VelazquezCh3 - CHAPTER THREE The Market and Business...

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C HAPTER T HREE The Market and Business Overview Introduction This chapter examines the ethical aspects of the market system itself—how it is justified, and what the strengths and weaknesses of the system are from the point of view of ethics. It begins by discussing the economic conditions in the U.S. at the close of the 20th century, when proponents of industrial policy were urging the government to help declining industries and their workers to adjust to new economic conditions. Others urged caution, advising the government to "avoid the pitfalls of protectionism." This dichotomy illustrates the difference between two opposite ideologies, those who believe in the "free market" and those who advocate a "planned" economy. These two ideologies take different positions on some very basic issues: What is human nature really like? What is the purpose of social institutions? How does society function? What values should it try to protect? In general, two important ideological camps, the individualistic and communitarian viewpoints, characterize modern societies. Individualistic societies promote a limited government whose primary purpose is to protect property, contract rights, and open markets. Communitarian societies, in contrast, define the needs of the community first and then define the rights and duties of community membership to ensure that those needs are met. These two camps face the problem of coordinating the economic activities of their members in two distinct ways. Communitarian systems use a command system, in which a single authority decides what to produce, who will produce it, and who will get it. Free market systems are characteristic of individualistic societies. Incorporating ideas from thinkers like John Locke and Adam Smith, they allow individual firms to make their own decisions about what to produce and how to do so. Free market systems have two main components: a private property system and a voluntary exchange system. Pure free market systems would have absolutely no constraints on what one can own and what one can do with it. Since such systems would allow things like slavery and prostitution, however, there are no pure market systems. 3.1 Free Markets and Rights: John Locke John Locke (1632-1704), an English political philosopher, is generally credited with developing the idea that human beings have a "natural right" to liberty and a "natural right" to private property. Locke argued that if there were no governments, human beings would find themselves in a state of nature. In this state of nature, each man would be the political equal of all others and would be perfectly free of any constraints other than the law of nature—that
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is, the moral principles that God gave to humanity and that each man can discover by the use of his own God-given reason. As he puts it, in a state of nature, all men would be in: “A state of perfect freedom to order their actions and dispose of their possessions and persons as they think fit, within the bounds of the law of nature, without
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VelazquezCh3 - CHAPTER THREE The Market and Business...

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