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Diversity in Goals Brings Diversity in Value – Article by Frank Shostak

Diversity in Goals Brings Diversity in Value – Article by Frank Shostak

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The New Renaissance Hat
Frank Shostak
November 28, 2014
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A major problem with the mainstream framework of thinking is that people are presented as if a scale of preferences were hard-wired in their heads. Regardless of anything else this scale remains the same all the time. Valuations however, do not exist by themselves regardless of the things to be valued. On this Rothbard wrote,

There can be no valuation without things to be valued. 1

Valuation is the outcome of the mind valuing things. It is a relation between the mind and things.

Purposeful action implies that people assess or evaluate various means at their disposal against their ends. An individual’s ends set the standard for human valuations and thus choices. By choosing a particular end an individual also sets a standard of evaluating various means.

For instance, if my end is to provide a good education for my child, then I will explore various educational institutions and will grade them in accordance with my information regarding the quality of education that these institutions are providing. Observe that the standard of grading these institutions is my end, which, in this case, is to provide my child with a good education. Or, for instance, if my intention is to buy a car, and there are all sorts of cars available in the market, then I have to specify to myself the specific ends that the car will help me achieve. I need to establish whether I plan to drive long distances or just a short distance from my home to the train station and then catch the train. My final end will dictate how I will evaluate various cars. Perhaps I will conclude that for a short distance, a second-hand car will do the trick.

Since an individual’s ends determine the valuations of means and thus his choices, it follows that the same good will be valued differently by an individual as a result of changes in his ends. At any point in time, people have an abundance of ends that they would like to achieve. What limits the attainment of various ends is the scarcity of means. Hence, once a larger variety of means become available, a greater number of ends — or goals — can be accommodated (i.e., people’s living standards will increase).

Another limitation on attaining various goals is the availability of suitable means. Thus to quell my thirst in the desert, I require water. If no one willing to sell water is nearby, any diamonds in my possession will be of no help in this regard.

Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies. See Frank Shostak’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

For the Love of Money? – Article by Gary M. Galles

For the Love of Money? – Article by Gary M. Galles

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The New Renaissance Hat
Gary M. Galles
April 13, 2014
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It’s not unusual to hear market systems criticized for relying too much on money, as if this comes at the expense of the altruistic relationships that would otherwise prevail. Ever heard the phrase “only in it for the money”? It’s as if self-interest has a stink that can corrupt transactions that generate benefits for others, turning them into offenses. So this line of thinking suggests reliance on market systems based in self-ownership would be tantamount to creating a world where people only do things for money, and lose the ability to relate to one another on any other terms.

People Don’t Do Everything for Money

One need not go far to see the falsity of the claim that everything is done for money in market systems. My situation is but one example: I have a Ph.D. in economics from a top graduate program. It is true that, as a result, I have an above-average income. But I did not do it all for the money. One of my major fields was finance, but if all I cared about was money—as my wife reminds me when budgets are particularly tight—I would have gone into finance rather than academia and made far more. But I like university students. I think what I teach is important, and I value the ability to pass on whatever wisdom I have to offer. I like the freedom and time to pursue avenues of research I find interesting. I enjoy the ability to tell and write the truth as I see it (particularly since I see things differently from most) and I prefer a “steady job” to one with far more variability.

Every one of those things I value has cost me money. Yet I chose to be a professor (and would do it again). While it’s true that the need to support my family means that I must acquire sufficient resources, many things beyond just money go into choosing what I do for a living. And the same is true for everyone.

Ask any acquaintances of yours who they know that only does things for money. What would they say? They would certainly deny it about themselves. While they might apply this characterization to people they don’t know, beyond Dickens’s Ebenezer Scrooge and his comic book namesake, Scrooge McDuck, they would be unable to provide a single convincing example. If market critics performed that same experiment, they would recognize that they are condemning a mirage, not market arrangements.

Confusing Ends and Means

Beyond the fact that all of us forego some money we could earn for other things we value, the fact that every one of us gives up money we have earned for a vast multitude of goods, services, and causes also reveals that individuals don’t just do things for the money. Each of us willingly gives up money up to further many different purposes we care about. Money is not the ultimate end sought, but a means to a vast variety of possible ends. Mistakenly treating money as the end for which “people do everything” is fundamentally flawed—both for critics of the market and for the participants in it.

To do things for money is nothing more than to advance what we care about. In markets, we do for others as an indirect way of doing for ourselves. This logic even applies to Scrooge. His nephew Fred’s assertion that he doesn’t do any good with his wealth is false; he lends to willing borrowers at terms they find worth meeting, expanding the capital stock and the options of others.

That an end of our efforts is to benefit ourselves, in and of itself, merits neither calumny nor congratulations. Money’s role is that of an amoral servant that can help us advance whatever ends we ultimately pursue, while private property rights restrict that pursuit to purely voluntary arrangements. Moral criticism cannot attach to the universal desire to be able to better pursue our ends or to the requirement that we refrain from violating others’ rights, only to the ends we pursue.

To do things for money in order to achieve world domination could justify moral condemnation. But the problem is that your intended end will harm others, not the fact that you did some things for money, benefitting those you dealt with in that way, to do so. Using money to build a leprosarium, as Mother Teresa did with her Nobel Prize award, does not justify moral condemnation. Similarly, using money to support your family, to live up to agreements you made with others, and to try not to burden others is being responsible, not reprehensible. Further, there is nothing about voluntary arrangements that worsens the ends individuals choose. But by definition, they place limits on ends that require harming others to achieve them.

It is true that money represents purchasing power that can be directed to ends others object to. Money is nothing more than a particularly powerful tool, and all tools can be used to cause harm. Just as we shouldn’t have to forego the benefits of hammers because somebody could cause harm with one, there’s no reason to think society would be better off without money or the market arrangements it makes possible just because some people can use those things for harmful ends. And if the ends aren’t actually causing harm, then the objections over them come down to nothing more than disagreements about inherently subjective valuations. Enabling a small class of people to decide which of these can be pursued and which can’t makes everyone worse off.

Those who criticize people for doing everything for money also do a great deal for money themselves. How many campaigns have religious groups and non–profit organizations run to get more money? How much of government action is focused on getting more money? Why do the individuals involved not apply the same criticism to themselves? Because they say they will “do good” with it. But every individual doing things for money also intends to do good, as he or she sees it, with that money. And if we accept that people are owners of themselves, there is no obvious reason why another’s claims about what is “good” should trump any “good” that you hold dear, or provide for another in service through exchange.

Criticizing a Straw Man

Given that the charge that “people do everything for money” in market systems is both factually wrong and logically lame, why do some keep repeating it? It creates a straw man easier to argue against than reality, by misrepresenting alternatives at both the individual and societal level.

At the individual level, this assertion arises when people disagree about how to spend “public” resources (when we respect private property, this dispute disappears, because the owner has the right to do as he or she chooses with it, but cannot force others to go along with or allow it; “public” resources are obtained by force). The people who wish to spend other people’s confiscated resources in ways the original owners disagree with claim a laundry list of caring benefits their choice would provide, but foreclose similar consideration of the harms that would be caused to those they claim care only about money. That, in turn, is used to imply that the purportedly selfish person’s claims are unworthy of serious attention. (Something similar happens when politicians count “multiplier effects” where government money is spent, but ignore the symmetrical negative “multiplier effects” radiating from where the resources are taken.)

This general line draws support from a misquotation of the Bible. While more than one recent translation of 1 Tim 6:10 renders it “the love of money is a root of all sorts of evils,” the far less accurate King James Version rendered it, “the love of money is the root of all evil.” When one simply omits or forgets the first three words, it becomes something very different—“money is the root of all evil.” Portray those who disagree with your “caring” ends as simply loving money more than other people, and they lose every argument by default. Naturally, it’s a seductive strategy.

At the societal level, criticizing market systems as tainted by the love of money implies that an alternate system would escape that taint and therefore be morally preferable. By focusing attention only on an imaginary failing of market systems that would be avoided, it allows the implication of superiority to be made without having to demonstrate it. This is a version of the Nirvana fallacy.

By blaming monetary relationships for people’s failings, “reformers” imply that taking away markets’ monetary nexus will somehow make people better. But no system makes people angels; all systems must confront human flaws and failings. That means a far different question must be addressed: How well will a given system do with real, imperfect, mostly self-interested people? And it shouldn’t be necessary, but most political rhetoric makes a second question nearly as important: Does the given system assume that people are not imperfect and self-interested when they have power?

Given that the utopian alternatives offered always involve some sort of socialism or other form of tyranny, an affirmative case for them cannot be made. Only by holding the imaginary “sins” of market systems to impossible standards, while holding alternatives to no real standards except the imagination of self-proclaimed reformers, can that fact be dodged. But there’s nothing in history or theory that demonstrates that overwriting markets with expanded coercion makes people more likely to do things for others. As Anatole France noted, “Those who have given themselves the most concern about the happiness of peoples have made their neighbors very miserable.” And as economist Paul Heyne wrote, “Market systems do not produce heaven on earth. But attempts by governments to repress market systems have produced . . . something very close to hell on earth.

Money at the Margin

Money is not everything. But changes in the amounts of money to be earned or foregone as a result of decisions change our incentives at the many margins of choice we face, and so change our behavior. Such changes—money at the margin—are the primary means of adjusting our behavior in the direction of social coordination in a market system.

Changes in monetary incentives are how we adapt to changing circumstances, because whatever their ultimate ends, everyone cares about commanding more resources for those purposes they care about. It is how we rebalance arrangements when people’s plans get out of synch, which is inevitable in our complex, dynamic world. In such cases, changing money prices allow each individual to provide added incentives to all who might offer him assistance in achieving his ends, even if he doesn’t know them, doesn’t know how they would do so, and doesn’t think about their well–being (in fact, it applies even if he dislikes those he deals with, as long as the benefits of the arrangements exceed his perceived personal cost of doing so).

For instance, consider a retail gas station faced with lengthy lines of cars. That reflects a failure of social cooperation between the buyers and the seller. Those in line are revealing by their actions that they are willing to bear extra costs beyond the current price to get gas, but their costs of waiting do not provide benefits to the gas station owner. So the owner will convert those costs of waiting in line, which are going to waste, into higher prices (unless prevented by government price ceilings or antigouging directives) that benefit him. That use of money at the margin benefits both buyers and sellers and results in increased amounts of gasoline supplied to buyers.

Further, people can change their behavior in response to price changes in far more ways than “outsiders,” unfamiliar with all the local circumstances, realize. This makes prices, in turn, far more powerful than anyone recognizes.

Consider water prices. If water prices rose, your first thought might well be that you had no choice but to pay them. You might very well not know how many different responses people have already had to spikes (ranging from putting different plants in front yards to building sophisticated desalinization plants). Similarly, when airline fuel prices rose sharply, few recognized in advance the number of changes that airlines could make in response: using more fuel-efficient planes, changing route structures, reducing carry-on allowances, lightening seats, removing paint, and more.

If people recognized how powerful altered market prices are in inducing appropriate changes in behavior, demonstrated by a vast range of examples, they would recognize that the cost of abandoning money at the margin, which enables these responses by offering appropriate incentives to everyone who could be of assistance in addressing the problem faced, would enormously exceed any benefit.

Massive Improvements in Social Cooperation

If we could just presume that individuals know everyone and all the things they care about and the entirety of their circumstances, we could imagine a society more focused on doing things directly for others. But in any extensive society, there is no way people could acquire that much information about the large number of people involved. Instead, this would extend the impossible information problem that Hayek’s “The Use of Knowledge in Society” laid out in regard to central planners. You can care all you want, but that won’t give you the information you need. Beyond that insuperable problem, we would also have to assume that people cared far more about strangers than human history has evidenced.

Those information and other-interestedness requirements would necessarily dictate a very small society. But the costs of those limitations, if people recognized them, would be greater than virtually anyone would be willing to bear.

Without a broad society, the gains from cross-pollination of ideas and different ways of doing things would be hamstrung. The gains from comparative advantage (areas and groups focusing on what they do best, and trading with others doing the same thing) would similarly be sharply curtailed. A very small society would eliminate the incentive for large-scale specialization (requiring more extensive markets) and division of labor that makes our standard of living possible. Virtually every product that involves a large number of separate arrangements—such as producing cars or the gasoline to power them—would disappear, because the arrangements would be overwhelmed by the costs of making them without money as the balance-tipper. As Paul Heyne once put it,

The impersonal transactions that constitute the market system . . . have, over the course of a few centuries, enormously expanded our ability to provide [for] one another . . . while at the same time vastly extending our freedom both by offering us a multitude of options and by freeing us from arbitrary restrictions on our choice of life goals and on the means to further those goals. To reject impersonal transactions as unethical amounts to rejecting the foundation of modern life.

Conclusion

A pastiche of false premises leads many to reject out of hand what Hayek recognized as the “marvel” of market systems, which, if they had arisen from deliberate human design, “would have been acclaimed as one of the greatest triumphs of the human mind.” This is great for those who seek power over others—they have an endless supply of bogeymen to promise to fight.

But it’s a disaster for social coordination. The record of disasters inflicted on society demonstrates what follows when voluntary arrangements are replaced by someone else’s purportedly superior vision.

But it’s often forgotten. We must continue to make the case.

Gary M. Galles is a professor of economics at Pepperdine University. He is the author of The Apostle of Peace: The Radical Mind of Leonard Read. Send him mail.

This article was originally published by The Foundation for Economic Education.

Responses to an Inquiry on Ethics, Human Purpose, and the Future of Humanity – Article by G. Stolyarov II

Responses to an Inquiry on Ethics, Human Purpose, and the Future of Humanity – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
September 5, 2013
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A recent philosophical exchange with reader Elu Sive on TRA’s “About Mr. Stolyarov” page was sufficiently interesting and constructive that I have decided to post it here for a general audience. Elu Sive raised ten points of view and requested my feedback, which I subsequently provided. Here, I will cite each of the points and my response.

Elu Sive Point 1: “There is an objective reality.”

My Response: I agree in full.

Elu Sive Point 2: “The purpose of democracy is mainly a means of fighting corruption and promoting the interests of the people as opposed to those in power. It is not a valid method to select the correct answer among alternatives and should never be used as such.”

My Response: I agree. The will of the majority does not determine truth, nor does it necessarily coincide with good policy. Moreover, most decisions should be left up to individuals to implement, so long as such implementation can be done non-coercively. Democracy is only useful in the highly limited context where conflicts of preference are unavoidable and necessarily involve some people’s preferences being overridden. For instance, if only one person can be the neighborhood sheriff, then it makes sense to put the issue to a majority vote. However, even then, the powers of the neighborhood sheriff should be highly limited to the protection of individual rights, and not their violation.

Elu Sive Point 3: “Science is the best method we have for evaluating what is true and not.”

My Response: I agree, especially when science is defined broadly to include logic and mathematics. More generally, rational inquiry based on real-world observation and logical deduction therefrom is the best method we have for evaluating what is true and not.

Elu Sive Point 4: “Our human existence is only meaningful in our social contexts, to our selves and to future generations (our existence is not meaningful in universal or spiritual fashion).”

My Response: Here I disagree. Our existence is meaningful per se and as the antecedent to all meaning and value. My video series “Life as the Basis of Morality” (see Part 1 and Part 2) explains my reasoning. I agree with Ayn Rand’s statement: “I need no warrant for being, and no word of sanction upon my being. I am the warrant and the sanction.”

Elu Sive Point 5: “We should place a greater emphasis on our social context and future generations than on our selves. We should favor altruism over self-reliance.”

My Response: Here I also disagree. While I advocate considering the future and taking a longer-term view of one’s actions, as well as considering one’s impact on the world and on others, all of this should be done to promote one’s own enlightened, rational self-interest, particularly in the continuation of one’s own life and flourishing. Each individual is, by nature, best suited to promote his own well-being. In promoting his own well-being, the individual should be concerned about the well-being of others and should seek ways to exchange values with others to promote mutual flourishing. Complete autarky is impossible and undesirable; we can gain great values and improve our lives tremendously by interacting with others. However, each individual’s moral self-reliance – in the sense of thinking for oneself, acting out of one’s own initiative, and valuing one’s own productive work and independence from subjugation to the arbitrary dictates of others – is paramount for creating a world where human flourishing is maximized to the extent possible.

Elu Sive Point 6: “What classifies as common good depends on circumstances and must be continuously re-evaluated.”

My Response: What is good for people does depend on the specific context, but it is still rooted in objective requirements of human survival and flourishing. As a simple example, there are some items that can give our bodies energy if we consume them, while there are others that would poison us. The objective requirements of human survival and flourishing depend on the laws of nature, which are universally valid, though their applicability will differ based on the context. The correct answer in a given situation is like the correct choice of tool for constructing a building; it depends on what part you are working on, with what materials, in what setting, and for what goal (in terms of the values you are trying to realize). Multiple answers will be good enough for a particular problem, but some answers are clearly superior to others in achieving human survival and flourishing. That being said, it is important to continually use one’s rational faculty to evaluate the soundness of possible approaches on a case-by-case basis.

Elu Sive Point 7: “Our social context is only meaningful in the long-term context of supporting and improving human civilization, or a possible post-human civilization.”

My Response: I agree with the goal of improving human and possibly post-human civilization (though I prefer the term “transhuman”, since I think that technological transformations will amplify and supplement our humanity, enabling us to transcend existing limitations, rather than take our humanity away). I think that human societal interactions can serve multiple valuable purposes both in the immediate term and in the long term. In the immediate term, it is certainly good that grocery stores exist in one’s vicinity to enable one to obtain food and other conveniences. The shorter-term interactions, as long as they are compatible with long-term perspectives and values, can certainly be of value as well.

Elu Sive Point 8: “The defining character of our age as judged by future civilization will be: short-shortsightedness and extreme individualism.”

My Response: I agree that there is considerable short-sightedness in our era, though it is probably less than in previous eras, when the average human lifespan was several times shorter than today. The extreme individualism, though, is not a phenomenon that I observe. I see all too many people bound by thoughtless traditions and norms, while refusing to think about matters on principle (instead of being attached to the concrete institutions and thought patterns that are fed to them by “opinion leaders” and the surrounding culture). The true individualist, who takes charge of his own life and is willing to engage in innovative thinking which transforms the world, is quite rare still. If asked to characterize our era, I would describe it as a time when the knowledge to solve many of the world’s problems is already available and accessible, but the willpower to solve these problems and overcome the constraints of obsolete institutions is lacking. I also see our era as characterized by a race between accelerating technological progress and increasingly outrageous authoritarian intervention.

Elu Sive Point 9: “We should practice future-oriented altruism: just as we care for others in our immediate vicinity in order to create a better life for everyone, we should care for our [descendants] as predecessors have, or we wish them to have had.”

My Response: I agree that we should look forward into the future and consider how life would be then, and how our current actions would affect future living conditions. I do not think that our focus should solely be on future beings, though. I hope to personally see a better future, and to structure my actions to maximize my chances. I am, though, happy to have been born into a world where the many generations of humans before me have already created an infrastructure of knowledge and capital to enable a relatively comfortable way of life. The great challenge of our time is to secure our lives against the still-omnipresent forces of ruin, death, and decay.

Elu Sive Point 10: “We should aim to replace humanity with post-human beings, remedied from most of the flaws that plague the human psyche and physiology today and in the past.”

My Response: I agree with remedying existing human flaws and transcending human limitations, with the important caveat that I consider such actions to be consistent with and to amplify humanity. Importantly, I think that we ourselves should be the beneficiaries of these improvements, through new medical treatments and augmentations (especially radical life extension), as well as the eventual integration of biological and non-biological components.

Productivity Enhancement – Video Series by G. Stolyarov II

Productivity Enhancement – Video Series by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
June 2, 2013
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In this series on productivity enhancement, taken from Mr. Stolyarov’s e-book The Best Self-Help is Free, Mr. Stolyarov discusses the fundamental nature of productivity and approaches by which any person can become more productive.

This series is based on Chapters 7-14 of The Best Self-Help is Free.

Part 1 – What is Productivity?

The most reliable way to achieve incremental progress in your life is by addressing and continually improving your own productivity. Productivity constitutes the difference between a world in which life is nasty, brutish, and short and one in which it is pleasant, civilized, and ever-increasing in length.

Part 2 – Reason and the Decisional Component of Productivity

In order to properly decide what ought to be produced, man can ultimately consult only one guide: his rational faculty.

Part 3 – Perfectionism — The Number One Enemy of Productivity

Perfectionism engenders a pervasive sense of futility in its practitioner and mentally inhibits him from pursuing further productive work.

Part 4 – Quantification and Productivity Targets

Quantification enables an individual to set productivity targets for himself and to escape underachievement on one hand and perfectionism on the other.

Part 5 – Habit and the Elimination of the Quality-Quantity Tradeoff

A common fallacy presumes that there is a necessary tradeoff between the quantity of work produced and the quality of that work. By this notion, one can either produce a lot of mediocre units of output or a scant few exceptional ones. While this might be true in some cases, it overlooks several important factors.

Part 6 – The Importance of Frameworks for Productivity

Time-saving, productivity-enhancing frameworks can be applied on a personal level to enable one to overcome the human mind’s limited ability to hold and process multiple pieces of information simultaneously.

Part 7 – The Benefits of Repetition to Productivity

One of the most reliable ways to reduce the amount of mental effort per unit of productive output is to create many extremely similar units of output in succession. Mr. Stolyarov discusses the advantages of structuring one’s work so as to perform many similar tasks in close succession.

Part 8 – Making Accomplishments Work for You

Producing alone is not enough. If you just let your output lie around accumulating dust or taking up computer memory, it will not boost your overall well-being. Your accomplishments can help procure health, reputation, knowledge, safety, and happiness for you — if you think about how to put them to use.

Flourishing and Happiness in a Nutshell – Article by Edward W. Younkins

Flourishing and Happiness in a Nutshell – Article by Edward W. Younkins

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The New Renaissance Hat
Edward W. Younkins
June 3, 2012
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By integrating features found in the writings of Aristotle, Austrian economists, Ayn Rand, and a number of contemporary thinkers, we have the potential to develop a powerful, reality-based argument for a free society in which individuals have the opportunity to flourish and to be happy. Modern contributors to this approach include Tibor R. Machan, Douglas B. Rasmussen, Douglas J. Den Uyl, Frederick D. Miller, Roderick T. Long, Chris Matthew Sciabarra, George Reisman, Eric Mack, Neera K. Badhwar, Lester H. Hunt, Geoffrey Allan Plauché, among many others.

At the big-picture level, it can be argued that Aristotelian and neo-Aristotelian theories of morality and human flourishing can be compatible with Objectivist teachings regarding the nature of reality and man’s distinguishing characteristics of reason and free will and with Austrian ideas with respect to value theory, decision making, action, and social cooperation. It may be possible to construct an integrated conceptual framework that coordinates the ideas of Aristotle, the Austrian economists, Ayn Rand, and a number of current philosophers, economists, political scientists, positive psychologists, and others.

My inquiry in my book, Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism, does not extend beyond a systematic level that relies heavily on logic and common sense. My purpose has been to outline the essentials of a worldview leaving it to philosophers and economists to fill in the details and to evaluate, critique, revise, refine, and extend my systematic understanding. What follows here is a brief summary of my attempt to formulate ideas and to relate them logically to other ideas and to the facts of reality. Although a person’s ideas are derived from reality and are about reality, there are differences between one’s ideas and the identity of the things that we can know. The rules of logic are determined by the facts of reality. In a sense, logic is both epistemological and ontological.

A proper philosophy must appeal to the objective nature of human beings and other entities in the world. There is a world of objective reality that exists and that has a determinate nature that is intelligible. Reality will not yield to permit a person’s subjective desires. Reality establishes the conditions for objectivity. It follows that realism is a necessary, instrumental means for a person’s success in the world. To be morality efficacious, a person must discern and use proper means to attain his truly valuable ends.

There is a human nature and it is man’s nature to be individual, volitionally conscious, rational, and purposive. Because each individual has a specific identity as a human being, we can say that there are particular things and actions that are appropriate to him and for him. Individuality is essential to one’s nature. Possessing reason and free will, each individual has the capacity and responsibility to choose to try to actualize his potential for being a flourishing, individual human being. Each person is a metaphysically unique self who is responsible for discerning what is good for himself. A person discovers his individual strengths and virtues through a process of moral development. A particular man’s own life is his purpose or goal. One’s aspirations are the aspirations in the only life he has to live. One’s entire life can be viewed as a project or overall goal which is subject to continual evaluation.

The goal or function of an individual human being is to perfect himself by fulfilling the potentialities that make him who he is. One’s flourishing is teleological consisting in fulfillment of his unique set of potentialities to be a mature human being. Each person has an innate, unchosen potentiality for his mature state along with the obligation to attempt to actualize that potentiality. Each person is responsible to discern and to live according to his daimon (i.e., true self) which includes his aptitudes, talents, and so on. This involves a process of progressive development, unfolding, or actualization in which a man attains goals that are in some way inherent in his nature as an individual human being. What constitutes a person’s daimon at a given point in time is a function of his endowments, circumstances, latent powers, interests, talents, and his history of choices, actions, and accomplishments. We could say that the fulfillment of one’s daimon is not static or fixed. An individual uses his practical rationality to assess himself and to work on his life in accordance with the objective standard of his flourishing as a singular human person. He can increase his generative potential to attain his own flourishing. A person is able to critique what he has done in the past and can change what he does with respect to the future development of his potentialities. Possessing free will, a man can adjust his actions in response to feedback that he has received.

Morality is an essential functional component of one’s existence as an individual human being. Moral knowledge is possible and can be derived from the facts of reality including human nature. Possessing rationality and free will, a person needs a proper moral code to aid him in making objective decisions and in acting on those decisions in his efforts to attain his true self-interest. Morality and self-interest are inextricably interrelated. Morality is concerned with rationally determining what best contributes to a person’s own flourishing and happiness.

Flourishing is a successful state of life, and happiness is a positive state of consciousness that flows from, or accompanies, a flourishing life. The legitimate function of every human person is live capably, excellently, and happily. This involves an ethic of aspiration toward one’s objective well-being that is actively attained and maintained. A person should aspire to what is best for him taking into account his given potentialities, abilities, and interests. Limits for self-fulfillment are set by reality including the type of being that we are and our individual characteristics.

Rationality is the foundational means to the end of human flourishing. Rationality is necessary to effect the appropriate means to a person’s ends and to integrate them. To be rational, a man must be committed to reality, truth, and logic. Not solely instrumental with respect to a person’s flourishing, rationality can also be viewed as partially constitutive of his flourishing. Rational introspection by a specific individual can enable him to determine the type of life that he should be leading.

Practical wisdom, an aspect of rationality, involves the ability to discern the relevant and important aspects of one’s circumstances in order to make the most proper response to them. The use of practical wisdom (or prudence) can only take place through self-direction or human agency. An individual requires practical wisdom to contend with the specifics, contingencies, and circumstances of one’s life. Practical wisdom is needed to guide oneself regarding the progressive fulfillment of his own potential to flourish. A prerequisite for one’s flourishing is self-direction or autonomy. Human flourishing requires self-direction and practical wisdom.

Natural rights are based on the common attributes of human beings and, therefore, apply universally to all people and to all actions. A metanormative system of negative rights that provide a context of self-directedness can be derived from a proper conception of human nature. Such a system of rights allows for value pluralism and for a variety of approaches to living one’s life. A conception of negative rights emphasizes where one individual’s life begins and another individual’s life ends. A political and legal order that protects natural rights is a necessary precondition for individual self-direction and for the possibility that human flourishing can take place in a social context. Protected self-directedness is necessary for social cooperation, specialization and trade, freely-chosen productive work, private property, free markets, voluntary contracts, and so on.

There is an important interrelationship and complementarily between the ideas of natural rights and human flourishing which together comprise a two-level ethics. At a metanormative level, rights protect people’s liberty to pursue (or not to pursue) their own good. They simply regulate the conditions under which moral conduct may (or may not) occur. In turn, what is good for the life of each individual person is found in the realm of personal virtue, morality, and flourishing. The ideas of natural rights and human flourishing describe different but related sides of what it means to be a human being. Together they provide a rational ethical framework.

The only enforceable limits on one’s actions are other people’s rights. We must recognize other individuals as purposive beings with ends of their own choosing. It would be contradictory to advocate my own rights and not to recognize the rights of other individuals. If a person does not acknowledge the rights of others, then he cannot declare that his own rights are valid. Each individual is thus permitted and limited in both the private and social spheres with respect to the types of actions in which he can engage.

People are born with physical, philosophical, and psychological needs specific to them as individual human beings. Human beings have needs embedded in their nature. We could say that value derives only to the extent that something satisfies an objective human need. The term value implies the personal importance or significance of an activity or object. Self-interest refers to the objective needs of a flourishing human life. Values promote and constitute one’s life and happiness. They have a metaphysical foundation in the nature of reality. There is an inextricable connection between values and natural facts. A value relationship exists due to the nature of a living beings and the nature of other existents in the world. Something in the world can be a value to a specific man even though he does not view it as valuable or even if he is not aware of its existence.

A flourishing life, including the happiness that accompanies it, is a person’s ultimate value. Everything else in life is aspired to because of this chief value. All of a man’s other values are instrumental and/or constitutive of the ultimate value. Means that serve the end of a flourishing life can be part of that end. Constitutive values such as a productive career, friendships, and so on are not simply means to a flourishing life but are also vital parts of such a life.

In order to flourish and to be happy, each man must select values, place them in a hierarchy, and strive to attain them. A person must experience many aspects of reality in order to discover values that are proper for him and that interest and inspire him. This active learning process highlights the exploratory nature of individual human interests and values. A person decides to live a particular type of life because he sees the value of it. He should select and pursue specific meaningful values that are metaphysically appropriate for him. He needs to identify the positive relationships in which things exist in relationship to his life. The meaning of particular projects in a person’s life is a function of his individuality.

There are differences among needs, values, and goals. Whereas needs are inborn, values are acquired. Values prioritize needs. People require a value hierarchy in order to be able to make choices. Goals are values applied to particular circumstances. Goals achieve values and values fulfill needs. A person’s goals and values should be consistent with his needs. Values are translated into reality through the means of goals. Value attainment requires setting and pursuing goals. Needs lead to values, values lead to goals, and goals lead to action.

Human beings are goal-directed. Goals are specific forms of values. Values provide a strategic underpinning for a person’s goal-setting activities. They supply meaning and purpose to a person’s goals. We could say that goals depict values as related to particular states of affairs. Because not all goals are equally valid, a person needs to examine the values underlying his goals. It is important to realize that goals are not isolated from one another. A person should strive to create a rational system of goals aimed at his flourishing and happiness.

Human flourishing is related to a number of general goods and virtues that provide structure but not specific direction or content with respect to living one’s life. Because there is a wide diversity of human beings, it follows that a flourishing life is not universal. Generic goods such as knowledge, health, and friendships need to be integrated in various measures and the virtues need to be applied in specific circumstances.

Each person needs to consider a variety of values, goods, and virtues in order to determine the relationship among them that will best achieve his flourishing as an individual human being. This requires rational insight into the particular and the contingent. Reason is the basic means used by human beings to create the values necessary for life and to interrelate and integrate goods and virtues into their lives. Virtues may be viewed as a set of fundamental principles that a rational person uses to guide the long-term course of his life.

Virtues can be viewed as principles of action which promote the flourishing of an individual who, by following them, engages in consistent actions that are in alignment with practical rationality. Virtuous actions enable a person to gain (and keep) the values he pursues. The virtues are required for one’s practical efficacy and happiness. Of course, virtue, by itself, is not enough to guarantee practical efficacy. A person also needs to have the relevant skills, resources, and so on. The fundamental virtue is rationality and the other virtues are particular expressions of that basic virtue. The virtues are both instrumental to, and a constitutive part of, an agent’s flourishing. They are valuable, not merely as means to flourishing, but also as partial realizations of it. Virtuous action begins with the ability to discern the aspects of a situation that are the most relevant and that fit the circumstances at hand. A man needs to possess the ability to decide which virtues are required in a particular situation and the optimal way of applying them. Virtuous actions tend to foster further virtuous actions. Applying the virtues is heavily dependent upon the context of a situation. People tend to take pleasure in virtuous actions—affect is related closely to virtue especially when one’s emotions are properly aligned with his rationality.

Ayn Rand makes a powerful case that the rational pursuit of one’s flourishing requires the consistent practice of seven essential virtues—rationality, honesty, independence, justice, integrity, productiveness, and pride. She saw rationality as the master virtue and the other six virtues as derivative from the primary virtue. Some scholars have pointed out that Rand did not specifically discuss the intellectual virtue of practical wisdom (i.e., prudence). It is likely that she considered practical wisdom as part of rationality. Others have suggested that her version of virtue ethics might be improved by including positive qualities such as benevolence, kindness, generosity, charity, tolerance, and so on in her prescription for moral perfection.

Emotions are an important part of one’s life experience and are relevant to his moral character. A case can be made that many emotions are the products of a person’s judgments of value as integrated by his subconscious mind. Such emotions stem from a person’s values and estimates which, in turn, depend upon his knowledge. They are about personally meaningful values and circumstances. These emotions are directed by one’s chosen values. It follows that a change in one’s values can bring about a change in his emotions. Emotions can encourage or discourage goal-directed actions. Correctly programmed positive emotions can be indicators that we have located objective values. Such emotions both signal and promote a person’s optimal functioning and flourishing. Justified positive emotions are fundamental conditions of human existence. We could say that emotional and psychological well-being is a crucial part of human flourishing.

Happiness occurs to the extent that one leads a flourishing life. We could say that happiness is an emergent effect of living a good life. Happiness has both cognitive and affective dimensions and depends upon the degree to which a person responds realistically, morally, and efficaciously to his life circumstances. Successful people tend to be happy people who continue to intentionally seek new, not-yet-attained goals. There are various degrees of personal growth, development, and happiness. A person can be happy and still strive to be even happier. Happiness is an issue of living a particular type of life—it is not just a case of having positive feelings. However, happiness is related to emotion-laden experiences such as flow and self-esteem.

A person is apt to be in a psychological state of flow when he is engaged in meaningful, self-controlled, and goal-related activities. Flow involves focused immersion in an activity, lack of self-consciousness, and the merging of awareness and action. A man is in the flow state when he is vitally engaged in enjoyable activities that offer him scope.

Self-esteem refers to a person’s legitimate attitude of self-affirmation. Self-esteem is connected to a sense of agency and control of one’s environment. A person with self-esteem tends to be competent, optimistic, and virtuous, and to have self-respect. A person who does not practice the virtues (such as rationality, honesty, justice, and so on) is not likely to possess self-esteem. Virtuous action leads to self-respect and self-esteem.

People should take virtuous actions in alignment with their objective values. A person must use his practical wisdom to examine and judge the context of a situation before freely choosing to exercise virtuous action. Deliberation itself is an action aimed at an end. The final end of the actions of a human being is his own flourishing life. People are capable of taking self-directed, deliberate, reasoned, and planned actions directed by a notion of an ultimate end. Of course, they can choose to act and live in a variety of ways that are not conducive to a flourishing life.

Austrian Economics and Objectivism agree on the significance of the ideas of human action and values. The Austrians explain that a person acts when he prefers the way he thinks things will be if he acts compared to the way he thinks things will be if he fails to act. Austrian Economics is descriptive and deals with the logical analysis of the ability of selected actions (i.e., means) to achieve chosen ends. Whether or not these ends are truly objectively valuable is not the concern of the praxeological economist when he is acting in his capacity as an economist. There is another realm of values that views value in terms of objective values and correct preferences and actions. Ayn Rand’s Objectivism is concerned with this other sphere and thus prescribes what human beings ought to value and act to attain.

Austrian economists contend that values are subjective and Objectivists maintain that values are objective. These claims can be seen as compatible because they are not claims about the same phenomena. These two senses of value are complementary and compatible. The Austrians view actions from the perspective of a neutral examiner of the actions and Objectivists suggest values and actions for an acting human being as a moral agent himself. The Austrian economist does not force his own value judgments on the personal values and actions of the human beings that he is studying. Operating from a different perspective, Objectivists maintain that there are objective values that stem from a man’s relationship to other existents in the world. For the Objectivist, the purpose of ethics is to live a flourishing and happy life by recognizing and responding to the significance of human action.

It is possible for these two schools of thought to be combined into an integrated framework. At a descriptive level, the Austrian idea of demonstrated preference agrees with Ayn Rand’s account of value as something that a person acts to gain and/or keep. Of course, Rand moves from an initial descriptive notion of value to a normative perspective on value that includes the idea that a legitimate or objective value serves one’s life. The second deeper level view of value provides an objective standard to evaluate the use of one’s free will.

Austrian praxeological economics (i.e., the study of human action) has been used to make a value-free case for liberty. This economic science deals with abstract principles and general rules that must be applied if a society is to have optimal production and economic well-being. Misesian praxeology consists of a body of logically deduced, inexorable laws of economics beginning with the axiom that each person acts purposefully.

Although Misesian economists hold that values are subjective and Objectivists argue that values are objective, these claims are not incompatible because they are not really claims about the same things—they exist at different levels or spheres of analysis. The value-subjectivity of the Austrians complements the Randian sense of objectivity. The level of objective values dealing with personal flourishing transcends the level of subjective value preferences.

The value-freedom (or value-neutrality) and value-subjectivity of the Austrians have a different function or purpose than does Objectivism’s emphasis on objective values. On the one hand, the Austrian emphasis is on the value-neutrality of the economist as a scientific observer of a person acting to attain his “subjective” (i.e., personally-estimated) values. On the other hand, the philosophy of Objectivism is concerned with values for an acting individual moral agent himself.

Austrian Economics is an excellent way of looking at methodological economics with respect to the appraisal of means but not of ends. Misesian praxeology therefore must be augmented. Its value-free economics is not sufficient to establish a total case for liberty. A systematic, reality-based ethical system must be discovered to firmly establish the argument for individual liberty. Natural law provides the groundwork for such a theory and both Objectivism and the Aristotelian idea of human flourishing are based on natural-law ideas.

An ethical system must be developed and defended in order to establish the case for a free society. An Aristotelian ethics of naturalism states that moral matters are matters of fact and that morally good conduct is that which enables the individual agent to make the best possible progress toward achieving his self-perfection and happiness. According to Rand, happiness relates to a person’s success as a unique, rational human being possessing free will. We have free choice and the capacity to initiate our own conduct that enhances or hinders our flourishing as human beings.

A human being’s flourishing requires the rational use of his individual human potentialities, including his talents, abilities, and virtues in the pursuit of his freely and rationally chosen values and goals. An action is considered to be proper if it leads to the flourishing of the person performing the action. A person’s flourishing leads to his happiness. Each person is responsible for voluntarily choosing, creating, and entering relationships in civil society that contribute toward his flourishing.

Long ago, Aristotle observed that social life and social cooperation in a community are essential conditions for one’s flourishing. Today, it is generally held that a person’s social networks have strong effects on a person’s well-being. Mediating institutions such as charitable societies, fraternal organizations, churches, clubs, and so on, provide individuals and communities with valuable interaction networks. Most people hold memberships in a number of value-providing associations. It follows that civil society is important to the pursuit and attainment of our individual ends.

Unlike the state, which is based on coercion, civil society is based on voluntary participation. Civil society consists of natural and voluntary associations such as families, private businesses, unions, churches, private schools, clubs, charities, etc. Civil society, a spontaneous order, consists of a network of associations built on the freedom of the individual to associate or not to associate. The voluntary communities and associations of civil society are valuable because human beings need to associate with others in order to flourish and achieve happiness.

One’s personal flourishing requires a life with other people. Sociality is essential to a man’s attempt to live well. Benefaction (i.e., charity) can be viewed as an expression and specific manifestation of one’s capacity for social cooperation.

The interpersonal realm is integral to a well-lived life. We love our friends because we appreciate their potential to advance our well-being. Friendship and love have an egoistic basis in a person’s love for, and pride in, himself. The well-being of a person who is a value to an individual increases the individual’s own ability to flourish and to be happy. The fundamental reason for performing other-regarding actions is to enhance one’s own well-being. Other people’s interests can be viewed as contributive to, or interrelated with, one’s own interests as evidenced in the case of production and free trade. It can be said that a person’s authentic self-interest cannot conflict with the self-interests of other people.

Dr. Edward W. Younkins is Professor of Accountancy at Wheeling Jesuit University. He is the author of Capitalism and Commerce: Conceptual Foundations of Free Enterprise [Lexington Books, 2002], Philosophers of Capitalism: Menger, Mises, Rand, and Beyond [Lexington Books, 2005] (See Mr. Stolyarov’s review of this book.), and Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism [Rowman & Littlefield Pub Incorporated, 2011] (See Mr. Stolyarov’s review of this book.). Many of Dr. Younkins’s essays can be found online at his web page at www.quebecoislibre.org. You can contact Dr. Younkins at younkins@wju.edu.

Creation of an Ethical Business: The Implementation of Virtuous Behavior and Shared Values and Goals – Article by Jessica L. Kuryn

Creation of an Ethical Business: The Implementation of Virtuous Behavior and Shared Values and Goals – Article by Jessica L. Kuryn

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The New Renaissance Hat
Jessica L. Kuryn
May 10, 2012
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IN TODAY’S COMPETITIVE BUSINESS ENVIRONMENT, a growing number of firms will do almost anything to gain sales and customers, as well as to increase profits.  For some of these firms, playing by the rules doesn’t achieve the results they are after.  Firms have the choice to act ethically or unethically.  While misguided managers think that unethical behavior can lead the firm, and ultimately themselves, to greater profits over the long term, it is only for the short term.  It will eventually lead to their downfall in that unethical behavior spirals out of control and can be very difficult to maintain.  Once this occurs, a firm’s reputation becomes tarnished and the company fades into non-existence.  On the contrary, “firms that pursue ethically driven strategies realize a greater profit potential than those firms who currently use profit-driven strategies” (Arjoon 159).

The point is that a firm’s leaders do have a choice in how they conduct business.  Creating an ethical business does not happen overnight.  It takes extensive collaboration and several implementation and evaluation processes, as well as continual reinforcement of and changes to established practices and values.  Perhaps one of the most important aspects to creating an ethical business is that it requires cooperation on multiple organizational levels and the implementation of virtuous behavior and values.

Maintaining ethical practices, once implemented, is an ongoing process.  There are many factors that can affect ethical behavior, such as competition for customers and market share, the need for increased profits, and management incentives.  Some firms, such as BB&T have been able to implement an ethical environment that has led to firm success, while others such as Enron, have succumbed to greed and wrongdoing, and no longer are in existence.  BB&T’s story of success will be discussed later in this paper.

CREATING AN ETHICALLY DRIVEN BUSINESS

Business ethics can be defined as “the applied ethics discipline that addresses the moral features of commercial activity” (Marcoux).  The question we have to ask concerning business ethics is how they can be applied to a business.  One of the most important aspects in creating an ethical business entails the need for new and refined organizationalvalues.  A value, as defined by Ayn Rand in Younkins’s article, is “that which one acts to gain and/or keep” (Younkins 9). Antonio Argandoña suggests a business must first identify its currently existing values and from that develop what values are needed (Argandoña 22).  In identifying these needed values, it is crucial that businesses select values that pertain to both the business’s goals, as well as the employees’ goals.  Congruence between the goals of the business and its employees increase the chances that the valueswill be received well and adhered to.

Once the desired values and goals have been determined, it falls in the hands of management to implement and communicate them.  “At the top level of an organization, it takes effective communicators who are clear about what they champion and who establish the company on virtuous behavior” (Younkins 21).Virtues, which are also defined by Ayn Rand in Younkin’s article, are “the act[s] by which one gains and/or keeps an objective value” (Younkins 11).  It is crucial for each employee and manager to establish virtues within themselves in order to pursue individual and organizational values, as well as keep them once they have been successfully implemented.It is the responsibility of management to ensure that these values are clearly communicated and followed, while established virtuous behavior becomes the mean by which these values flourish and exist.“A culture (or climate) of virtue in a business begins with executives who exhibit virtuous leadership through their personal actions and interpersonal relationships” (Younkins 21).

In displaying virtuous behavior throughout an organization, managers are setting an example for employees.   “Employees are influenced by observing visible and legitimate role models who themselves act as virtuous agents.  Not only should leaders openly discuss virtues and values, they should also live the virtues and values that they advocate” (Younkins 21).  I believe that this is one of the most important aspects in creating and sustaining an ethical business environment.  As explained by Kouzes and Posner in Minkes, Small, and Chatterjee’s article, “…leaders who could not personally adhere to a firm set of values, could not convince others of the worthiness of those values” (Minkes, Small, and Chatterjee 330).  People learn through example.  Therefore, managers should be mindful of this and back up their words with consistent virtuous behaviors that champion the organization’s values.

Once organizational values have been implemented, only half of the work has been done.  The remaining half is a continual and never ending process within the business.  In maintaining an ethical business, ongoing promotion and reinforcement is necessary.  Management must continue to display ethical behavior, while continuing to communicate values to employees.  This also includes communicating what actions are and are not acceptable.  Employee evaluations should also frequently be performed, in which employees are evaluated on values implemented by the organization’s managers.  In addition, management also needs to develop systems that reward value-oriented behaviors and reprimand value-destructive behaviors.

In regards to a reward system, “employees should be objectively appraised and compensated based on their contribution toward achieving a firm’s mission, values, and goals” (Younkins 19).  Employees may receive monetary or recognition awards for their display of virtuous and ethical behavior.  In establishing such incentives, there is an encouragement that exists among employees to accept and display the organization’s values and goals.  In addition, such incentives create a pathway in which individuals can fulfill their own self-interests and goals simultaneously.  “The good manager tries to shape employees’ ideas about self-interest by instituting incentives rewarding cooperation and reinforcing the pleasure people take in collaborating with each other” (Koehn 498). When employees act ethically, the business is also handsomely rewarded in that it gains a good reputation as being an ethically driven business.  This can lead to higher profits in that consumers will be more likely to choose that particular business over competitors because of its reputation.  “Many companies are now realizing that ethically driven strategies are resulting in a sustainable competitive advantage” (Arjoon 168).  In addition, “companies that have seriously adopted ethically driven or people-centered strategies have seen clear gains in productivity, sales and profits, customer service, retention rates, reduction in absenteeism, positive impact on employee morale, [and] increased and timely launching of products” (Arjoon 169).

Adversely, a disciplinary system is also necessary in order to maintain organization values and ethically driven behavior that have already been established.  Employees should be aware of the possible repercussions of their actions in advance, and management needs to ensure disciplinary actions are followed through with when dealing with value-destructive behaviors.  This sends a message to employees that unethical behavior will not be tolerated and it should be avoided at all costs.

The acts of Enron and WorldCom have increased consumer demands for ethically driven organizations.  Therefore, the businesses that make ethics a priority will likely obtain a sustainable competitive advantage because more consumers will choose to do business with them.  In today’s economy and business world, businesses must place a large focus on ethics in order to be successful.

FACTORS THAT AFFECT ETHICAL BEHAVIOR

Implementing a form of virtue ethics and values throughout a business can be very challenging, but maintaining it can be just as difficult.  There are many factors that can affect ethical behavior and lead a manager or employee to act unethically.  Competition for customers and increased market share, as well as the need for more profit are common issues that can lead to unethical behavior.  In addition, management incentives, such as bonuses, pay increases, promotions, and stock options can open the gateway for unethical behavior.

With a specific focus on profit, businesses that have an urgency to increase profits are likely to engage in false reporting.  Reporting false financial information makes a business’s financial statements look more appealing to investors and gives a false pretense that the business is in better financial health than it really is.  In addition, management may inflate earnings if they receive bonuses, pay increases, or promotions for increasing profits.  These monetary compensations can prove beneficial for businesses in that management will be more driven to make sales and increase wealth in the business.  Adversely, these monetary compensations can be dangerous if a manager works in his or her own interest and does not act ethically.  It could put the business in a financial position that is difficult to correct.

Stock options are another form of management compensation.  “Stock options allow employees to purchase a particular number of common shares of company stock at a specified price over a specified time period” (Brooks and Dunn 172).  Stock options can be beneficial in that they serve as a motivational devise.  When managers have an interest in the company they work for, they are more willing to strive towards an increase in stock prices.  Shareholders, as well as the managers, enjoy higher returns when stock prices increase.  In addition, stock options enable management to adopt the investor’s perspective in that theyenable both the interests of investors and management to be aligned.

One of the biggest problems with this is that unethical managers can work out of their own self-interest to falsely raise stock prices in order to earn more money.  With the incentive to earn more money comes the high possibility for unethical behavior and false reporting.  Managers that get used to these increasing stock prices are also the ones who will likely forego ethical standards and correct reporting procedures.  The concept of stock options can be extremely dangerous to a firm, especially when stock prices are truly in decline and these types of managers are present.  Reporting false income to increase these prices will eventually catch up to the firm and will result in the company’s non-existence.  Another problem with stock options is that management has the option to exercise their stock options and then sell them immediately.  This does not align with investor interests in that managers are only maintaining a short term perspective.  Making decisions based on the short term only hurts the long term investors.

BB&T – A TRUE ETHICALLY DRIVEN BUSINESS

BB&T is a fine example of a business that has been led to success through the values-driven approach adopted by one its leaders.  John Allison, former CEO of BB&T, now serves as the chairman of the board of directors.  During Allison’s time as CEO, the company has grown from approximately $5 billion in assets to $165 billion in assets.  This substantial growth has placed the company as the eighth largest financial institute in the United States.  Just a few of the issues BB&T has made a bold stand on are a municipality’s right to seize property by eminent domain for the purpose of economic development, and negative amortization loans.  Allison received national attention is his decision to “not provide loans for any economic development projects in which the land for the project had been taken in this manner” (Parnell and Dent 587).  This decision was not initially favored by many mortgage producers.

“When we made the decision not to do these loans, we got beat up in the market.  We also lost a number of mortgage producers who could make more money working for Countrywide – of course a number of these producers would now like to come back to BB&T.  We believe that doing our best to help our clients make the right financial decisions is good for BB&T.  I believe that while there may be short-term trade-offs by sticking to your values, you are never making a sacrifice in the long run, if your values are rational” (Parnell and Dent 589).

“Allison is known for, and attributes BB&T’s success to, operating by a set of principles that are embodied in BB&T’s Values Statement.  These ten values – Reality (Fact-Based), Reason (Objectivity), Independent Thinking, Productivity, Honesty, Integrity, Justice (Fairness), Pride, Self-Esteem (Self-Motivation), and Teamwork/Mutual (Supportiveness) – are not simply platitudes at BB&T but drive the decision-making process of the bank” (Parnell and Dent 588).  These values serve as the foundation that BB&T was built on.  As part of the evaluation process, employees are evaluated on their performance in accordance with the 10 values.  Those employees that perform in accordance with the values are rewarded.

Allison attributes Rand’s philosophy of Objectivism as the framework for these 10 values.  The main aspect of Objectivism is that it relies on truth and blocks out all emotions in the decision making process.  “The purpose of the process is to help you think rationally.  It is about not letting your emotions make decisions that are bad for you.  It is the ability to make logical decisions based on the facts and to pursue our purposes that makes us happy” (Parnell and Dent 591).

In addition, BB&T has also been viewed as being socially responsible.  Milton Friedman, who is referenced to in Parnell and Dent’s article, argues that there are two reasons as to why a firm should act socially responsible.  “First, not doing so can increase the likelihood of more costly government regulation.  A number of regulations over business operations were enacted because some firms refused to be socially responsible” (Parnell and Dent 593).  The second reason as to why a firm should act socially responsible is that “stakeholders affected by a firm’s social responsibility stance – most notably customers – are also those who must choose whether to transact business with the firm” (Parnell and Dent 593).  The point here is that if consumers do not think a firm is socially responsible, they have the option to do business with another company, and they will more than likely do so.  As discussed in Parnell and Dent’s article, studies have shown that consumers will be willing to pay more for products and services that are responsibly produced.  Simply, consumers favor ethically driven and responsible businesses, and will purchase products and services from them considering this factor.  This is why it is crucial for businesses in today’s economy and environment to be ethically driven and socially responsible.  With the events as seen in Enron and WorldCom, it has made consumers extra sensitive to firms and what approach they take in formulating profit.  Consumers want to be valued for their choice to do business with a particular firm, and they take enjoyment in purchasing products from these firms when they display ethically driven strategies.

From a market and environmental perspective, we could argue that BB&T is doing exceptionally well.  “From a market perspective, BB&T has delivered strong growth and financial performance since Allison’s appointment as CEO in 1989.  From a broad environmental perspective, BB&T’s business decisions defending eminent domain rights and eschewing negative amortization loans reflect support for a sustained society that respects personal property rights and responsible mortgage loan practices” (Parnell and Dent 594).  In respect to this, BB&T speaks on behalf of individuals and what they want.  While BB&T suffered somewhat in the short term, they were able to come out on top in the long run.  In my personal opinion, I have much more respect for companies like BB&T because they are willing to forgo potential profits and take a stand, even when it is not the popular decision.  Companies, like BB&T, will be around for years longer than the companies that jump on the popularity bandwagon.  They will also see considerably larger profits because they stand out among their competitors – just as BB&T has come to do

CONCLUSION

In conclusion, it is easy to see how BB&T has come to be a top competitor in the financial institution sector of business.  BB&T is a classic example of an ethically driven firm that has realized greater profits than the firms that have adopted a profit-driven strategy.  The implementation of ethics throughout an organization is a very difficult thing to do.  It requires substantial acceptance from employees and managers alike to be successful.  Most importantly, managers are the driving forces in implementing such a strategy throughout an organization.  They must be effective in communicating the values of an organization to employees, as well as lead by example.  Management cannot expect to preach values that they do not live by themselves.  After all, people learn through example.  A leader that lives by the values it communicates to employees has the best shot at having an ethically driven business.

In addition to the communication process, managers must provide incentives for desirable behavior.  A rewards system based on monetary or recognition awards are great ways to encourage cooperation and motivate employees.  This also encourages the creation of a pathway in which individuals can fulfill their self-interests.  These same values must also be a part of the evaluation process.  Just as there are rewards systems, management must also design a disciplinary system.  It is important that employees are aware in advance what they could encounter by not behaving in accordance with a firm’s values and policies.  Managers must also follow through with any disciplinary action to reinforce their importance on having a values-based business.

The benefits of implementing an ethically driven business strategy can be great, but it can be a difficult thing to do.  Competition for customers and increased market share, as well as the need for more profit are common issues that can lead to unethical behavior.  In addition, management incentives, such as bonuses, pay increases, promotions, and stock options can open the gateway for unethical behavior. However, if a firm is able to successfully implement an ethics-driven approach, these issues can be minimized and the interests of the firm and employees will be satisfied and aligned.  When a firm is able to align individual self-interests with its own interests, happiness and flourishing are more likely to occur for both.

Jessica Kuryn is a student in Wheeling Jesuit University’s Master of Science in Accountancy (MSA) program.

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Objectivist Virtue Ethics in Business – Article by Edward W. Younkins

Objectivist Virtue Ethics in Business – Article by Edward W. Younkins

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The New Renaissance Hat
Edward W. Younkins
April 24, 2012
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Virtuous actions can lead to the achievement of values. When one’s context is reduced to business, virtue theory contends that pursuing virtuous principles, strategies, and actions can result in firms realizing their values including their mission, purpose, profit potential, and other goals. Virtuous employees tend to carry out their roles in a competent manner that is congruent with the firm’s goals. Virtues are instrumental allowing a person to act to gain values. When business people conform to the Objectivist virtues, they increase the likelihood of achieving their values and goals. Virtue ethics stresses the importance of each individual employee being able to make contributions of value. Valid virtue concepts are required to describe what it means to be an excellent director, leader, manager, or employee. To be successful, a business needs to espouse a set of virtues that are reality-based, non-contradictory, integrated, and comprehensive.

Virtue theory holds that ethics is an inherent part of business and that it is necessary to integrate moral theory into management theory and practice. The role of the virtues in business is to direct and motivate behavior toward the success of the business. Strategic management and business ethics converge because each area has an explicit interest in the nature and goals of business. In business, the virtues facilitate successful management and cooperation and enable a company to attain its goals. The Randian virtues can provide a moral framework and integrating strategy to guide a business in achieving its goals.[1]

The virtues connect ethics to business positively and provide a sound logical foundation for business ethics. Given the laws of nature and of human nature, there exists a set of virtues that fit reality and that are most likely to lead to success and happiness in business. Ayn Rand’s Objectivist ethics specifically recognizes production as the central human value. In addition, the personal virtues that she advocated have a direct bearing on work: rationality, honesty, independence, justice, integrity, productiveness, and pride. These virtues can be used as guiding forces in a business career and in the management of a business. They define the excellent manager (or other employee) and provide the principles that a corporation should adopt with respect to investors, employees, customers, vendors, and others.

A case can be made that virtue ethics has priority over, and perhaps grounds, other competing ethical approaches to business. In most cases being virtuous will be sufficient for leading a morally decent life in the world of business. Virtue theory is more attractive, positive, unified, comprehensive, and practical than are traditional approaches to business ethics because it is concerned with the type of person that one should be rather than with rules that tell people how they ought to act. Virtue theory is concerned with the cultivation of character and provides a framework through which a person can lead a flourishing and happy life. Moral growth comes from choice rather than from conformity to rules or codes.

Traditional approaches to business ethics (i.e., deontology, consequentialism and codes of conduct) are viewed as formulaic, prescriptive, constraining forces that legislate the form of moral deliberation. Conventional approaches focus on a set of prohibitive principles or rules that tell people how they ought to act. Kantian and utilitarian act-oriented approaches concentrate only on the development of principles while neglecting the cultivation of an individual’s character. Neither deontic nor consequentialist judgments are apt to supply sufficient action guidance for resolving particular dilemmas. Virtue ethics should be viewed as a precondition of, and complement to, moral reasoning based on a deontological focus on one’s obligation to act and on a teleological focus on the consequences of an action. Virtue ethics is more fundamental, and in many cases, preempts the consideration and application of deontic and utilitarian rules. An emphasis on virtuous behavior is motivational because it depends upon a person’s ability to aspire to excellence through virtuous acts. Virtue ethics emphasizes the process of individual moral character development. Above all, virtue ethics is concerned with the flourishing and happiness of the human agent (Mintz 1996, 537-38; Arjoon 2000, 159-78; Whetstone 2001, 101-14).

Virtue theory provides a context in which strategies, plans, tactics, policies, and procedures can be developed to attain a business’s stated mission and other relevant values. Virtues can play a causal role in achieving economic success. Virtues-driven firms tend to maximize profits. However, acting virtuously does not always result in wealth creation because other factors can come into play. Despite such an occurrence, virtuous employees still can experience the internal rewards of pride, self-esteem, and the joy of knowing that they did their jobs well.

The achievement of a firm’s telos, mission, purpose, ultimate end, or ultimate value requires virtuous action on the part of the company’s employees. The ultimate value for a business is financial value. The purpose of a business is to maximize owner value over the long-term by selling goods and/or services. Most corporation mission statements explain this purpose explicitly, or at least implicitly. It is necessary to recognize a business’s distinctive purpose when organizing and integrating human effort into purposeful long-term activities. Purposeful behavior requires a single overarching valued objective function. In a corporation market price per share can be a surrogate for owner value. More specifically, the ultimate purpose of maximizing total long-term market value can provide a criterion for management decisions and choices among competing alternatives, Virtues are instrumental and support a firm’s overall telos.

To accomplish a corporation’s ultimate purpose requires the attainment of a number of goals within a business. It is possible look upon both a firm’s ultimate purpose and its goals as values that need to be achieved. Although technically a value is an object of goal-directed action, in general parlance, the terms, goals and values, are often used interchangeably. For our purposes, we can consider both the ultimate end of a corporation (i.e., the long-term maximization of firm value) and the goals that can lead to the ultimate end to be values.

Goals (sometimes referred to as objectives) are specific quantitative targets that a business needs to meet in a manner consistent with ethical principles in order to accomplish its purpose. Typical goal areas in a business include: profitability, sales, sales growth, return on investment (ROI), profit margin, cash flow, market share (or position), customer loyalty, productivity, efficiency, cost control, research and development, product leadership, employee development, employee attitudes, employee loyalty, expansion or contraction of product and service lines, reducing business risks, and so on. Each and every goal should be analyzed to determine the potential impact on firm value and whether or not they are contributing to the attainment of the firm’s target valuation. Goals whose achievement does not contribute to increasing shareholder value should be eliminated.

To succeed a business must have a superior vision and purpose to work toward and the strategic focus and direction of effort to achieve them. The Objectivist virtues can enable people to direct their actions toward the attainment of a company’s goals and values including the maximization of owner value. Virtuous actions can lead to better customer service, gains in productivity and efficiency, higher employee retention rates, reduction in employee absenteeism, improvement in employee morale, better communications both internally and externally, honest and reliable internal and external financial reporting, the flexibility necessary to adapt to market conditions, increased innovation and the more frequent and more timely launching of new products and services, higher sales and profits, sustainable competitive advantages, greater flourishing and happiness of the firm’s employees, and so on.

Virtuous behavior is required at all levels of a company from employees who realize that business is a natural and moral means by which they can satisfy their needs and attain their actualization as individual human persons. Virtuous employees are energetic, productive workers who: (1) focus on reality; (2) think objectively, rationally, and logically in applying relevant knowledge; (3) ask clear, pertinent, insightful questions and listen carefully; (4) search for facts in their total context before judging and evaluating business situations; (5) use time efficiently and effectively; (6) organize their lives and work toward accomplishing worthwhile endeavors; and (7) set value-producing goals and strive to accomplish them.

A virtuous employee begins by understanding what the facts are and does not evade the distinction between the real and the unreal. Evasion detaches a person from reality. Virtue begins with the effort to confront reality as it is. Given that there is no standardized algorithm for making business decisions, an employee needs to use his reason to make rational, logical decisions based on the facts of reality. One needs to apply conscious, prudent, rational judgments and choices in various business contexts in order to identify, execute, and implement profitable and ethical internal and external exchange transactions.

Much of morality in business falls under the rubric of honesty. Honesty means being in accord with reality. Honesty is basic to the structure of human relationships in virtually all contexts. Dishonesty is self-defeating because it involves being in conflict with realty. Morality in business involves objectively recognizing and dealing with customers, employees, creditors, stockholders, and others as autonomous rational individuals with their particular goals and desires. The trader principle should govern the course of all human interactions because voluntary value-for-value relationships are consonant with human nature.

Honesty is closely related to the virtue of justice. Justice, a form of faithfulness to reality, is the virtue of granting to each man that which he objectively deserves. Justice is the expression of man’s rationality in his dealings with other men and involves seeking and granting the earned. A trader, a man of justice, earns what he gets and does not give or take the undeserved. For example, a virtuous manager must make sure that customers get what they pay for. In addition, he needs to identify employees for what they accomplish and treat them accordingly. Employees should be objectively appraised and compensated based on their contribution toward achieving a firm’s mission, values, and goals. A virtuous manager will discriminate among all those that he deals with (i.e., customers, suppliers, workers, etc.) based on relevant qualities and personal merits such as ability, competency, performance, and character. He will not improperly discriminate based on irrelevant characteristics such as sex, race, nationality, and so on.[2]

Although individuals can learn from each other, the fact remains that each of us thinks and acts alone and is responsible for his own actions. Independence requires the acceptance of one’s intellectual responsibility for his own existence, requires that a man form his own judgments, and that he support himself by the work of his own mind. It is not a corporation’s fault if someone does not attain his goals. Each employee is responsible for his favorable or unfavorable outcomes in a business setting where responsibilities are defined by, and arise out of, his particular role. Of course, a goal may not be completely under one’s control. It may require interdependence with or on other employees who co-contribute to whether or not someone attains a goal. Positive change and innovation in a company are based on the creativity of logical independent thinkers. It is through such employees that a firm discovers and invents ways to improve the fiscal bottom line thereby increasing the firm’s market value.

Integrity is the refusal to permit a breach between thought and action. It means acting consistently with rational principles that will lead to success and happiness. In business, an employee’s rationally-made plans are integrated with his actions in order to bring values into existence. From more of a macro viewpoint, we could say that the integrity of a business is maintained if the purpose for which it was created is followed (i.e., the maximization of owner value).[3]

Productiveness, the virtue of creating material values, is the act of translating one’s thoughts and goals into reality. Productiveness comprises an important existential component of virtuousness and is a responsibility of every moral person. It involves a commitment to creating value and to being self-responsible for bringing what one needs and wants into existence. Workers in a business are committed to producing wealth and bringing about well-being by taking the actions required to achieve the firm’s mission. Profits are an indicator of productive work on the part of people who want to achieve, produce, and improve well-being. Because people differ with respect to their intelligence, talents, and circumstances, the moral issue becomes how a particular employee addresses his work given his facticity, including his potentialities and concrete circumstances. In a business, the Randian virtues (including productiveness) offer a set of principles for getting the most value from one’s work. Rand’s Objectivist ethics recognizes that individuals search for meaning and purpose in the various components of one’s life (i.e., one’s work life, love life, home life, social life, and so on). Each of these is an end-in-itself and a means to the end of one’s life in total. One’s life in total is an end-in-itself and an ultimate value.

Pride, also called moral ambitiousness, is a man’s commitment to achieving the best in his life thereby effecting his moral perfection. Pride is the reward we earn by living by the other six Objectivist virtues. A businessman’s drive for success is a result of his taking pride in the business portion of his life. Each employee needs to work in a way as to be able to be rightfully proud of what he has done. Work is needed not only for sustenance, but also for one’s psychological well-being—it can be viewed as a means by which a man can maintain an active mind, attain purposes, and follow a goal-directed path throughout his lifetime. Through work a man can achieve his highest potentials. Doing work well in accordance with the goals of a firm (which are aligned with the personal goals of the worker) can cause an employee to positively enhance his self-esteem.

Dr. Edward W. Younkins is Professor of Accountancy at Wheeling Jesuit University. He is the author of Capitalism and Commerce: Conceptual Foundations of Free Enterprise [Lexington Books, 2002]. Many of Dr. Younkins’s essays can be found online at his web page at www.quebecoislibre.org. You can contact Dr. Younkins at younkins@wju.edu.

 

[1] Ayn Rand’s Objectivist ethics is specifically related to business and business ethics in Kirkpatrick 1992; Greiner and Kinni 2001; and Hicks 2003.

[2] See Locke and Woiceshyn 1995 for an argument for honesty in business from the perspective of rational egoism.

[3] Paine 1994 provides an interesting perspective on how to manage for organizational integrity.

References

Arjoon, Surendra. (2000). Virtue theory as a dynamic theory of business. Journal of Business Ethics, no. 28: 159-78.

Greiner, Donna and Theodore Kinni. (2001). Ayn Rand and Business. New York: Texere.

Hicks, Stephen R.C. (2003). Ayn Rand and contemporary business ethics. Journal of Accounting: Ethics and Public Policy 3 (1) (Winter): 1-26.

———. (2009). What business ethics can learn from Entrepreneurship. Journal of Private Enterprise 24 (2): 49-57.

Kirkpatrick, Jerry. (1992). Ayn Rand’s objectivist ethics as the foundation for business ethics. In Business Ethics and Common Sense. Edited by Robert W. McGee. Westport: CT: Quorum Books 67-88.

Locke, Edwin A. (2001). and J. Woiceshyn. (1995). Why businessmen should be honest: The argument from rational egoism. Journal of Organizational Behavior 16: 405-14.

Mintz, Stephen M. (1996). Aristotelian virtue and business ethics education. Journal of Business Ethics, no. 15: 827-38.

Paine, Lynn Sharp. (1994). Managing for organizational integrity. Harvard Business Review 72 (March-April): 106-17.

Rand, Ayn.  (1964). Objectivist ethics. In The Virtue of Selfishness. New York: New American Library.

Whetstone, J. Thomas. (2001). How virtue fits within business ethics. Journal of Business Ethics, no. 33: 101-14.