Question

How does the market failures approach understand the morality of the market? In what sense is this morality, and perhaps also business ethics more generally, a “third best” evaluative framework (see p. 185-186 in particular)? What common misconceptions does such a framework correct?

Answer 1

Market failure approach to business ethics shows that a moral code can be developed from an idea that fundamental obligation of managers must do so within the framework of the law. Moral philosophy values altruism.i.e. an individual should do well if it benefits others not just because the individual will be better off from the good. As a result, business ethicists have nothing to say about the conflict between ethics and interest.

Rawlsian egalitarian theories of justice can accommodate the rough world of competitive markets and business firms if they recognize Paretian efficiency as the third best ideal principle of justice.

It is not that market failures wipe out efficiency in modern markets. It can facilitate efficiency and innovation like economies of scale which cannot be a part of perfect competition. There is no coincidence that the decades following the emergence and dominance of the widely held public corporation have been the decades with the most inefficient creation of economic value the world has ever seen.However, one's goal should be to have a general sense of the nature of moral responsibility.