Contrasting the Behavioural Business Ethics Approach and the Institutional Economic Approach to Business Ethics: Insights From the Study of Quaker Employers

Abstract

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.

Putting ethics and economic rationality together: an Aristotelian and philosophical approach

“…Similarly, modernity is related to individuality, value fragmentation, and pluralism (Wagner‐Tsukamoto ). In contrast, pre‐modern societies ‘interacting choice‐makers intrinsically share values and other behavioral dispositions’ (Wagner‐Tsukamoto : 70) are ‘grounded in the concept of a value consensus’ (Wagner‐Tsukamoto : 839) and require like‐mindedness (Wagner‐Tsukamoto ). For example, Wagner‐Tsukamoto (: 67) clearly states that ‘behavioural (business) ethics is overburdened to analytically accommodate pluralism’.…”

“…Accepting that the ineffectiveness and inefficiency of behavioral ethics in our contemporary world is related to its inability to deal with value pluralism (Wagner‐Tsukamoto ; Lütge ), the pluralistic nature of Aristotelian ethics can be seen as an effective and efficient approach to business ethics. For that reason, a behavioral business ethics approach is not necessarily ‘theoretically and practically exhausted’ (Wagner‐Tsukamoto : 841).…”

“…Nevertheless, and as we will see below, although Aristotelian ethics implies the awareness of perceptions' discrepancy, phronesis entails a shared mutually acceptable understanding of the importance as a common way of reasoning – the rational reasoning under virtue or happiness. Despite the fact that the content of that sharing does not necessarily ensure ‘like‐mindedness’ (Wagner‐Tsukamoto : 839), it makes an appeal to the philosophy of mind which, however, is not explored in this article. Its importance deserves separate research into the philosophy of mind and its relationship with ethics and economics.…”

“…Smith ; Friedman ; Buchanan ). Some business ethicists have sought to relate ethics with economics on the basis of classical and neoclassical economics theory (Lütge ; Wagner‐Tsukamoto , ), especially the New Institutional Economics, or by challenging economic rationality (Bowie ; Solomon ; Duncan ; Hartman ). There have also been several proposals from behavioral economic theorists to reconcile ethics with economics (Sen ; Akerlof & Shiller ; Akerlof & Kranton ).…”

“…Our endeavor seems controversial however, because on the one hand, Aristotelian behavioral holistic philosophical ethics can be seen as belonging to a pre‐scientific modern world (Wagner‐Tsukamoto , ; Lütge ), and on the other, our Aristotelian approach can also be seen as an anachronism, inadequate to explain ethical and economic behavior in modern plural and individualistic societies (Wagner‐Tsukamoto ; Lütge ). Consequently, invoking Aristotelian virtue ethics today could be seen as an extemporaneous, ineffective, inefficient, and archaic perspective of inquiring about economic and ethical rationality in our contemporary world.…”