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                                                                                              Ethics in Economics


                that computer models are developed by people and people  Decisions made by economic institutions do not
                are the ones who implement recommendations made by  always match what the general populace thinks is correct.
                computer modeling.                               When this happens, the result can be new laws or rules
                   In order for people in all institutions to make choices,  that are passed to try to contain those who are perceived
                there must be some guidelines or principles upon which  as violating the public trust. For example, many laws have
                the choices are based. These guidelines are often referred  been passed to curb problems with pollution. Antipollu-
                to as values. Everyone develops a set of values, or prefer-  tion laws are designed to reduce the harmful effects of pol-
                ences, beginning in early childhood—or perhaps even  lution; when a business does not follow the laws, it can be
                immediately from birth. These values stem from how peo-  severely penalized. In some cases, the new laws force the
                ple are raised, where they live, their ancestry, and all the  closure of business enterprises because conformity to the
                other factors that influence everyone’s lives. If everyone  laws is cost-prohibitive. This was the case when laws went
                has a value system, everyone must have an ethical system  into effect requiring underground gasoline tanks at service
                upon which to base judgments and choices. Stemming  stations to meet Environmental Protection Agency
                from this personal set of values will come policies and pro-  requirements. Many businesses could not meet the
                cedures that will guide all organizations within the eco-  requirements because of the expenses involved and they
                nomic structure.                                 closed their doors.
                   Boulding (1968) argued that individuals have a real  At other times, businesses choose to violate the laws
                personal ethic, which can be deduced from a person’s  in order to save money. In the long run, this can cost more
                actual behavior, and a verbal ethic, which can be deduced  than the business would have had to pay had the changes
                from a person’s statements. Boulding found that it is basi-  been made to comply with the laws. This occurred when
                cally a universal phenomenon that a person will talk about  a chemical manufacturing company was caught dumping
                one set of ethical principles but act according to another.  hazardous waste into an Illinois River. The company was
                The old statement “Do as I say, not as I do” seems to  told to stop the dumping and was fined a large sum of
                reflect an accurate perception of reality.       money. However, during the time the environmental
                                                                 inspectors were on the premises, the company chose to
                   Ethics, from an economist’s perspective, is a matter of
                                                                 dump more waste into the river, saying that if they had
                choice. Economics is a matter of choice. There are several
                                                                 not done it, there could have been a fatal accident in the
                alternatives from which a choice must be made. A busi-
                                                                 plant. They were fined an additional sum. These examples
                ness owner or manager might have to decide between pro-
                ducing weapons for military use or firearms for use by  illustrate choices that must be made—not by businesses in
                private individuals who pursue the sport of wild game  economic systems, but by individuals in the businesses.
                hunting. These decisions are not always easy, especially  Whereas businesses are the most significant institu-
                when guided by the need for the organization to make a  tion within the economic structure, it should also be
                profit. The choice that is ultimately made is based on a  noted that businesses are not the only institutions within
                value system that influences policies and procedures in the  an economic structure. There are many other important
                organization. In an economic environment, the decision is  groups, such as the family, government, churches, and
                often made based on values that have been determined to  schools. All these institutions play an important role in
                be most important or that are ranked on a scale of best to  developing value systems and the moral influences on
                worst.                                           individuals in businesses.
                   A dilemma that faces all decision makers, especially  Because many other institutions influence the think-
                when group decision making is used, is the different value  ing of individuals in organizations, different value systems
                systems that are held by individuals. While organizations  are developed. Some value systems are inconsistent with
                have policies and procedures, not every option from  what is necessary for successful business operations and
                which to choose is necessarily easily defined or clearly  become a threat to a business and economic system. An
                understood. Many organizations have mechanisms   example of that is honesty. An individual whose value sys-
                through which those affected by the decision can appeal it  tem does not include complete honesty becomes a threat
                for further consideration. In the case of a university stu-  to successful business operations. Because of threats like
                dent who receives a failing grade but thinks the grade was  these to economic entities, rules are established to deal
                undeserved because of a conflict with the professor, an  with those who have different value systems. The rules are
                appeal by the student might be heard and a decision could  called laws, and the government is the largest enforcer of
                be made to overturn the professor’s decision. Or the deci-  laws.
                sion might be made in favor of the professor and the stu-  Governments are important to successful business
                dent’s appeal denied. Such a decision is based on value  and economic operations. Governments help to assure fair
                systems that guide ethical behaviors.            trade and commerce within a country and internationally.


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