Ethics--Hosmer Ch. 2 Vocab

Ethical Dilemma
decisions and actions faced by managers in which the financial performance (measured by revenues, costs, and profits) and the social performance (stated in terms of obligations to individuals and groups) of the organization are in conflict.
Economic Theory of Society
economic outcomes in economic theory refer to the net balance of benefits over harms for the full society as a result of that decision or action.
Pareto Optimality
refers to the condition in which the scarce resources of society are being used so efficiently by the producing firms, and the goods and services are being distributed so effectively by the competitive markets, that is would be impossible to make any single person better off without harming some other person. The theory requires that every business manager attempt to optimize profits.
Economic Decision Rule
rule that an economist would propose for finding the proper balance between the economic and social performance of a business firm would be to always be truthful (don't mislead), honorable (observe contracts), and competitive (set prices and costs at marginal levels), and always decide for the greater financial return.
Primary Mechanism in Economic Theory
market structure: Each firm is located between a "factor" market for the input factors of production (labor, material, and capital) and a "product" market for the output of goods and services.
Don't Lie, Cheat, or Steal
the three ethical constructs of economic theory
Product Market
consists of all the individual customers for a given good or service, together with all the producing firms that supply that good or service
the economic model is descibed as
"the greatest good for the greatest number"
Objections to economic theory
exclusion of segments of society, presence of injurious practices, and absence of competitive markets
Moral Claims of Economic Theory
effective use of resources, effecient conversion of resources into products, effective distribution of products, political adjustment of inequalities, managerial responsibilities for profits
Presence of Injurious Practices
purchase bribes, process pollutants, workplace hazards, product dangers, and minority employment
Justice in Economic Theory
defined as a democratically determined pattern of distribution and imposition