I argue that Taylor was a pioneer in theorizing principles of institutional economics, and I challenge conventional preconceptions that scientific management is theoretically unsophisticated and aimed at disadvantaging certain organization members. I identify in Taylor's writings the institutional economic ideas of dilemmatic interaction conflict regarding capital contributions and capital distributions, conflict resolution through incentives management, mutual gains as the outcome of conflict resolution, and the model of economic man, and I suggest that Taylor's behavioral concept of hearty cooperation deviated from the economic principles he had espoused regarding worker opportunism.
The paper reconstructs in economic terms Friedman's theorem that the only social responsibility of firms is to increase their profits while staying within legal and ethical rules. A model of three levels of moral conduct is attributed to the firm: (1) self-interested engagement in the market process itself, which reflects according to classical and neoclassical economics an ethical ideal;(2) the obeying of the "rules of the game," largely legal ones; and (3) the creation of ethical capital, which allows moral conduct to enter the market process beyond the rules of the game.Points (1) and (2) position the Friedman theorem in economic terms while point (3) develops an economic revision of the theorem, which was not seen by Friedman. Implications are spelled out for an instrumental stakeholder theory of the firm.3
The paper suggests that in a modern context, where value pluralism is a prevailing and possibly even ethically desirable interaction condition, institutional economics provides a more viable business ethics than behavioural business ethics, such as Kantiansim or religious ethics. The paper explains how the institutional economic approach to business ethics analyses morality with regard to an interaction process, and favours non-behavioural, situational intervention with incentive structures and with capital exchange. The paper argues that this approach may have to be prioritised over behavioural business ethics which tends to analyse morality at the level of the individual and which favours behavioural intervention with the individual's value, norm and belief system, e.g. through ethical pedagogy, communicative techniques, etc. Quaker ethics is taken as an example of behavioural ethics.The paper concludes that through the conceptual grounding of behavioural ethics in the economic approach, theoretical and practical limitations of behavioural ethics as encountered in a modern context can be relaxed. Probably only then can behavioural ethics still contribute to raising moral standards in interactions amongst the members (stakeholders) of a single firm, and equally, amongst (the stakeholders of) different firms.
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