Ethics in Economic and Business Activity

Economic activity – including business – is first and foremost a human activity, one with ethical content; after all, it involves persons – the origin and end of the activity – as well as environmental effects. However, the integration of ethics into economic activity is problematic, as it is into decision-making in business. It has been so throughout history, even amounting to a total separation between ethics and economics, either because of the way economics is understood or because of the ethical theories adopted. Ever since the 1970s, a movement on behalf of business ethics has arisen, with the goal of integrating ethical theories into the practice of business. Nevertheless, such “integration,” in too many cases, has been nothing but an add-on, a way of understanding business with ethical theories tacked on, extrinsic to any economic action. Moreover, ethics is frequently presented as a series of prohibitions rather than a guide for human excellence. In this chapter, after discussing such problematic perspectives on integrating ethics into economic activity, we review certain key elements of Adam Smith, so influential in economic and business thought, with regard to ethics in economic activity and business decision-making. As alternative, we begin with a careful analysis of interpersonal relations in the context of business relations. Then we argue about the need for a comprehensive rationality in economic activity, not limiting it to that provided by the instrumental reason, which is necessary but not sufficient; we must reflect from theoretical reason, which seeks to know reality, and on practical reason, which guides our action toward what is most convenient all things considered. We also underlined the roles of motivations and the learning to which actions give rise, including virtues. We emphasize the trust that can be created by acting with benevolent motivation, and the concomitant effect on the relationship between the interacting agents. The reinforcement of the “relational bond” that results, together with the virtues that arise, will facilitate right future interactions. The foregoing analysis is about decision-making in business, carried out with the triple rationality mentioned, as well as the help of the virtues. In this approach, ethics is at the core of business decision-making, based on practical wisdom and benevolence-based virtues, as well as the concern for achieving satisfactory economic results with efficiency. Several factors, including generation of trust, loyalty, and willingness of cooperation lead one to think that ethics and long-term efficiency are fully intertwined. This opens up new horizons for a full integration of ethics into business theory, which should be developed in the future.