Exam 2 Flashcards
Capitalism
Production and distribution that is in private hands and the operations are funded by profits
Strength: allows new products and businesses, free market, provides social services, customer driven, competition gives variety
Weakness: allows top 1% to get all the wealth, classes are spread out, lowers work ethic and want for american dream
Socialism
Production and distribution that is in public hands and the operations are funded by profits; value made belongs in hands of society
*Difference between capitalism and socialism
public vs. private hands
5 historical components of capitalism
-Mercantile
Based on mutual dependency between state and commercial interest.
-Industrial
Large scale industry
-Financial
Characterized by trust, banks, money
-State welfare
Provides welfare services to employees
-Globalized
Transcends national borders
4 elements/functions of capitalism
-Companies
Promotes creation of companies or business organizations that exists
-Competition
Makes individual pursuit of self interest socially beneficial
-Profit motive
Lies in the motive that the company is which to make a profit
-Private property
Capitalism requires private ownership of the means of production
Keynes (British)
Government regulated capitalism
Spend money to spread economic growth
FDR and Obama
Most accepted/popular in early 20th century
Specifically during Roosevelt’s new deal time period
Giving 300-400 dollars to families to spend
Government bailouts
F. A. Hayek (Austria in the early to mid part of the 20th century)
free market capitalism
Save money to help economic growth
Friedman and Reagan
Milton Friedman (relates to Nozick)
Move towards socialism
Barbara Thaten as prime minister in Britain
Monopolies
single seller
Ex: apple owns phone and laptop.. They can buy out Nike and sell computers
Oligopolies
market shared by a small number of producers
Ex: Apple buying Nike and Patagonia but keeping their products but owning them
Karl Marx
workers taking power could be a problem
No one should have power over another majority of wealth
Broader view
Goodpaster and Matthews
Business has social responsibility to stakeholders, consumers, environment, workers
Donaldson’s social contract theory
business owes society because it allows for the business to exist
Multiple stakeholders argument
other stakes in business besides profit
Velasquez’s argument
companies are about moral ethics
Employment at will
either party may fire/quit and hire/apply without reasoning
Narrow
Friedman
Business has no social responsibility except to maximize profit
Fiduciary responsibility
get most amount of money for the shareholder as possible
Maximize profits through shareholders
Adam Smith invisible hand
if people were left to pursue their own interests they would unknowingly create the most good and benefit
Visible hand
“let government do it” government has the resources and ability to hold the responsibility they should
Government has everything they need in order to appeal to social responsibility which is why they should do it and not businesses
Inept
businesses are like a custodian trying to handle a responsibility “government doesn’t know what to do”
Economic efficiency
hating broad view; wrong bc it’s inefficient and does not maximize shareholders values
Materialization of society
if social responsibility is imposed it will increase materialization in society
Ex: clean up ocean to get in newspaper
Compatibility of self interest and social responsibility
if companies are to put their shareholders first that they will automatically be fair to workers and society
Ford v. Pinto case
1970s
Ford ran a cost benefit analysis and determined that people’s lives are worth the price that they’d pay for the car
Unsafe gas tank situation
Macpherson v. Buick
Wheel of car fell off and sued manufacturers
Moves us to the idea of manufacturers acting under the process of due care
Due care: consumers and sellers do not meet as equals
Let the buyer beware
Consumer misuse
Greenman v. Yuba Power Products
Liability and safety case
Hemington v. Bloomfield
Legal responsibility to compensate for injury
Caveat emptor- let the buyer beware
*Switched to Due care- consumers and sellers do not meet as equals
Business Responsibility (6)
Business should give safety the priority warranted by the product
Business should abandon the misconception that it is exclusively product misuse and they are therefore responsible
Business must monitor manufacturing process
When a product is ready to be marketed, business should have a product safety staff review it
When products reach marketplace, firms should offer information about the product
Companies should investigate consumer complaints and do it quickly
Advertising
*Ambiguity Ad can be understood in two or more ways *Concealment of facts Not giving all the information about a product Ex: pain reliever *Exaggeration Claims that are unsupported by evidence *Puffery Making product sound better than it is Ex: company claiming they have the best blanket on the market *Psychological appeals Aimless effort swayed at a motion Ex: puppy ads *Subliminal ads Communicate at a level beneath conscious awareness Ex: coke in romantic comedy
Cpsc
Consumer product safety commision
Review safety
Fda
Food and drug administration
Sec
Security exchange commision
Ftc
Federal trade commision
Pricing, labeling and packaging
Consumerism
Pricing- $499.99
Price manipulation
Mail and rebate
Bait and switch
Price gouging
Raises price of product in high demand
Horizontal price fixing
occurs when multiple companies agree to adhere to set price
ex: gas prices
Vertical price fixing
set price for seller
ex: Barbie dolls
Quality of products
Expressed warranties- this product will not shrink, fade, break
implied - this product will work for intended use
Social corporate responsibility
Ad problems
For understanding
For providing consumer needs
Because consumers are completely dependant on business for safety
