The Ethics and Culture of Corporations

Two oft-repeated assumptions about big companies in market economies:

1. Corporations pursue profit by all means without regard to concerns for ethics, the environment, diversity (racial/gender/socioeconomic), and community externalities.
2. Corporations consistently underpay minorities and women for doing the same work that white men do.

I see these as contradictory. A vast amount of literature shows that diversity at a company is good for its bottom line. Having more women and people of color in an office is good for everyone’s productivity and increases the likelihood of good ideas that are essential for keeping a company strong. Furthermore, if a company was only concerned about its bottom line, it’d only employ women and minorities (much cheaper!). The obvious reality is that companies do pursue profit, they do discriminate against women and minorities, but they engage in behavior that is not always profit-maximizing.

Consider an alternate proposition:

• Corporations pursue profits in an environment that is constrained by the prevailing culture and ethical norms; sometimes that culture leads to discriminatory behavior and sometimes it means putting ethics over profits.

This means that if the higher-ups at a corporation come from a culture that gives them implicit bias towards men, white people, or those that went to their alma mater, hiring decisions will be made that reflect those biases even when it is against the self-interest of the company. At the same time, culture can also influence business decisions that put ethics over profits. Price-gouging during a natural disaster, for example, might not happen (even if profit-maximizing) because cultural norms shun such behavior.

Essentially, prudence is not the only thing guiding human behavior, even if economic models often suggest so. What’s interesting to me is the overlap of people who a) attack the utility-maximizing framework of mainstream economics as being oversimplified; and b) say that people in a “capitalist” economy are purely self-interested.

 

 

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Empathy and Globalization

A plane in Malaysia has gone missing and everyone is presuming…you know. Aside from the obvious tragedy that goes along with the loss of any human life, I always find it interesting that news outlets frame a story like this by how many Americans may or may not have been on board. I don’t fault them for it, it genuinely is what Americans are interested in knowing. I won’t get into a discussion of what’s ethical in how we should care about different peoples. Instead, I think it’s useful to focus on how this phenomenon has broader implications.

David Hume had “Concentric Circles of Loyalty and Empathy” that basically observed this: if I was told my pinky finger was going to be cut off tomorrow, I wouldn’t be able to sleep; if I was told five people halfway around the world that I have never met and know nothing about are going to die, I probably wouldn’t lose any sleep over it. Then there’s everything in between. Generally speaking, people care about themselves the most. If you want to get annoying about it we can say the first concentric circle is one’s immediate family. After that, you go outward to tribe, village, country, and then all of humanity. Hume observed this centuries ago and I think it’s still largely true.

But there’s a new reality that changes it. Because of globalization, we are more connected to those five people halfway across the world. We might know more about their country, do business with them, or see them on the news. Even the simplest exposure can make us feel more connected and empathetic to them. Jagdish Bhagwati argued in his book In Defense of Globalization that globalization itself fuels most anti-globalization. Globalization has made people empathize more with those starving kids in Africa, so westerners now want to stop a force that allegedly causes those children to starve. If we didn’t feel connected to them, they’d be out in a concentric circle totally irrelevant to us. Today, I think the concentric circles are getting more and more mushed together.

I’ve always found the “buy American” or “buy local” movements to be steeped in a weird nationalism exposing people’s allegiance to group identities. There’s more to these than just “looking out for your people” (people might trust American goods more than Chinese ones or buy local thinking it reduces environmental harm from shipping, for example). But when people tell me they follow these mantras I’m always forced to ask “why should I care more about Americans or people in Austin/Scotland/Chicago?” After all, buying anything is local somewhere. If I buy American for the sake of buying from people whom I share a passport that signifies an arbitrary identity caused by legal borders, I’m just discriminating against people of other nationalities.

As people get richer I think we have less reason to be distrusting. I don’t assume people are going to rob me, the guy I give my credit card to is going to steal my info, or that a product online will show up at my house completely different than the description. It could be that long ago we cared most about our family then tribe then village etc because we knew them best and felt a connection. We felt we could trust them. Perhaps it was a instinctual defense mechanism.

But I don’t think it’s necessary anymore. We do business with people all around the world, we marry people from all around the world, live amongst people from all around the world, experience media from all around the world. It only makes sense that as people feel more connected the concentric circles become blurrier. Humanity is humanity, and hopefully these national borders will become more arbitrary.

 

Climate Change and World Poverty

Matt Yglesias is worried about what climate change will do to poor farmers in the developing world:

Farmers have particular land and particular crops they’re accustomed to growing. When the climate shifts, they’ve got a problem. Initially it won’t be an insurmountable problem for farmers in rich countries who’ll be able to draw on a lot of technical resources to try to adapt. But for poor peasants in the developing world, their livelihoods will be ruined quite rapidly.

My understanding is that, sadly, this is true: climate change will have its most damaging effects on countries that are closer to the equator.  The vast majority of these countries are poor.  Yglesias goes on:

[I]t’s worth attending to the problems of the third world and the ethical issues it raises. I doubt many members of the Chamber of Commerce would, if faced with a starving Namibian family on their front doorstep, just refuse to give them any food and say “hey, I’m greedy, get over it.” But when the climate shifts, there will be crop failures and famines and people will die. And the people preventing action to stop that outcome are doing it because it would be financially inconvenient. So how different is that?

The starving family on the doorstep example greatly understates the complexity of the ethical challenge that climate change poses.  Any climate change mitigation policy that actually succeeds in slowing climate change by enough to have a noticeable effect on the well being of subsistence farmers in the developing world will significantly retard economic growth around the world (global collective action is required for any climate change policy to work).  Unfortunately, this is bad for residents of developing countries because it reduces the export demand for their products, making it more difficult for them to rise out of poverty.

So the ethics of the effect of climate change on farmers in poor countries ends up hinging on a comparison of the cost of climate change with the cost of slower economic growth.  Because of all the uncertainties in the science (granting that there’s scientific consensus about the existence of global warming, the exact amount of warming and the extent of the future damages caused by warming are not clear), this is a difficult calculation to make.

Yglesias’s example does help to illustrate that there are moral demands upon the world’s privileged to help the world’s poor, even if the poor are far away.  But the best way to meet this demand is to donate money to charity, or perhaps to lobby for increased legal immigration and an end to farm subsidies (which indirectly hurt poor farmers).  There are just too many uncertainties for climate change action to be a sensible way of fulfilling our moral obligation to help the poor.

 

Peter Singer on Abortion

When debating the permissibility of abortion, conservatives tend to argue that killing innocent humans is wrong, fetuses are innocent human beings, and therefore killing fetuses is wrong.  In response, liberals tend to attack the premise that fetuses are human beings.  The focus of the abortion debate thus tends to be on the location of the line between a fetus as a bundle of cells and a fetus as an unborn human child.

I’ve been reading through Peter Singer’s Practical Ethics, and he offers an interesting take on the abortion debate that sidesteps the usual abortion debate sticking point.  Singer’s position on abortion follows fairly straightforwardly from his well known argument about the ethical treatment of animals.  There is no intelligible distinction, Singer claims, that justifies allowing a being’s species to determine the being’s moral standing.  Most attempts to draw this distinction run into trouble when it comes to children and the mentally disabled.  For example, Aristotle argued that what distinguishes humans from animals is the unique human capacity to reason.  However, children and some mentally disabled people have reasoning abilities that are similar to those of some animals.  Therefore, this distinction, and others like it, fail, because they judge that (counter to our intuitions) some children and mentally disabled people do not qualify as fully human.

So if there is no intelligible morally significant distinction between human and non-human, then the dividing line between a fetus as a bundle of cells versus a fetus as a full human in the abortion debate loses its importance.  Instead, Singer proposes giving fetuses, depending on how developed they are, the same moral standing that we would give to animals with similar capacities to experience pain.

This seems closer to being right to me than any other stance on abortion that I’m aware of.