maximize shareholder profit."

That's not true, and it's not event a popular opinion among the people who actually study the subject. It's only popular among the arm-chair internet specialists on corporate governance. For a well-rounded perspective on the subject I would suggest the "Corporations" text book by Alan Palmiter.

In brief, a corporation's purpose is maintaining balance between interests of various stakeholders such as shareholders, employees, management, creditors, regulators, consumers, the public, etc. Each stakeholder is exerting a different kind of influence on the corporation and suffers different consequences from the resulting consensus action (which motivates his influence).

[rayiner]

We used the Klein textbook on Business Associations, but it should be the same material...

Yes, I agree that in the eyes of the law there is more to the corporate purpose than just maximizing shareholder profit. However, I'd argue that the law is really the last bastion of considerations of fairness and equity in the corporate sphere, and the idea that maximizing shareholder profit is morally right is dominant, both among business people and in our political discourse.

[DenisM]

I'll provide few obvious counter examples:

1. As an employee, you will refuse to murder children, even if legally, to maximize corporate profit. You have your own ideas of what's right and wrong, and so do all other employees. Employees have a lot to say about what's going to happen.

2. Corporate management is often criticized for short-sightness and destroying shareholder value for their own benefit. This, and "the shareholder profit is holy" cannot be true at the same time. :)

3. Some corporations give shareholders little or no voice in governance (e.g. Google). The courts historically (per Plamiter's book) give the management benefit of the doubt in any ambiguous situation, and only slap the management down when it's clear they act against shareholder interests. Management has huge leeway. Further, corporate charter can be written such that profit motive is not the primary goal.

To the extent that a corporation behaves exclusively like a profit-seeking device, it does so on the consensus of the stakeholders, not due to its inherent nature.

If I may offer an analogy, American expansionism in the Middle East, is not an inherent property of a republican democracy, but only of this particular one, given to how interests of stakeholders (including foreign stakeholders) have balanced out.

[dreamdu5t]

The ethics of private property aren't based on profit, they're based on the self-evident fact that one owns his own will and is responsible for his own actions, and consequently the fruits of his labor.

Social responsibility isn't a dirty word, it's a completely meaningless and dangerous word used by ideologues of all types to serve their personal vision of the world. It means something different to everyone you ask.

I don't have responsibilities to obligations I never made.

[rayiner]

If you read Adam Smith, his argument is that pursuit of individual gain produces social good. "By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." The rhetoric we use today "a rising tide lifts all boats" and the like is thoroughly rooted in that thinking.

The fact of that matter is that we know this premise to be false. That knowledge is indeed irrelevant if you conceive of the profit-maximizing principle as being entirely rooted in an "every man is an island" hyper-libertarian conceptualization, but that is a relatively modern phenomenon and a wholly inaccurate description of the underpinnings of modern American ethics.

As a practical matter, only a few crazies actually believe that people have no social obligations. A large majority have some social conscience, but because they fully buy in to Smith's normative principle, they believe that their business decisions need not be guided by considerations other than profit. To the extent that this principle is invalid, their behavior is inconsistent with fostering desirable outcomes.

[paganel]

> As a practical matter, only a few crazies actually believe that people have no social obligations.

It depends. I live in a former Communist country in Eastern Europe, and you'd be surprised of how effective +50 years of communist rule were at destroying any "social feelings" whatsoever.

Of course you could say it's a bad thing, but on the other hand the fact that you've lived your entire life with the credo "rely only on yourself and yourself only and trust no-one" is really good in times of crisis like the ones we're going through right now.

[dreamdu5t]

"By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it." [..] The fact of that matter is that we know this premise to be false.

I disagree. If someone doesn't pursue their own interests then by logical necessity they are pursueing interests imposed on them. "Social interest" is merely a euphamism for State interests. Killing the Jews in gas chambers was a social interest. Of course, by disagreeing with that you would prove my point that "social responsibility" is anything but a completely subjective term that varies (greatly) by each individual, and only has power in the context of the State.

As a practical matter, only a few crazies actually believe that people have no social obligations.

But what does social obligation mean? If you didn't obligate yourself, then social obligation really means obligation by force, obligation to the State and whatever the State deems an obligation. Obligation to a small group's whim instead of obligation to your own actions, interests, and responsiblities.

[rayiner]

> I disagree. If someone doesn't pursue their own interests then by logical necessity they are pursueing interests imposed on them.

If you read the text surrounding the quoted language, it uses "own interest" in a narrow sense, not encompassing altruism. If you subscribe to the notion that there is a dichotomy between "own interest" (encompassing altruism) and "the state's interest" then yes your claim is logically valid, but also besides the point. The ethic underlying modern American business ethics conceives that profit maximization maximizes overall social welfare (i.e. it uses the narrower definition of "own interest" that Smith uses, not your broader definition).

> Of course, by disagreeing with that you would prove my point that "social responsibility" is anything but a completely subjective term that varies (greatly) by each individual, and only has power in the context of the State.

Guess what? We live in a state. And we live in a state where most people believe in welfare maximization: the greatest good for the greatest number. And many of those people, in the business context, believe that profit maximization leads to welfare maximization. To the extent that this assumption is incorrect, their behavior is inconsistent with their desired outcomes.

> But what does social obligation mean? If you didn't obligate yourself, then social obligation really means obligation by force, obligation to the State and whatever the State deems an obligation.

You obligate yourself by participating in civilized society. You obligate yourself by exchanging, for the protections of civilized society, the duties of living in a civilized society. You try to separate "the State" from "the people" but in reality "we the people" created "the State" to defend our property interests. "We the people" through "the State" keep big strong men from taking what you conceive of as "your property" and that obligates you to us.

That obligation doesn't necessarily have to involve coercion. To the extent that you don't consider how your business decisions impact society at large, it might simply make you a "bad person." The problem is that we have an ethical system that relieves you of the duty to make that consideration. You can ruthlessly try to maximize shareholder value and still be a "good person." That ethic is predicated on the idea that profit maximization ultimately serves to maximize social welfare. What I'm arguing is that this assumption has been empirically invalidated (or at least drastically limited) and as such we should move towards an ethic that labels people who are socially inconsiderate as "bad people."

[dreamdu5t]

> but in reality "we the people" created "the State" to defend our property interests.

No, I did not. I didn't consent to any such agreement creating the State.

> We the people" through "the State" keep big strong men from taking what you conceive of as "your property" and that obligates you to us.

We the people? I did not consent to the constitution. Just like I can't bind you to contracts that you didn't consent to, I am not part of "we the people" because I never consented to be represented. Funny that it's called a "social contract" when it doesn't conform to contract law!

> You obligate yourself by participating in civilized society.

If that's the case, why can't I levy taxes and impose rules on people without their consent, simply because I sold something to them?

[clavalle]

"No, I did not. I didn't consent to any such agreement creating the State."

You do every moment you live in civilized society.

What is the alternative? Ask people when they reach the age of majority to sign an agreement to follow the laws of the land? What if they refuse?

[rayiner]

> Funny that it's called a "social contract" when it doesn't conform to contract law!

It is a basic principle of contract law that you ratify a contract (implicitly consent) by acting according to the contract.

You have, for some number of years, accepted the protection of the state. You have ratified the contract through your participation in civilized society.

[wazoox]

You've got to the Godwin point at impressive speed, kudos.

> If someone doesn't pursue their own interests then by logical necessity they are pursueing interests imposed on them.

You fall for the fallacy that you actually could be free of social influence anyway. This isn't the case; see you've been Ayn-Randed to the bones, for instance. That makes you believe mad things that work against your own interest in the long term. See?

> But what does social obligation mean?

You're born to some family, speaking some language, walking some road, sheltering under some roof someone built, lighten by some power that was brought to you, etc. Are you pretending you don't need anybody else?

[dreamdu5t]

> You fall for the fallacy that you actually could be free of social influence anyway.

No, I never implied that I was free from the forceful influence of the State. Social obligation in the context of the post I was responding to is (I thought) referring to regulation and taxes, the social contract.

> You're born to some family, speaking some language, walking some road, sheltering under some roof someone built, lighten by some power that was brought to you, etc. Are you pretending you don't need anybody else?

I'm not pretending that I don't need anybody else. I just don't find moral legitimacy in being compelled to do things by force without my consent.

Private roads aren't allowed to exist, I pay for my own shelter presumably built by people who were already paid to build it, I pay for my power by the company that provides it, and language I acquired by picking it up from others at who provided it freely.

[wazoox]

> I just don't find moral legitimacy in being compelled to do things by force without my consent.

By force? Were you subject to violence? You're free to head into the wilderness, live from your hunting and start your own civilisation on your own, perfectly free; others did. However it proves more cumbersome and less pleasant than simply living in our oppressive society.

I'm perfectly happy with paying taxes, and having roads, policemen, garbage collectors and street lights. What's the opposite stance?

> Private roads aren't allowed to exist

How so? The path going across my terrain is as private as possible. However private roads aren't really practical. It's commonly known that infrastructure work in general is less efficient when not a monopoly, and so far the only working monopoly is the state (monopoly of violence most saliently).

[pyre]

   I just don't find moral legitimacy in
   being compelled to do things by force
   without my consent.

So, you're arguing in favor of anarchy?

[georgieporgie]

You've got to the Godwin point at impressive speed, kudos.

Please drop the snark.

[ams6110]

Capitalism, personal liberty, and morality (e.g. traditional Judao-Christian morality, though I don't claim that's the only workable system) are like three legs of a stool. It will fall over without one of them. A moral person's "own interest" includes doing things that are consistent with his sense of morality. Personal liberty and private property rights are essential to allow capitalism to flourish. Decades of attacks on and marginalization of traditional morality in favor of more contemporary "social obligations" (code for "whatever feels good") have resulted in capitalism motivated by greed, rather than a more complete "self interest" that includes morality. We see the results.

[lcargill99]

I really think you are mixing up your units, so to speak. Smith spoke of men wanting to be loved and to be lovely. The reducibility of society to the individual is a feature of liberalism - indeed, it's probably the defining characteristic. Once we try to make a collective a unit of polity, we run into trouble.

Smith's math was - for every dollar in profit "p" you make, you create "x" dollars of consumer surplus, and "x" is always much more than "p" ( because people simply would not bother. The "unconscious" nature of consumer surplus, and the clear historical disasters wrought by large efforts based on intentions show clearly that we need discipline in our evaluation of what we do that does good. One was of doing that is price and profit.

There are the Adam Curtis films, in which he tries to use neocon logic to critique liberalism without being the sort of neocon one can spit on, but his films are problemsome. He at least asks the right questions, which are hard questions, and you can't blame him for being responsible enough to provide at least one answer.

Profit is little more than a "qsort callback" related to priority. it is a tool for the always difficult question of "what shall we do now?" There are certainly forms of gain which entail rent-seeking or despoilment which are called profit ( but are not, really - there are either economic rents or involve the creation of negative externalities ) but beyond that, Smith's read really is that of a moral philosopher first, and I've yet to see a really good counter to it that does not involve something akin to universe-building.

[digikata]

If you read Adam Smith, he has a more nuanced view of individual gain for social good when it comes to corporations and the elite. For example, I think he has a more pragmatic view of when free markets deliver benefits, vs assuming that free markets always (eventually?) optimize for the overall social good.

http://www.theglobalist.com/storyid.aspx?StoryId=4677

[wazoox]

> ... they're based on the self-evident fact that one owns his own will and is responsible for his own actions, and consequently the fruits of his labor.

On the contrary, this is an extremely non obvious, loaded assumption. It is deemed true in many cases, such as in front of a court, but is then well known to be a judicial fiction.

The worst problem with some people (particularly libertarians) is that they actually believe that this is the simple, unadulterated truth, which unfortunately isn't nearly as easy as this, and this will bring our civilisation to complete collapse under the oh-so-wonderful pursuit of our own individual self-interest, the same way its huge antlers doomed the gigaceros (for the individual male gigaceros, bigger antlers were always a net advantage against competitors in the "struggle for life", but they assured the species inability to adapt as a whole).

Annoying as it is, this is again best explained with the famous joke: for every complex problem, there is a solution that is clear, simple, and wrong.

[yummyfajitas]

...the oh-so-wonderful pursuit of our own individual self-interest, the same way its huge antlers doomed the gigaceros (for the individual male gigaceros, bigger antlers were always a net advantage against competitors in the "struggle for life", but they assured the species inability to adapt as a whole).

Some actions have externalities and should be subject to pigouvian taxes to internalize the externality. Few people, including libertarians, dispute this point. Once harmful externalities are properly taxed/penalized, then it is no longer harmful for individuals to pursue their own self interest.

You are also correct that signalling (e.g., growing large antlers) generates harmful externalities. Thus, we should tax signalling activities such as obtaining a college degree, wearing a suit or writing in a moleskin.

[wazoox]

> Some actions have externalities and should be subject to pigouvian taxes to internalize the externality. Few people, including libertarians, dispute this point.

I'm not so sure about the later, apparently dreamdu5t and many other libertarians find all and every sort of taxes unacceptable. Thanks for the Arthur Pigou reference.

[shareme]

Its like the American miss-understanding of Karma..

Karma is the balance between self interests and other people's/world's interests..

[Klinky]

The ethics of private property aren't based on profit, they're based on the self-evident fact that one owns his own will and is responsible for his own actions, and consequently the fruits of his labor.

This is assuming that everyone is born into an equal setting, with an equal upbringing & that property & resources are dolled by a completely unbiased party. Something that is essentially impossible.

[dreamdu5t]

Individual sovereignty, the fact that you are responsible for your own actions, does not require an equal anything outside of being a human being that acts.

[Klinky]

This is like saying an algorithm just needs the ability to compute & the computer it runs on or data set it's given plays no part regarding it's performance.

[dreamdu5t]

Individual sovereignty doesn't mean I'm not dependent on other people, it means I own my body and thus am responsible for its actions.

To deny individual sovereignty is tantamount to denying the concept of free will.

[Klinky]

If worthiness of fruit is determined by the person's decision making, then in order for it to be truly fair, all persons must be offered the exact same opportunities for it to be an accurate benchmark of the person's character or will.

If you are giving some a head start, while handicapping others & your system doesn't account for this, it is no longer a useful benchmark.

[cma]

This comment finally coherently explained to me why a carrot farmer who first farmed some land (after murdering the commie Indians who lived there beforehand) gets to own mineral rights in the volume created by extending a cone from the surface of his carrot patch to the center of the earth. Thanks!