Does Business Ethics Make Economic Sense?

Given many people's belief that the term business ethics" is an oxymoron, the natural response to the question is "no." However, Amartya Sen argues otherwise in an essay titled "Does Business Ethics Make Economic Sense?" It's ironic really that we think business ethics does not make economic sense because many feel this was inspired by the father of classical economics, Adam Smith. However, it is often forgotten that before Smith wrote Wealth of Nations, he published a rather large tome on ethics titled The Theory of Moral Sentiments. Ethics was a central concern to Smith not only in everyday life but also in economics. As Sen points out, Smith says in The Theory of Moral Sentiments that "humanity, justice, generosity, and public spirit, are the qualities most useful to others."

But still, Smith is seen as the great exponent of self interest in economics thus making business ethics unnecessary. The main passage in Wealth of Nations that is responsible for this is the passage about the butcher, the brewer, and the baker. "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard for their own self interest."

Sen maintains that Smith stresses the importance of self interest in motivating exchange but that there are other factors at work in making exchange possible. Additionally, economics is also concerned with production and distribution which cannot be adequately explained by self interest alone. In the example of the butcher, the brewer, and the baker self interest certainly does provide a reason for their desire to enter into an exchange but more is needed in order to make the exchange successful. That more is a set of ethical institutions. For example, trust is needed for an exchange to work. Think about credit for a moment. You go into a store and want to purchase some merchandise but instead of paying with cash you put it on your credit card. Now, in order for a merchant to accept this there has to be some trust in place. This is because in essence you are simply promising to pay for the merchandise at a future time instead of right now. When you sign the credit receipt you are entering into an agreement with the merchant. Now, you might say that this has nothing to do with ethics since you are obligated to pay the money or else you'll end up being punished. But, think about what punishment is in this case. It is simply

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