How the market actually works? Ethical problems of a market economy

How does the market actually? Like a “magic funnel”, in which the top of the actions of self-interest maximierern be filled and the bottom of the General welfare of the people?

Against this view can

many objections are made!


The Overuse

The market has problems in the handling of so-called public goods, which include virtually all people, because no one can be excluded at a reasonable cost from the consumer. Large parts of the natural environment (eg. Air, rivers, seas, and atmosphere), but also intangible goods, such as the internal and external security of the state. The individual utility maximizer will have no interest to invest in public goods, because the Benefit to it other that the cost but he’s wearing private. In addition, he will use the public Good is unrestrained, because the Use is private, the costs will be socialized. The overuse and under-investment in public goods is expected in General, what also is impressive is the enormous pollution of the environment.

Unwanted Offers

From the market on the other hand, provided the goods are undesirable. Of the self-love of the drug lords, we expect the ample supply of drugs. Rational benefit maximizers, the demand for child pornography use, according to weapons for Criminals, according to state secret, to organs, etc.

Lack of transparency

Unlike in the model of the ideal market, provided there is in reality no complete market transparency. There is an information asymmetry between the Stakeholders of the newer Economics, especially from the so-called Principal-Agent approach, is often. The Consumer knows for example. not, whether the meat he buys at the butcher’s, actually comes from Biohaltung. The self-interest-maximising the butcher for example. without further meat from factory farming is cheap to buy and it as an expensive organic Meat to sell. The information asymmetry is a moral hazard, a moral hazard arises.

The Question Of Power

Also to note, the power asymmetries between the parties Involved. As Adam Smith himself has problematized, there is such an imbalance of Power, often in the labour market between employers and workers. Purely according to market logic, an excess supply of labor would have to press the wages down to a level where people could just vegetate, Yes some would be condemned simply to Starve to death. It is the market results to be expected, the “wouldn’t be cheap with our ideas about humanity”. Power asymmetries with the corresponding moral risks (especially of coercion of the weaker party to the contractual concessions), basically, whenever a party is to rely more on the exchange than the other. Also this Problem is recognized by the New institutional Economics, especially the transaction cost approach.

The Distribution Question

The market may not provide for need of justice. Who gets goods, the purchasing power, not the means. The self-interest-maximising the Baker has no reason to give a beggar his buns. Without the well-being of others and a certain degree of solidarity, which cannot compete in the market, would remain on the track.

The Scarcity Question

The market does not prevent the wastage of scarce resources. Although the economy in dealing with scarce resources is often declared to be the main advantage of the market economy, the market is not such an economy. Because, first, the scarcity of a resource, the price must be expressed, if the market is to detect it. As the example of the perception of nature and the environment as “free”, i.e., “shows free” Well, there is a real shortage and the price are far apart. Secondly, scarce and expensive resources are wasted, as long as the customer is only willing to honour this price. Be sold in Germany, more and more heavy all-terrain vehicles, although they contribute with their very high fuel consumption certainly to wastage of scarce resources. Also, the providers repeatedly accused of planned obsolescence, i.e., deliberately sought early wear, particularly of technical devices, is highly wasteful.

A question of Fairness

The market actors are often not interested in a fair competition, but, on the contrary the competition by means of agreements and combinations to prevent. The ideal Market situation from the point of view of a company, the monopoly of Supply, in which the consumer has no alternative possibility, and the provider can dictate the prices.

This post is an excerpt from the new book on corporate ethics.

Wie funktioniert der Markt tatsächlich? Ethische Probleme der MarktwirtschaftHow can be implemented the business ethics as a Management responsibility? A stronger orientation of the corporate guide on the guiding principle of a life-serving economy is more and more demanded. Elisabeth Gödel discusses the philosophical foundations of ethics and clarifies the relationship of ethics and Economics. The focus is on the institutionalisation of ethics is on the level of the individual company.

>> Link to book

>> Link to the Service book

>> Link to the slides for lecturers

>> Link to the editorial

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