MOS 4479: Business Ethics and Sustainability

Definition of Capitalism

An economic system that allows for private ownership of the means of production (land, labour, capital) and assumes that economic decision making is in the hands of individuals or enterprises who make decisions expecting to earn a profit.

What are the Three Central Features of Capitalism

(1) wage labour

(2) private ownership of the means of production

(3) production for exchange and profit

Definition of Laissez-Faire Capitalism

- Minimum government intervention

- Government strictly limited to police and fire protections

Definition of Free/Private Enterprise System

- An economic system characterized by ownership of private property by individuals and enterprises, the profit motive, a competitive market system, and a limited involvement by government.

- Responsible enterprise system: A form of free enterprise system where businesses are also responsible and accountable to society for their actions.

- Example; someone starting an online business, private restaurant chain

Definition of Stakeholder Capitalism

- Business accepts broader responsibilities beyond financial responsibilities with shareholders

- Balance the needs of shareholders with stakeholders such as employees, suppliers, customers, local communities

- Example; paying your employees a fair wage

Definition of Clean Capitalism

Incorporates social, economic, and ecological costs (and benefits) into the marketplace and the prices we pay

What are the Key Assumptions of Capitalism

(1) private property

(2) individualism

(3)Economic Freedom

(4) Equality of Opportunity (gender wage gap)

(5) Competition

(6) Profit

(7) Work Ethic

(8) Consumer Sovereignty

(9) Role of Government

Private Property

The legal rights to own and use economic goods (means of production) such as land and buildings

Individualism

- The individual, and not society or a collective, is the paramount decision maker in society

- The individual is inherently decent and rational

- Business makes the decision

- You do what is best for yourself

Economic Freedom

Few restrictions on business activity:

- Freedom to voluntary enter business

- Enter contracts

- Locate anywhere

- Choose occupation

- Choose goods and services for personal and business use

How Economic Freedom is Measured

- Property rights

- Taxation

- Government intervention

- Foreign investment

- Money and inflation

- Wage and price controls

- Corruption

Equality of Opportunity

Assumption that all individuals or groups have an even chance at responding to some condition in society

Competition

Many rival sellers seek to provide goods and services to many buyers

Profit

- The excess of revenues over expenses

- The "profit motive"

- Profit maximization

Work Ethic

Code of values, or a body of moral principles, claiming that work is desirable, it is natural activity