Business Ethics Part II - WS17 - Upload

Business Ethics / Wirtschaftsethik
Part II
Amit Ray M. Eng
Part II: Normative Ethical Perspectives
Objectives:
• To understand the key approaches to ethical considerations and their distinctions.

• To be able to apply these approaches to concrete situations
• To be able to compare and contrast different ethical approaches to a given situation
Ethical Relativism vs. Ethical Absolutism
Ethical Ethical
Relativism Absolutism
Morality is relative to the A universal ethical code

norms of the agent’s culture does exist.
Actions can only be wrong Ethical decisions can be

in the cultural context of the made based on objective
agent and the action rules
► There is no universal ► Some things are always

moral code right and others are always
wrong
NB: “Agent” in the context of ethics refers to the person who decides
which course of action to take
The trolley problem (Philippa Foot, 1967)
Situation: (Philippa Foot, 1967)
You are driving a trolley (train) which is racing down a track

and the brakes aren‘t working. On the track ahead you see
five workers who will be killed if you crash into them. You
see that there is a side track ahead with only one person on
it.
Would you pull the lever to divert the train onto the side
track?
Situation 2:
You are watching the runaway trolley from a bridge. You

realise that the trolley could be stopped by a large object on
the track. Next to you is a very large man who is leaning
over to get a better look.
Would you push?
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Classifying ethical theories
Motivation / Outcomes /
Action
principles results
Non-consequentialist ethics Consequentialist ethics

(Deontological ethics) (Teleological ethics)
Judgement depends on whether the Depends on whether the outcome is a

underlying principle is morally right desirable
It is wrong to willfully sacrifice the life of an It is better to lose one life than five
innocent person
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Theoretical approaches in this course
 Utilitarianism (Jeremy Bentham, John Stuart Mill)
 Deontology (Immanuel Kant)
 Contractualism (Thomas Hobbes, John Locke)
 Theory of Justice (John Rawls)
 Ethical Egoism (Adam Smith)
 Libertarianism (Robert Nozick)
 Communitarianism (Amitai Etzioni, Michael Sandel)
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Utilitarianism
 What is the moral basis for saying that losing one life is preferable to losing five?
Jeremy Bentham 1748-1832, British moral philosopher and legal reformer
Believed: Natural rights do not exist.

“I. Nature has placed mankind under the governance of two sovereign masters,
pain and pleasure. It is for them alone to point out what we ought to do, as well as
to determine what we shall do. On the one hand the standard of right and wrong,
on the other the chain of causes and effects, are fastened to their throne.”
Bentham, An Introduction to the Principles of Morals and Legislation, 1789
http://www.econlib.org/library/Bentham/bnthPML1.html
The highest principle of morality is to maximise utility
“III. By utility is meant that property in any object, whereby it tends to produce
benefit, advantage, pleasure, good or happiness, (all this in the present case comes
to the same thing) or (what again comes to the same thing) to prevent the
happening of mischief, pain, evil or unhappiness to the party whose interest is
considered… ”
Utility is whatever prevents pain and suffering, and produces happiness and pleasure
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Utilitarianism
Chapter IV
“IV. To a number of persons, with reference to each of whom to the value of a pleasure or a pain is
considered, it will be greater or less, according to seven circumstances:
1. Its intensity How intense is the pleasure / pain?

2. Its duration How long does the pleasure / pain last?
3. Its certainty or uncertainty What is the chance that the pleasure / pain will happen?
4. Its propinquity or remoteness How close or far off in the future will it happen?
5. Its fecundity
How likely is it to lead to other pleasures or pains?
6. Its purity
7. Its extent” How many other people are affected?

An action is morally right if it results in the greatest amount of good (pleasure

over pain) for the greatest amount of people affected by the action
8
Utilitarianism and natural rights
Why do people not have natural rights?
According to Bentham, any argument which claims to promote the concept of rights or duties,
is based on the idea that in the long run, greater utility (pleasure over pain) is produced by
respecting the right than by not respecting it – in other words it is utilitarian.
Why is it wrong to push a man off a bridge to stop a train? Because this would lead every
member of society to live under permanent a sense of fear (I could suddenly be pushed to
my death at any moment) a distrust of others and breakdown of society whose
consequences would be worse that the five lives lost.
“XIII. When a man attempts to combat the principle of utility, it is with reasons drawn, without
his being aware of it, from that very principle itself. His arguments, if they prove any thing,
prove not that the principle is wrong, but that, according to the applications he supposes to be
made of it, it is misapplied. Is it possible for a man to move the earth? Yes; but he must first find
out another earth to stand upon.”

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Using Utilitarian Arguments
Watch the interview with Snowdon here:
https://www.theguardian.com/us-news/2016/sep/13/edward-snowden-why-barack-obama-should-grant-me-a-pardon
Objections to Bentham’s Utilitarianism
1. Individual Rights
If maximising overall utility is the moral goal, then applying utilitarian logic
consistently would imply that individual rights are subordinate to the interests of the
society.
► The interests of the majority are more important than the rights of the individuals
What objection would utilitarianism have to the hunting of an

individual for the entertainment of others? (assuming of course,
that they were entertained by it)
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In June 2007 the Dutch TV Channel BNN

broadcast the Endemol-produced “De Grote Donor
Show” where 25 people requiring a kidney
transplantation competed for the kidney of a
terminally ill 37 year old woman.
At the end the show was revealed to be a hoax to raise awareness for kidney
transplantations. There were 7,300 new registrations in the Netherlands and the
show won an International Emmy in 2008.
The contestant all knew that the woman was an actress. Would it have made a
difference if they hadn’t?
Watch the final moments of the show here:
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Would it be justified to inflict pain on a terrorist suspect, if it meant that

they would reveal information which could prevent a deadly attack?
 Basic utilitarianism logic would  A utilitarian argument against:

suggest yes, as the suffering of the information given may not be
one could prevent the suffering accurate or they may not have
of many. any information to give -> there
is more overall pain inflicted
Michael Sandel: Comparing a suspected terrorist with innocent victims is an incorrect

text of the principle of utility. The question is, would we torture another innocent
person to the get the information?
Sandel, Justice, What’s the right thing to do?, 2009
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2. Can we create a common basis for comparison of pleasures and pains?
In the 1960s the Ford company in the USA was keen to produce a small car which would
compete with cheap Japanese imports.
The goal: „no more than 2,000 pounds and no more than $2,000.“
Pre-production crash tests showed that in a rear-end collision at 20mph the gas tank was
ruptured and caused an explosion. But Ford decided to proceed with the design anyway
in order to release in time for 1971.
Ford Pinto Memo. Available on: http://lawprofessors.typepad.com/tortsprof/files/FordMemo.pdf

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Cost / benefit analyses and the Ford Pinto
Ford Pinto Memo. Available on: http://lawprofessors.typepad.com/tortsprof/files/FordMemo.pdf
15
2. Can we create a common basis for comparison of pleasures and pains?
The utilitarian counter-arguments are:
• We may not agree with the sum given, but we all subconsciously agree with the
principle that the there is an upper limit on the value of a human life.
• Is there an upper limit on the cost of medicine?
• Is there an upper limit on the cost of safety mechanisms in devices?
• We all intrinsically engage in such calculations through certain purchasing decisions

we make and risks we choose to engage in. We are discomforted by the open
discussion about it, but that doesn’t make the principle invalid.
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Utilitarianism- John Stuart Mill
Objections to Bentham’s Utilitarianism:
1. It neglects individuals
2. It attempts to create a common basis
John Stuart Mill 1806-1873
Mill supported the concept of utilitarianism wholeheartedly,

but believed certain adjustments were necessary to
address the criticisms.
Mill believed in individual liberty, that people should be free to

choose their own actions, as long as they have no negative
impact on others
(their utility increases, that of others doesn’t change)
However, is individual liberty compatible with utilitarianism?
17
Utilitarianism- John Stuart Mill
If the benefits to the Donald Trump’s followers and to American

society from banning Muslims from travelling to the US is greater than
the suffering those Muslims experience, does this justify it?
“The illogic of the Government’s contentions is palpable. The

notion that one can demonstrate animus toward any group of
people only by targeting all of them at once is fundamentally
flawed.”
Honolulu District Judge Derrick Johnson in his ruling blocking the implementation
of Trump‘s 2nd Proposed Travel Ban.
John Stuart Mill: over the long term respecting personal liberties
and not requiring people to follow the will of the majority leads to
greater utility as it is a source of innovation and development, the
individuals view may in fact be true and even if not, they can
provide a valuable counter-balance and challenge to dominant
views.
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Utilitarianism
Bentham’s use of utility as a source of morality, relies on collective pleasure over pain. It
does not judge what produces the pleasure; that is determined by the individuals
concerned.
Are all pleasures of equal value? Are there some higher or lower pleasures?
Imagine you had to watch one of the following programmes. Which would cause
more “pleasure” for you?
• WWE Wrestling
• An episode of The Simpsons
• A TV Production of a Shakespeare Play
Examples taken from Michael Sandel, Justice, What’s the right thing to do?, 2009
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Utilitarianism
“It is quite compatible with the theory of utility to recognize the fact, that some kinds of
pleasures are more desirable and more valuable than others”.
Some pleasures are intrinsically worth more than others

 It is not only the quantity of pleasure, but also the quality
John Stuart Mill: Even though people may experience more pleasure with certain
activities than others, they are still able to distinguish more nobler pleasures from
more base ones.
“Men lose their high aspiration as they lose their intellectual tastes, because they have not time
or opportunity for indulging them; and they addict themselves to inferior pleasures, not
because they deliberately prefer them, but because they are either the only ones to which they
have access, or the only ones they are any longer capable of enjoying”.
“It is better to be a human being dissatisfied than a pig satisfied; better to be Socrates
dissatisfied than a fool satisfied. And if the fool, or the pig, is of a different opinion, it is
only because they only know their own side of the question.”
John Stuart Mill, Utilitarianism, 1863

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Act and Rule Utilitarianism
Act Utilitarianism Rule Utilitarianism
We evaluate the greatest net 1. A specific action is

utility from the variety of justified if it conforms to a
various actions in any given justified moral rule
situation, on a case by case 2. A moral rule is justified if
basis. its inclusion in the moral
would create the overall
greatest net utility
compared to other moral
rules.
Refers to the utility resulting Refers to the utility resulting

from a single act. from a class of act
22
Are there Universal Human Rights?
Following the end of WWII the international

community was determined to ensure that such
atrocities were never repeated. On 10 December
1948 the UN General Assembly adopted
the UN Declaration of Human Rights, consisting
of 30 Articles.
The Articles centred on the four freedoms that

the Allies adopted as their basic war aims:
freedom of speech, freedom of religion, freedom
from fear and freedom from want.
The articles were drawn up by the

Commission on Human Rights with 18
members. The formal drafting committee
http://www.un.org/en/universal-declaration-human-rights/ was chaired by Eleanor Roosevelt.
23
Hernán Santa Cruz of Chile, member of the drafting sub-Committee, wrote:
“I perceived clearly that I was participating in a truly significant historic event in which a
consensus had been reached as to the supreme value of the human person, a value that
did not originate in the decision of a worldly power, but rather in the fact of existing—
which gave rise to the inalienable right to live free from want and oppression and to fully
develop one’s personality.”
Which Human Rights are most relevant for business and economics?
What is the moral basis for the concept of universal rights?
It cannot be derived from a utilitarian perspective as maximising utility may require

contravening what is described here as right.
24
The Commission on Human Rights met for the first time in 1947. In her memoirs, Eleanor
Roosevelt recalled:
“Dr. Chang was a pluralist and held forth in charming fashion on the proposition that there
is more than one kind of ultimate reality. The Declaration, he said, should reflect more
than simply Western ideas and Dr. Humphrey would have to be eclectic in his approach.”
http://www.un.org/en/sections/universal-declaration/history-document/index.html
8 countries abstained from the 1948 vote (48 in favour, 0 against).

These were Saudi Arabia, South Africa and 6 communist countries (China, USSR, Belarus,
Czechoslovakia, Ukraine, Yugoslavia)
Said Raja’i Khorasani, an Iranian official and representative to the UN claimed in 1982 that
the UDHR was a “secular understanding of the Judeo-Christian tradition” and that it is
impossible for Muslims to implement it without contravening Islamic law.
In 1990 the Cairo Declaration on Human Rights in Islam (CDHRI) was adopted by the now
Organisation of Islamic Cooperation
David Littman, Universal Human Rights and “Human Rights in Islam”, Midstream(New York, Feb/Mar 1999) cited on
http://blogs.lse.ac.uk/mec/2012/12/10/1569/
25
Ethics of Duties / Pflichtethik (Kant 1724 – 1804)
Kant: Groundwork for the Metaphysics of morals

(Grundlegung zur Metaphysik der Sitten) 1785
Context:
1780 – Bentham, Principles of Morals and Legislation
1776 – American Revolution
1789 – French Revolution
1861 / 1863 – John Stuart Mill, Utilitarianism
The focus on pleasure and pain in Bentham’s utilitarianism reduces us to creatures with
more animal instincts. We are servants of these temporary desires, obeying them does
constitute “freedom”.
If we choose not to do an action to avoid punishment, then this motivating source was
external. Even our preferences and our desires were not chosen by us. We are not free to
choose them and therefore they cannot be a guide to morality and good and bad.
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Kant’s Ethics of Duties
Freedom is related to autonomy.
The opposite of autonomy is heteronomy, and describes decisions that are influenced
by external sources – biology, society, today: companies & marketing.
Autonomy for Kant is about using our capacity for internal reasoning to follow a set of
rules that we have given ourselves.
What makes us human and therefore moral beings, is our capacity for reason. Reason
can override our desire for pleasure and avoidance of pain and lead us to make
decisions with more dignity and universal validity.
The moral goal is to value actions for the end in itself – not as a means to an end.
Our objection to pushing the man off the bridge should be based in the action itself, not
in the achievement or avoidance of possible consequences.
27
Kant and importance of motivation
Does a
present
selected
and bought
by a
company
have the
same
value?
“For example it is certainly in accord with duty that a shopkeeper should not overcharge and
inexperienced customer; and where there is much business , prudent merchant refrains from
doing this…People thus get honest treatment. But this is not nearly enough to justify our
believing that the shopkeeper acted this way out of duty or from principles of honesty; his
interest requires him to act as he did…Thus the action was done neither out of duty nor from
immediate inclination, but solely out of self-interest.”
Immanuel Kant in Justice: A Reader, Sandel p163.

For Kant: acting in a way that benefits your self-interest and that also benefits others is
not unethical, but it is also not ethical. It has no ethical value.
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Ethics of Duties / Pflichtethik (Kant 1724 – 1804)
„Pflicht ist die Notwendigkeit einer Handlung aus Achtung fürs Gesetz“
(Immanuel Kant: AA IV, 400)
I could buy a KVB ticket because:

• I recognise the responsibility I have to pay for a service I use duty
• I want to avoid paying a €60 fine. self-interest
Moral law or duty should be the motivation for the actions, not pleasure or the
avoidance of pain.
“For if any action is to be morally good, it is not enough that it should conform to
the moral law (Pflichtgemäß), – it must also be done for the sake of that law. (aus
Pflicht)”
Every action motivated by duty, conforms to duty, but not every action which conforms
to duty was motivated by it.
An action which conforms to duty but was not motivated by it, but rather through
preference or assessment of possible consequences has no positive moral value.
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Ethics of Duties
30
3 Distinctions in Kant’s Ethics of Duties
1. Duty and inclination
Only the motive of duty can confer moral worth to an action. Actions which are
performed for reasons of self-interest are not necessarily wrong, but they are not of
moral value.
e.g. not breaking the law to avoid going to jail, donating money to charity so that others
consider you to be generous, companies engaging in sustainability because of its
marketing value.
“A good will is not good because of its effects or accomplishments, and not because of its
adequacy to achieve any proposed end: it is good only by virtue of its willing – that is, it is good
in itself.”
2. Autonomy and heteronomy
Freedom is not about being able to pursue our desires, as we didn’t choose our
desires; they are external – heteronomous. Freedom means being able to use
our capacity for reason to follow other rules and laws that we set ourselves –
autonomy.
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3 Distinctions in Kant’s Ethics of Duties
3. Hypothetical and Categorical imperatives
Hypothetical imperatives: if you want x, do y (if you want to get a good grade in the exam, read
the book)
These are conditional (if you don’t want x, don’t do y)
“A hypothetical imperative…says only that an action is good for some purpose or other, either possible
or actual…A categorical imperative ...declares an action to be objectively necessary of itself without
reference to any purpose”.
Categorical imperatives: these are unconditional. They always apply.
32
Categorical Imperative ( 2 Formulations)
1. “Act only according to that maxim by which you can at the same time will that it should
become a universal law”
„Handle nur nach derjenigen Maxime, durch die du zugleich wollen kannst, dass sie ein
allgemeines Gesetz werde.“ – Immanuel Kant: AA IV, 421
This means: ethically correct actions are ones which can be generalised and therefore valid
for everyone in the same situation.
2. “Act so that you treat humanity, both in your own person and in that of another, always as
an end and never merely as a means.”
„Handle so, dass du die Menschheit sowohl in deiner Person, als in der Person eines jeden anderen
jederzeit zugleich als Zweck, niemals bloß als Mittel brauchst.“ – Immanuel Kant: AA IV, 429
People should always be treated as valuable - as an end in themselves - and should not just
be used in order to achieve something else. Their interests are of prime importance an they
should not be tricked, manipulated or bullied into doing things.
33
How does Kant’s apply his formulations of the CI apply to…
I. Suicide?
II. Promising to pay back money when you know that you won’t?
III. Not developing talents?
IV. Not helping others in need?
I “If he damages himself in order to escape from a painful situation, he is making use
of a person merely as a means to maintain a tolerable state of affairs till the end of
his life.”
II “The universality of a law that permits anyone who believes himself to be in need
to make any promise he pleases with the intention of not keeping it would make
promising, and the very purpose one has in promising, itself impossible.”
III “As a rational being he necessarily wills that all his powers should be developed,
since they are after all useful to him and given to him for all sorts of possible
purposes.”
IV “A will that [neglected to help others in need] would be in conflict with

itself,…[as] by such a law of nature generated by his own will, he would rob himself
of all hope of the help he wants.”
34
Formulation 1
1. “Act only according to that maxim by which you can at the same time will that it
should become a universal law”
By only acting according to rules which can be generalized, we prevent ourselves from making
exceptions for ourselves, or only considering the (possible small) individual outcome of our own
actions.
35
Formulation 2
“Act so that you treat humanity, both in your own person and in that of another, always
as an end and never merely as a means.”
Isn‘t business always about using somebody else to further your own needs?
If in economic transactions, the other party is not to be considered as simply a means to further
your own ends, but as somebody with their own needs and desires which are to be respected, what
does this mean?
Economic transactions are themselves not violations of the „respect for persons“ principle, but the
issue of freedom is essential.
Negative Freedom: Positive Freedom:
free from manipulation, free to develop your human capacities

coercion or deception
36
Challenges to the Ethics of Duties
 The second formulation (treat everyone as an end in themselves) is similar to the golden
rule [treat others as you would want to be treated]
The golden rule is contingent upon what we would want done to us. The categorical imperative
requires us to go beyond what we would want to the idea of respect for human beings.
 Following a categorical imperative (a rule) cannot be compatible with freedom
Following a rule is compatible with freedom when it is a rule we have set ourselves.
 Giving yourself a rule means that everyone would give themselves different rules.
These rules are not arrived at via preferences and desires but via the capacity for
reasoning. If following this correctly, we will all arrive at the same rule.
37
38
Social Contract Theories
Socrates (470 – 399 BC)
Crito was a dialogue between Socrates and his friend Crito, written by Plato (428 – 348
BC). It is set in Socrates’s prison cell where he is awaiting execution for crimes against the
state of Athens. Crito is prepared to help him escape, but Socrates refuses and gives
explanations for why he will accept his fate.
The main themes in Crito centre on justice and injustice.
Socrates’s life as a citizen of Athens was made possible by the rules of the society
which required his parents and society to care for and educate him.
The relationship between the citizens of a state and their government is not forced.
As an adult he had the choice the choice to leave Athens. By staying he implicitly
agreed to accept the laws of the city, including any punishments the state gave for
contravening their laws.
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Social Contracts and Social Licenses
Social contract theory is the view that persons' moral and/or political obligations are
dependent upon a contract or agreement among them to form the society in which
they live.
Those who have power in our society (e.g. politicians, corporations, business leaders)
have therefore been given it in exchange for fulfilling certain obligations. In return, we
agree to forego certain freedoms, and limit ourselves to the options they give us.
Corporations are given a “social license to operate” by their stakeholders and society.
The stakeholders are happy to engage with them in return for some perceived benefit.
Unlike legal contracts, they are not necessarily consciously entered into, and the
precise terms and conditions are unclear.
Questions are:
• What is the content of such social contracts?

• What constitutes a breach of social contracts?
40
Contractualism: Classical Social Contract Theory
Imagine human beings in a state of nature
► There are is no government or institution to provide security, public order, protect

rights and resolve disputes. What would life be like?
Concept of Human Nature Life in the State of Nature
Ultimately self-interested, will only A state of war of all against all

act in their best interest “Life of man [would be] would be
Thomas Hobbes
Capable of rational reasoning solitary,poore, nasty, brutish and short”
(1588-1679)
Humans have a God given Pre-political but not pre-moral.

John Locke concept of morals, prohibiting us Relatively peaceful until the
(1632-1704) from harming one another balance is disturbed
(except in self-defence)
With natural resources in
Jean-Jaques abundance, quiet and peaceful.
Peaceful, with no in-built desire
Rousseau Scarcity would lead to the
for competition
(1712-1778) concept of possession → envy,
shame pride.,
41
Legitimacy Theory
“Legitimacy Theory relies upon the notion that there is a “social contract” between the
organisation … and the society in which it operates”. …[The social contract] is used to
represent the multitude of implicit and explicit expectations that society has about how the
organisation should conduct its operations”.
“[In legitimacy theory] society allows the organisation to continue operations to the extent
that it generally meets their expectations – that is, the extent to which it complies with the
social contract.”
Failure to comply with societal expectations may lead to sanctions being imposed by
society:
• Legal restrictions
• Limited resources (financial, labour)
• Reduced demand – sometimes through boycotts
“Organisations are not considered to have any inherent right to resources. Rather the right
to access resources must be earned”.
Deegan, Unerman (2011) Financial Accounting Theory

Legitimacy Gap
Where there is a difference between how society believes an organisation should act and
how they perceive that it has acted, we can refer to a legitimacy gap.
Two possibilities for the legitimacy gap:
1. Societies expectations change (e.g. regarding working conditions, environmental

performance etc)
2. Previously unknown information about the organisation becomes available (e.g.
corporate scandals)
Organisational activities around legitimacy (marketing, reporting) will be different in the

following three areas:
Gain Legitimacy Corporation has no existing reputation in area and needs to build one
Maintain Legitimacy Corporation needs to ensure it keeps up with changes in societal expectations
Repair Legitimacy Corporation needs to regain trust after legitimacy has been lost
Deegan, Unerman (2011) Financial Accounting Theory

44
Justice and injustice
Think about today’s society – in Germany, in Europe, in the world.
Examine the distribution of resources, opportunity and freedoms.
Who has more of the above? Why? Do they deserve more?

Who has less? Why? Do they deserve to have less than others?
In which areas of modern society do you consider there to be

injustices of distribution?
Global Wealth Distribution
Access the Global Wealth Pyramid 2016 from Credit

Suisse here
The richest 1% of the world‘s

population own 48% of the
world‘s wealth.
The top 10% have 87%
The bottom ½ own less than

1%
Credit Suisse Global Wealth Report

2016
46
Global Wealth and inequality
47
Wealth redistribution and utilitarianism
Taking money from one rich Distributing it amongst

person many poor people
Pleasure Pleasure
Redistributing the money would cause a greater increase in happiness for the
needy than a loss in happiness for the extremely rich. This would therefore
increase the overall utility.
►This could be done until the loss in pleasure to the rich is equal to the gain to the
needy.
48
Wealth redistribution and utilitarianism
Objection 1:
Taxing the rich excessively will reduce their incentive to generate wealth in the first place
and thereby reduce the overall amount that there is to distribute.
A utilitarian argument
Objection 2:
Taking money away from people violates a fundamental right to use their property as they
see fit.
Libertarianism
An unfair test
Imagine you are going to sit a test.
The resources you require however are limited, therefore they will be distributed as
follows:
• Women get a chair and table, men have to sit on the floor
• People with first names A – I get 30 mins
J – R get 20 mins
S – Z get 15 mins
• People with lighter hair will be given a pen. People with darker hair can “buy” a pen at
a price of 2 minutes.
• People with glasses will be allowed to use phones.
Additional rules:
As a group you can establish rules to distribute these resources before and during the test,
however these rules would affect everyone in the relevant group.
Before the test, each of you will achieve a new identity referring to gender, name, hair colour
and glasses.
50
Theory of Justice (John Rawls 1971)
Rawls’s version of the State of Nature is the

Original Position
What terms of cooperation and justice do free and equal citizens agree to?
What we see in election processes is that people are influenced by their own interests
and position in society.
► We cannot agree on the concept of a just society because our definition

depends on our current position in society.
The only way that we could decide on rules for society would be if we did not know our position
within in.
The question is: what rules would we decide upon in a (hypothetical) discussion in which the
citizens do not know demographic details about themselves, thereby preventing them from
arguing for laws which advantage them?
i.e. they were operating from behind a Veil of Ignorance

The fair conditions are dictated by the abstract thought experiment of the Original
Position where representatives of citizens discuss principles of justice in their society.
Parties do not know:
 The race, ethnicity, gender, age, income, wealth, natural

“If a man knew that he endowments, comprehensive doctrine, etc. of any of the citizens in
was wealthy, he might society, or to which generation in the history of the society these
find it rational …that citizens belong.
various taxes for  The political system of the society, its class structure, economic
welfare measures be system, or level of economic development.
counted unjust; if her
knew that he was poor, Parties do know:
he would most likely
propose the contrary  That citizens in the society have different comprehensive doctrines
principle.” and plans of life; that all citizens have interests in more primary
goods.
 That the society is under conditions of moderate scarcity: there is
enough to go around, but not enough for everyone to get what they
want;
 General facts about human social life; facts of common sense;
general conclusions of science (including economics and
psychology) that are uncontroversial.
Exercise: Bargaining for Justice
What rules should our society have for distributing resources?
53
Modern Social Contract Approaches:
Rawls argues that under these conditions, the following two principles of justice would be
established:
First Principle: Each person has the same indefeasible claim to a fully adequate scheme of
equal basic liberties, which scheme is compatible with the same scheme of liberties for all;
[Basic rights exist and are available to all, and are equally able to be practiced by all.]
Second Principle: Social and economic inequalities are to satisfy two conditions:
a) They are to be attached to offices and positions open to all under conditions of fair equality
of opportunity;
[Assuming that talents and motivation are evenly distributed, under fair equality of opportunity,
any profession would have a social makeup which mirrors that of society]
b) They are to be to the greatest benefit of the least-advantaged members of society (the
difference principle). (Rawls, 42–43)
[Social institutions should be arranged so that any inequalities of wealth and income work to
the advantage of those who would be worst off].
Rawls, J., Justice as Fairness: A Restatement, E. Kelly (ed.), Cambridge, MA: Harvard University Press.
Arguing the Difference Principle by examining the Alternatives
 Aristocracy / Caste system Position in society is a coincidence

Power is reserved for those born to certain of birth. Only randomly selected
families. Others are denied people are allowed access to
positions of power and authority.
 Free Market Societies (libertarian) In practice only those with access to

Formal equality of opportunity for all certain resources (money,
(according to the rules, anyone is allowed) connections, influence) can take
advantage of such opportunities
 Meritocracies
Rawls: if what follows is based purely
Rewards given to those who produce the
on market principles, then the rewards
best performance, correcting for social
still go to those with the best natural
and economic imbalance by ensuring
talents. These natural talents are as
equal access of opportunity e.g. free
arbitrary and no more earned as any
education and job training, family support
other privilege of birth.
►Being born with world-class sporting or business talents is just as random as being born
as royalty, or as the child of an influential politician.
55
Effort and Circumstance
 Even with superior natural talents, achieving greater rewards involves effort. Surely
people are entitled to the rewards from their effort?
Rawls: even ability to willingness to exert effort is a product of upbringing and social
surrounding, factors over which we have no control.
Rawls: not only have we played no role in the existence of our natural talents, we have
also not played a role in living in a society that values such talents. In another society we
may not achieve such rewards with our talents, therefore we cannot say that we deserve
them.
 Egalitarian – people are free to use their natural talents, but the rewards from
those talents go towards society as a whole, to support those who were not
born with such talents. This is the only form of distribution which is morally
defensible (Rawls)
56
Equality vs justice
http://culturalorganizing.org/the-problem-with-that-equity-vs-equality-graphic/
57
58
What motivates companies be “good”?
Ethical Corporation Magazine The Guardian Sustainable Business Hub

http://www.ethicalcorp.com/ https://www.theguardian.com/uk/sustainable-business
Egoism (Adam Smith, 1723 – 1790)
In the Theory of Moral Sentiments, Adam Smith writes:
”
The Theory of Moral Sentiments, Part I, Section I, Chapter I, p. 9, para.1.
The Theory of Moral Sentiments, Part I, Section I, Chapter V, p. 25, para. 5.
Note: Egoism is not selfishness (or egotism)
Can be moved by pity for others:

Insensitive to others
possible to help others to make
yourself feel better
60
Ethical Egoism (Adam Smith, 1723 – 1790)
In ethical egoism an action is morally right if it maximises

the self-interest of the agent.
This does not mean that there is a disregard for others, as

not considering others would not be in anyone’s self-
interest.
In a free market, ethical egoism ensures that people only provide

products and services which meet consumers‘ needs.
Having dissatisfied customers is not ultimately in the best interests of the

business.
“It is not from the benevolence* of the butcher, the brewer, or the
baker, that we can expect our dinner, but from their regard to their
*benevolence = kindness own interest”
Wealth of Nations, Book I, p19, 1776
Key difference to Bentham’ utilitarian approach:
• Utilitarianism is agent-neutral which means that everybody’s interest and well-being has an equal
value.
• Smith promotes actions in the interest of the agent, the person who was acting.
61
Ethical Egoism – The Invisible Hand
Adam Smith believed that it is through the combined actions of individuals who are
focussed on their own self-interest that markets operate most effectively.
“He generally, indeed, neither intends to promote the public interest,

nor knows how much he is promoting it. … he intends only his own
gain, and he is in this, as in many other cases, led by an invisible
hand to promote an end which was no part of his intention. Nor is it
always the worse for the society that it was no part of it. By pursuing
his own interest he frequently promotes that of the society more
effectually than when he really intends to promote it. I have never
known much good done by those who affected to trade for the
public good.” Joseph Stiglitz
Former chief economist of the
World Bank 1997-2000
Wealth of Nations, 1776. Book IV, p448
“The Invisible Hand of the market always

moves faster and better than the heavy Mitt Romney
hand of government” Former Governer of Massachusets
Republican Party Candidate for 2012 US Election
62
63
Libertarianism – Robert Nozick (1938-2002)
Why should we think that the rich do not deserve their property?
Imagine that we had a just distribution of resources and property in society (D1).
Beyonce has a great voice and people pay to hear her sing, for every person at a
concert she receives $1. After one tour she now has $300,000. This is an amount
that is much larger that the average income and one that does not fit into the
pattern D1. We now have D2 which contains one person with a considerable
wealth.
However each of those people gave their money freely, in a just transaction that
they were happy to participate in.
The only way to prevent D1 from changing to another, “less just” distribution is to
prevent or forbid free transactions.
“…no end-state principle or distributional patterned principle of justice can be continuously

realized without continuous interference with people’s lives.”
Robert Nozick, Anarchy, State and Utopia.
64
Nozick: Justice is not about a specific distribution (a “patterned

distribution”) but about the underlying principles that allowed this
distribution to come about.
“If the world were wholly just, the following inductive definition
would exhaustively cover the subject of justice in holdings.
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 entitles to the holding except by (repeated)
applications of 1 and 2.”
In other words:
• if someone obtains something fairly, it is theirs.
• If some is freely given something from someone who was entitled to have it, it is theirs.
• These are the only conditions under which they are allowed to own things.
65
This “intereference” would be wrong in Nozick’s view, following on

from the John Stuart Mill’s notion of individual liberty
Nozick takes the idea of John Locke (1632-1704) that people would still
have certain rights in a „natural state“ i.e. where there was no
government.
These rights would be to freedom, life and property – and self-ownership
This means, these rights are yours naturally, not because a government gives them to
you.
Nozick believes the role of a state is only to protect these rights.
→ The minimal state
66
Nozick‘s Minimal State
A minimal state protects your right to freedom, life and property – and that’s all
A minimal state does not pass laws which are:

 “paternalistic” and designed to protect people from themselves
e.g. seatbelt laws, mandatory pension or insurance payments.
Argument: Forcing me to pay for health insurance is a violation of my
self-ownership, it should be my choice.
 promote a certain concept of morality e.g. promoting religion or banning
homosexuality
 designed to forcefully redistribute wealth e.g. through taxation of higher earners
to fund social programmes.
→ Nozick believes this amounts to the state „owning“ a proportion of your
labour, and is therefore equal to forced labour.
67
Objections to Nozick’s minimal state and
►Libertarian responses
Objection 1: Taxation isn’t as bad as forced labour
You can choose to work less and thereby by less tax. With forced labour you have no
choice.
► Why should people be forced to make a choice by the state? The decision to work
hard and earn money should not be punished by the state.
Objection 2: The poor need the money more

► Just because they need it, doesn’t give them a right to it. I can be
encouraged to support them, but not forced.
Objection 3: People who are rich have become so with the support of others, to whom
they are indebted.
► These people have already been rewarded via the market value of their services. This
is also no reason for them to give money to unrelated needy people to whom they aren’t
indebted.
68
Objections to Nozick’s minimal state and
► Libertarian responses
Objection 4: The taxation isn’t forced. The rich are part of democracies where they
contribute towards making the laws.
► Being a member of a state doesn’t automatically mean that people should submit to
the democratically agreed principles and that these are just. Democracies can still
produce rules which target minorities and affect individual rights.
Objection 5: The rich are just lucky to be born in the position that they are, with
the talents that they have
► If rich people are not entitled to the rewards of the talents that they have,
then they do not own themselves, and we are implying that the state owns a
portion of them.
69
Libertarian Economics
Milton Friedman – 1912-2006, Nobel Prize in Economics 1976
“ The system under which people make their own choices – and
bear most of the consequences for their decisions – is the system
that has prevailed for most of our history. It is the system that
gave us the [great business leaders of the last centuries].
The resulting addition to the wealth of the community as a whole,
to the well-being of the masses of the people, amounted to many
times the wealth accumulated by the innovators”
People should be free to make choices regarding

business, unhindered from governments, as this is the
root of capitalism
70
Libertarian Economics
Milton Friedman – 1912-2006, Nobel Prize in Economics 1976
Essay: The Social Responsibility of Business is to Increase its Profits

New York Times Magazine, Sept 13, 1970
“ “ What does it mean to say that "business" has responsibilities?

Only people have responsibilities.”
“ In a free-enterprise, private-property system, a corporate executive

is an employee of the owners of the business. He has direct
responsibility to his employers. That responsibility is … to make as
much money as possible while conforming to their basic rules of the
society, ”
“If they are to be civil servants, then they must be elected through a political process.”
”
71
72
Communitarian Ethics (Amitai Etzioni *1929)
Western political societies are economically successful but also suffer from social problems such
as political alienation, loneliness, depression, divorce, crime - an absence of moral foundation
Political Left Libertarianism

The political left also focusses on Political focus on justice and liberty
individual rights, supporting (e.g. Rawls) assumed that the main
unaffordable welfare costs, and role of government was to secure and
removing incentives for personal fairly distribute the liberties and
involvement in political and social economic resources people need to
processes lead autonomous lives based on free
will.
► The focus on welfare rights and
shifting power to centralized structures ► The underlying belief is that
undermines family and social ties. The humans are primarily motivated by
emphasis is on the obligations of the self-interest, and the social contracts
state rather than the obligations of that exist are conscious decisions by
individuals. freely acting individuals.
Both approaches lack the concept of individuals rooted in social structures, which
shape and mould them and to which they sense commitments and obligations
Communities and modern life
The communitarian movement sees a fault in the concept of considering society to be

made up of individuals who have no social ties to each other, with a sole focus on
promoting individual rights and liberties, without a discussion of individual obligations.
Example from Amitai Etzioni:
American citizens consider it their constitutional right to be judged by a jury of their fellow
citizens if they are accused of a crime.
At the same time they are reluctant to sacrifice their own time to sit on a jury.
► There is a disconnect between expecting liberties and rights and disregarding our
obligations to society which are necessary to enable those rights.
There is too much focus on “individual rights, unmatched by individual responsibilities”

Communitarianism and Libertarianism
The communitarian movement is more strongly critical of libertarianism and their

differences cover three key aspects:
1. Universalism vs Particularism
2. The concept of the individual
3. The politics of community
These concepts were established and developed in the works of Amitai Etzioni (Rights
and the Common Good:The Communitarian Perspective 1995), Michael Sandel
(Liberalism and the Limits of Justice, 1981, 1998), Charles Taylor (Sources of the Self:
The Making of the Modern Identity) and Michael Walzer (Spheres of Justice, 1983)
1. Universalism vs Particularism
The focus on rights and liberties presents them as concepts which are
universally true – they exist independent of a society‘s background or validation.
Arguments about justice and rights in social criticism must reflect the background
and history of that culture. Otherwise they are politically meaningless.
There are few admirable societies that provide a better model than those
promoting individual liberty and justice. Cases where an increase in liberal
democracy has led to a decrease of stability are short term and do not disprove
that it is an ideal that people aspire to.
Cultural particularism recognises that cultural factors can:
1. Affect the prioritizing of rights

(e.g. data laws are a balance between the right to security vs right to freedom)
2. Affect the justification of rights
(the reasons for the development of certain rights cannot be solely grounded in
Western ideals but in arguments valid within particular cultures)
3. Provide moral foundations for distinct political practices
(e.g. cultures that place a moral imperative on caring for one’s parents are politically
and socially structures to enable that)
2. The Concept of the individual
We are individuals with a primary interest in creating and pursuing our own life-plans .
This concept denies that we define ourselves by our membership of various

communities (family, nation) which cannot simply be laid aside out of choice.
Most of our life is a result of unchosen routines as a result of group memberships.

Individual critical reflection (e.g. on life plans) only exists when these automatic
modes are insufficient, and thus we are aware of them.
The government has the role of providing rights so that these conscious
decisions can be made and pursued. Unchosen activities should not be overly
valued or endorsed by govt.
A moral principle made out of individual choice is not necessarily more valuable than
unchosen perspectives formed from community. In the balance between individual freedoms
and community, freedoms are not automatically superior.
The focus is on the ability and possibility of critical reflection and choice.
3. The politics of community
Individuals rights and freedoms to pursue own life-plans is in the foreground..
 This focus leads to an overly individualistic society which lacks social cohesion
and a moral code.
 Unregulated free-market capitalism contributes to the breakdown of social units

such as the family, local communities and a political system unaffected by
business interests. Globalisation pushes cultures towards this “ideal”.
 The focus needs to be away from creating new rights and enabling personal
fulfilment and towards promoting and supporting social and community
structures (families, schools, communities, political engagement)
 There is a normative need to establish our identity as a members of the

communities that have allowed us to develop, rather than as pure individuals.
79

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Business Ethics / Wirtschaftsethik

• To understand the key approaches to ethical considerations and their distinctions.

Morality is relative to the A universal ethical code

Actions can only be wrong Ethical decisions can be

► There is no universal ► Some things are always

Situation: (Philippa Foot, 1967)

You are driving a trolley (train) which is racing down a track

You are watching the runaway trolley from a bridge. You

Would you push?

Non-consequentialist ethics Consequentialist ethics

Judgement depends on whether the Depends on whether the outcome is a

 Utilitarianism (Jeremy Bentham, John Stuart Mill)

 Deontology (Immanuel Kant)

 Contractualism (Thomas Hobbes, John Locke)

 Theory of Justice (John Rawls)

 Ethical Egoism (Adam Smith)

 Libertarianism (Robert Nozick)

 Communitarianism (Amitai Etzioni, Michael Sandel)

Jeremy Bentham 1748-1832, British moral philosopher and legal reformer

Believed: Natural rights do not exist.

The highest principle of morality is to maximise utility

1. Its intensity How intense is the pleasure / pain?

Bentham, An Introduction to the Principles of Morals and Legislation, 1789

An action is morally right if it results in the greatest amount of good (pleasure

Why do people not have natural rights?

Bentham, An Introduction to the Principles of Morals and Legislation, 1789

Watch the interview with Snowdon here:

What objection would utilitarianism have to the hunting of an

In June 2007 the Dutch TV Channel BNN

Watch the final moments of the show here:

Would it be justified to inflict pain on a terrorist suspect, if it meant that

 Basic utilitarianism logic would  A utilitarian argument against:

Michael Sandel: Comparing a suspected terrorist with innocent victims is an incorrect

Sandel, Justice, What’s the right thing to do?, 2009

2. Can we create a common basis for comparison of pleasures and pains?

Ford Pinto Memo. Available on: http://lawprofessors.typepad.com/tortsprof/files/FordMemo.pdf

Ford Pinto Memo. Available on: http://lawprofessors.typepad.com/tortsprof/files/FordMemo.pdf

2. Can we create a common basis for comparison of pleasures and pains?

The utilitarian counter-arguments are:

• We all intrinsically engage in such calculations through certain purchasing decisions

Objections to Bentham’s Utilitarianism:

John Stuart Mill 1806-1873

Mill supported the concept of utilitarianism wholeheartedly,

Mill believed in individual liberty, that people should be free to

However, is individual liberty compatible with utilitarianism?

If the benefits to the Donald Trump’s followers and to American

“The illogic of the Government’s contentions is palpable. The

Some pleasures are intrinsically worth more than others

John Stuart Mill, Utilitarianism, 1863

Act Utilitarianism Rule Utilitarianism

We evaluate the greatest net 1. A specific action is

Refers to the utility resulting Refers to the utility resulting

 Utilitarianism (Jeremy Bentham, John Stuart Mill)

 Deontology (Immanuel Kant)

 Contractualism (Thomas Hobbes, John Locke)

 Theory of Justice (John Rawls)

 Ethical Egoism (Adam Smith)

 Libertarianism (Robert Nozick)

 Communitarianism (Amitai Etzioni, Michael Sandel)

Following the end of WWII the international

The Articles centred on the four freedoms that

The articles were drawn up by the

Hernán Santa Cruz of Chile, member of the drafting sub-Committee, wrote: