What is the Role of Ethical Behavior in a Free Market? Conventional wisdom views

by Caaltu · May 24, 2024

What is the Role of Ethical Behavior in a Free Market?
Conventional wisdom views

What is the Role of Ethical Behavior in a Free Market?
Conventional wisdom views free markets as places where self-interest, rather than ethical behavior, reigns, but this is a narrow view, keeping in mind that people are also self-interested when they are outside the marketplace as when they are acting in the political arena.
Markets may actually encourage ethical behavior. The only way to make money in a market is to provide a service that other people value enough to pay for. This leads people to be cooperative and friendly and to try to provide a product or service that people want. In contrast, in politics, politeness and cooperation are difficult to achieve.
When corporate leaders act unethically (making false statements about the condition of their stock or illegally using money from their corporation) they generally suffer as a result. Their companies may be forced into bankruptcy or go out of business. In other words, markets themselves punish wrongdoers.
Another way to look at markets and ethical behavior is to argue that markets can operate only if people are ethical. Some say that markets are not themselves either ethical or not ethical. Rather, they are just a system of voluntary trade. Whether the actions are ethical depends on the people involved.
Question: Does business have a special ‘ethical responsibility’ to do good (to go beyond just following the laws and avoiding fraudulent behavior)? Doing good this way is sometimes called ‘corporate social responsibility’.
Economists such as Milton Friedman argue that companies have one responsibility: to make a profit, following laws and acting responsibly but not taking on special charitable tasks. Others, such as John Mackey, CEO of Whole Foods, disagree.
What is your position on this ethical marketing and responsibility issue?