Ethics 2 Flashcards
command economy
economic systems based primarily on a government authority making the economic decisions
market economy
economic system based primarily on private individuals making the main economic decisions
free markets
each individual is able to voluntarily exchange goods with others and to decide what will be done with what he or she owns without interference from government
free trade
citizens may freely trade goods with the citizens of other nations without the interference of tariffs, quotas, or other government limits on the goods citizens may buy from or sell to foreign citizens
Locke’s State of Nature
-all persons are free and equal -each person owns his body and labor, and whatever he mixes his own labor into -people’s enjoyment of life, liberty, and property are unsafe and insecure -people agree to form a government to protect and preserve their right to life, liberty, and property
criticisms on Locke’s view
-Locke does not demonstrate that individuals have “natural” rights to life, liberty, and property -Locke’s natural rights are negative rights and he does not show these override conflicting positive rights -Locke’s rights imply that markets should be free, but free markets can be unjust
Adam Smith
-market competition ensures the pursuit of self-interest in markets and advances the public’s welfare -government interference in markets lowers the public’s welfare by creating shortages or surpluses -private ownership leads to better care and use of resources than common ownership
Hayek and von Mises
governments should not interfere in markets because they cannot have enough information to allocate resources as efficiently as free markets
criticisms of free market and utility
-rests on unrealistic assumption that there are no monopoly companies -falsely assumes that all costs of manufacturing are paid by manufacturer, which ignores the costs of pollution -falsely assumes human beings are motivated only by a self-interested desire for profit -some government planning and regulation of market is possible amd desirable
Keynes’ criticism of Smith
-Smith wrongly assumes demand is always enough to absorb the supply of goods -if households forego spending, demand can be less than supply, leading to cutbacks, unemployment, and economic depression -government spending can make up for such shortfalls in household spending, so government should intervene in markets -Keynes’ views were challenged when government spending did not cure high unemployment but created inflation
tradition-based societies
rely on traditional communal roles and customs to carry out basic economic tasks
Social Darwinism
belief that economic competition produces human progress
views of Herbert Spencer
-evolution operates in society when economic competition ensures the fittest survive and the unfit do not, which improves the human race -if government intervenes in the economy to shield people from competition, the unfit survive and the human race declines, so government should not do so -assumes those who survive in business are “better” people than those who do not
criticisms of free trade and utility
-ignores the easy movement of capital by companies -falsely assumes that a country’s production costs are constant -ignores the influence of international rule setters
Karl Marx’s criticizing of market and free trade
-capitalist systems offer only two sources of income: sale of one’s own labor and ownership of the means of production (i.e. buildings, machinery, land, and raw materials) -capitalism and its private property system creates alienation among workers
Marx on alienation
-in capitalism, workers become alienated when they lose control of their own life activities and the ability to fulfill their true human needs -capitalism alienates workers from their own productive work, the products of their work, their relationships with each other, and from themselves -alienation also occurs when the value of everything is seen in terms of its market price
Marx and private property
-private ownership of the means of production is the source of the worker’s loss of control over work, products, relationships, and self -productive property should serve the needs of all and should not be privately owned, but owned by everyone
Marx’s historical materialism
-the methods a society uses to produce its goods determine how that society organizes its workers -the way a society organizes its workers determines its social classes -a society’s ruling social class controls society’s government and ideologies and uses these to advance its own interests and control the working classes
Criticism of Marx
-Marx’s claims that capitalism is unjust are unprovable -justice requires free markets -the benefits of private property and free markets are more important than equality -free markets can encourage community instead of causing alienation -immiseration of workers has not occurred; instead their condition has improved
price and quantity move to equilibrium when…
-if price rises above equilibrium, surplus appears and drives the price back down -if price falls below equilibrium, shortage appears and drives price up to equilibrium -if quantity is less than equilibrium, profits rise, attracting sellers who increase quantity to equilibrium -if quantity is more than equilibrium, prices fall, driving sellers out which lowers quantity to equilibrium
utility in perfectly competitive markets
-prices in the system of perfectly competitive markets attract resources when demand is high and drives them away when demand is low, so resources are allocated
characteristics of monopoly markets
-one dominant seller controls all or most of the market’s product, and there are barriers to entry that keep other companies out -seller has the power to set quantity and price of its products on the market -seller can extract monopoly profit by producing less than equilibrium quantity and setting price below demand curve but high above supply curve -high entry barriers keep other competitors from bringing more product to the market
ethical weaknesses of monopolies
-violates capitalist justice -violates utilitarianism -violates negative rights (forcing other companies to stay out of market, letting monopolist force buyers to purchase goods they do not want, letting monopolist make price and quantity decisions that consumer is forced to accept
oligopolistic markets
- major industrial markets are dominated by only a few firms
- oligopolistic markets are “imperfectly competitive” because they lie between the two extremes of the perfectly competitive and monopolistic markets
- unethical practices: price-fixing, manipulation of supply, market allocation, bid rigging, exclusive dealing arrangements, tying arrangements, retail price maintenance agreements, predatory price discrimination
the fraud triangle
-the pressures or strong incentives to do wrong, such as organizational pressure, peer pressure, company needs, personal incentives -the opportunity to do wrong, which includes the ability to carry out the wrongdoing, being presented with circumstances that allow it, low risk of detection -the ability to rationalize one’s action by framing as morally justified
main views on oligopoly power
- do-nothing view- do nothing since power of oligopolies is limited by competition between industries and by countervailing power of large groups; oligopolies are competitive and big US companies are good international competitors
- antitrust view-large monopoly and oligopoly firms are anticompetitive and should be broken into small companies
- regulation view-big companies are beneficial but need to be restrained by government regulation
