business ethics

NPR, Psychology of Fraud (Toby Groves case)

Groves saw himself as helping others, but rationalized fraud.

Kahneman, Thinking, Fast & Slow (excerpt)

• System 1 vs System 2:

  • System 1 = fast, intuitive, emotional.

  • System 2 = slow, deliberate, analytical.

• Ethical application: bias creeps in when we rely too heavily on System 1.

Bazerman & Tenbrunsel, Narrowing the Gap

• Ethical fading & “bounded ethicality.”

• People often see themselves as ethical but behave otherwise because of context, incentives, and rationalizations.

• The “gap” = difference between intended ethical standards and actual behavior.

• Nudges, awareness, and structural changes can help reduce the gap.

Thaler, Nudge: The Gentle Power of Choice Architecture

• Choice architecture: the way choices are presented influences outcomes.

• Nudges: small interventions that steer choices without eliminating freedom.

• Example: cafeteria food placement → healthier eating.

• Ethical debate: when is nudging manipulative vs supportive of autonomy?

Sandel, Justice (Chs. 1, 2 & 5)

• Three approaches to justice:

  1. Welfare (Utilitarianism) – maximize happiness.

  2. Freedom (Libertarianism/Kantian emphasis) – respect individual rights/choices.

  3. Virtue (Aristotelian) – cultivate moral character and civic virtue.

• Key debates: price-gouging, markets in morality, fairness.

Utilitarianism (Bentham & Mill)

• Bentham: good = pleasure/happiness; bad = pain. Goal = greatest happiness for greatest number.

• Mill: distinguishes higher (intellectual, moral) vs lower (physical) pleasures; defends liberty and rights within utilitarianism.

Kantian Ethics

• Good will = only thing good in itself.

• Categorical Imperative (CI):

  1. Universalization test – act only on maxims that can be universalized.

  2. Respect-for-persons test – treat humanity always as an end, never merely as a means.

Moral Fading (NPR, Toby Groves)

When people stop seeing a decision as a moral issue and instead view it as just a business or technical problem.

Tunnel Vision (NPR, Toby Groves)

• Focusing so narrowly on a goal or outcome that you ignore broader ethical implications.

Ethical Blind Spots (NPR, Toby Groves)

Unawareness of one’s own unethical behavior, often because people think of themselves as good and therefore overlook their biases.

Self-Serving Bias (NPR, Toby Groves)

The tendency to see situations in ways that benefit yourself, even if it means bending the truth

Framing (NPR, Toby Groves)

How a situation is presented or interpreted shapes how ethical (or unethical) it seems.

System 1 (Kahneman)

• Fast, automatic, intuitive, emotional.

• Doesn’t require much effort; operates on “gut feeling.”

• Useful for routine or quick decisions.

• Ethical risk: prone to bias, stereotypes, overconfidence, and snap judgments.

System 2 (Kahneman)

• Slow, deliberate, logical, analytical.

• Requires effort, concentration, and conscious reasoning.

• Useful for complex, high-stakes, or ethical decisions.

• Ethical strength: can catch mistakes and question System 1’s impulses.

Ethical Application (Kahneman)

• Bias creeps in when we rely too much on System 1.

• Example: A manager hires someone because they “just had a good feeling” (System 1) rather than carefully evaluating qualifications (System 2).

Kahneman, Thinking, Fast & Slow (excerpt)

System 1 vs System 2:

Bazerman & Tenbrunsel: Narrowing the Gap

Core Idea:

• Most people want to be ethical, but they often fall short.

• The “gap” = difference between how ethical we think we are (intentions) and how we actually behave (actions).

Ethical Fading (Bazerman & Tenbrunsel)

The ethical dimension of a decision “fades” when people frame it as just business, financial, or technical.

Bounded Ethicality (Bazerman & Tenbrunsel)

Our ability to act ethically is limited by psychological biases and organizational pressures

Why the Gap Happens (Bazerman & Tenbrunsel)

• Context: Situations shape behavior (e.g., sales quotas, pressure to succeed).

• Incentives: Rewards can push people to cut corners.

• Rationalizations: People tell themselves stories that justify their actions (“everyone does it,” “I’m helping the company”).

How to Narrow the Gap (Bazerman & Tenbrunsel)

• Nudges: Small changes in decision-making environments that encourage ethical choices (e.g., requiring employees to actively sign honesty pledges before reporting numbers).

• Awareness: Training people to recognize bias, blind spots, and ethical fading.

• Structural Changes: Designing organizations and incentives to align with ethics, not just profit (e.g., whistleblower protections, transparent audits).

Thaler: Nudge

Core Idea:

• Choice architecture = the way options are structured or presented.

• Even small differences in presentation can strongly influence decisions.

• Nudges = subtle interventions that steer people toward better decisions without removing their freedom to choose.

Ethical Debate (Thaler)

• Supportive of autonomy: Nudges can help people make choices aligned with their long-term interests (e.g., saving for retirement, healthy eating).

• Potentially manipulative: If nudges are hidden or serve the nudger’s interests instead of the individual’s, they risk undermining autonomy.

Supportive of autonomy (Thaler)

Nudges can help people make choices aligned with their long-term interests

Potentially manipulative (Thaler)

If nudges are hidden or serve the nudger’s interests instead of the individual’s, they risk undermining autonomy.

Sandel: Justice

Three Approaches to Justice

1. Welfare (Utilitarianism)

2. Freedom (Libertarianism / Kantian Respect for Persons)

3. Virtue (Aristotelian)

Price-gouging (Sandel)

After natural disasters, should sellers be free to raise prices (freedom), or should the state limit them to protect welfare/fairness?

Markets in morality (Sandel)

Are there some goods that money shouldn’t buy (e.g., babies, votes, organs)?

Welfare (Utilitarianism) (Sandel)

• Goal: Maximize happiness or overall well-being.

• Think Bentham & Mill: “The greatest good for the greatest number.”

• Problem: Can justify harming minorities if it increases overall happiness.

Freedom (Libertarianism / Kantian Respect for Persons) (Sandel)

• Goal: Respect individual rights and free choice.

• Libertarian: Minimal government, free markets, voluntary exchange.

• Kantian: Respect human dignity — never treat people merely as means to an end.

Virtue (Aristotelian) (Sandel)

• Goal: Cultivate moral character and civic virtue.

• Justice isn’t just about outcomes or rights, but about the kind of society we want to build.

• Example: Debating whether certain practices (like buying organs) corrupt moral values.

Utilitarianism Jeremy Bentham

• Good = pleasure/happiness; Bad = pain.

• Principle of Utility: the morally right action is the one that produces the greatest happiness for the greatest number.

• Very quantitative → calculate total pleasure vs. pain (“hedonic calculus”).

• Criticism: treats all pleasures as equal; can justify sacrificing individual rights for majority happiness.

Utilitarianism John Stuart Mill

• Builds on Bentham but qualifies pleasure:

  • Higher pleasures (intellectual, moral, aesthetic) > Lower pleasures (physical, bodily).

  • Example: Reading philosophy > eating ice cream (though both give pleasure).

• Defends individual liberty and rights:

  • Even if violating someone’s rights could make the majority happier, protecting liberty is essential for long-term human flourishing.

  • This is Mill’s way of reconciling utilitarianism with respect for persons.

Kantian Ethics

Core Principle:

• The only thing good in itself = a good will (acting from duty, not just inclination or consequences).

Categorical Imperative (CI) (Kantian)

1. Universalization Test

   • Act only according to a maxim you could will to become a universal law.

   • Example: If everyone lied, trust would collapse → lying cannot be universalized → therefore always wrong.

2. Respect-for-Persons Test

   • Always treat humanity (yourself and others) as an end in itself, never merely as a means to an end.

   • Example: Using someone for personal gain without their consent disrespects their dignity.

Universalization Test (Kantian)

• Act only according to a maxim you could will to become a universal law.

• Example: If everyone lied, trust would collapse → lying cannot be universalized → therefore always wrong.

Respect-for-Persons Test (Kantian)

• Always treat humanity (yourself and others) as an end in itself, never merely as a means to an end.

• Example: Using someone for personal gain without their consent disrespects their dignity.

Key Features (Kantian)

• Morality is not about consequences (unlike Utilitarianism).

• Rightness depends on whether the action is done from duty and respects rational autonomy.

• Absolute: If an act fails the CI, it is morally forbidden (no exceptions for convenience).