What compatibility possible between Market and Ethics?
I) Ethics and Market are supposed to be incompatible
A) Ethics and Market are incompatible in theory and in practice, the short-term economy becomes the reference
1) In theory, incompatible (History of the Liberalism)
Economic liberalism is a school of thought, born during theEnlightenment, who believes that economic freedom (free trade, free enterprise, free choice of consumption, work, etc...) Are needed in economy and that State intervention should be as limited as possible. Proponents of economic liberalism can be studied in two different families. For classical liberals (Locke, Turgot, Smith and Condillac), economic liberalism is the application of the economic liberalism ofthe founding principles: freedom, responsibility and ownership. They contest both the legitimacy and effectiveness of the action of the State, and, according to trends, require the limitation more or less, or total of its action in the field of economics. They will consider that the public administration has neither the legitimacy nor the information they need to pretend to know better thanconsumers what they can or should eat or pretend to know better than producers what they can or should produce.
For others, economic liberalism is an economic reasoning that is most often based on the theory of general equilibrium and is often called "neo-classical liberalism." They contest the effectiveness of state action but they are more sensitive than classical liberals to critics about the "marketfailures". Thus, they have a different way of thinking in the fixation of the limits for the State intervention.
In the same way, we can speak about the Pure and Perfect competition. The conditions of pure and perfect competition were explained by Frank Knight in 1921. The pure and perfect competition represents an extreme case of market structure studied by neoclassical economists. Perfectcompetition is supposed to permit to keep the balance in all markets under very specific conditions. Each market must meet the following four conditions:
- Atomicity: the number of buyers and sellers is very large so the supply or demand of each player is negligible compared to total supply, and no actor can fix prices. This hypothesis does not include the possibility of increasing returns toproduction, to the extent that they lead to the formation of natural monopolies, however, possible in practice.
- Homogeneity of products: goods exchanged are similar in quality and characteristics, and therefore interchangeable, a higher quality product is another market.
- Transparency information: the perfect information between all the actors and the goods needs free and immediate information.Theory shows that the process of price calculation is centralized.
- The absence of transaction costs.
We must add two hypotheses that link the markets between them:
- Free entry and exit to the market: there should be no tariff barrier (protectionism), administrative (numerus clausus), no barrier for a new supplier or buyer.
- The free movement of factors of production (capital and labor): laborand capital are moving spontaneously to markets where demand is outstripping supply, there is no delay or cost in their conversion
We can see that in this model there is no need to an external regulation of the market. This means that Ethic doesn’t take part in its functioning. The market needs just himself to work and doesn’t take into consideration other aspects like social, ethical or moral,it looks like a mechanical functioning.
2) Adam Smith theory, self-regulating markets
If we go now closer to the way of thinking of Adam Smith, we can try to understand how Ethics and Market couldn’t be compatible. First of all, we need to present the theory of Adam Smith. According to him, the market is regulated by an invisible hand. This theory goes against compatibility between Ethic and...
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