James Otteson offers an account of business ethics grounded in the idea of honorable business. According to this view, the purpose of business is the creation of value for all parties involved through mutually beneficial exchanges. Engaging in honorable business means treating persons with respect, as rational agents who can freely accept or decline offers for exchange. When a particular transaction is freely accepted by both parties, Otteson argues, this transaction is mutually beneficial, creating value for both parties. In this way, the purpose of business is inherently moral since honorable businesspersons eschew “extractive behavior” (24) that is not mutually agreed upon and instead pursue only mutually beneficial transactions. Thus, business is an intrinsically valuable activity insofar as it involves respectful treatment of participants as free rational agents and it is the best means of promoting “increase[ed] prosperity” (38), especially amongst the poorest nations.
By focusing on the purpose of business, Otteson seeks to avoid an applied ethics approach to business ethics, arguing that business is already an inherently moral activity. For this purpose, the author draws upon a range of philosophers—Adam Smith and Aristotle being the most prominent—to elaborate the goals, norms, and virtues that are latent within the practice of business. Though Aristotle was skeptical of the role of virtue within commerce, Otteson draws upon his understanding of agency as directed toward a final end to explain the place of business practice in a “just and humane society.” Likewise, by elaborating on this account of the purpose of business, and thereby an account of business ethics, Otteson goes to great length discussing political questions concerning the role of the state in relationship to the market. Many readers who are otherwise sympathetic to the book’s compelling account of the purpose of business are likely to raise questions about the extent to which the notion of honorable business is tied to libertarian political theory.
In chapter one, Otteson outlines his account of the purpose of business as a mutually beneficial exchange. Interestingly, he approaches this in Aristotelian terms as a matter of asking why persons engage in business. As Otteson says, “If the Aristotelian logic of ‘a rationally ordered moral life’ holds water, then this proper context must link the daily activities of the individual businessperson all the way up to the highest-level social institutions” (19). This context is described as a “just and humane society . . . as the ultimate or highest social goal” (20). Within this context, individuals pursue “the construction of a eudaimonic life for themselves” (29), a life that achieves human flourishing in a unique way appropriate to each individual. Chapter two is largely devoted to an account of Adam Smith’s political economy and its implications for the role of the state in regulating the market, a topic I will return to below.
Chapter three provides a code of business ethics that Otteson takes to articulate the practical requirements of the idea of honorable business. The code is comprised of the following principles:
1. You are always morally responsible for your actions.
2. You should refrain from coercion and the threat of injury.
3. You should refrain from fraud, deception, and unjust exploitation.
4. You should treat all parties with equal respect for their autonomy and dignity.
5. You should honor all terms of your promises and contracts, including your fiduciary responsibilities.
Taken together, Otteson argues, these principles outline the requirements needed to ensure that businesses create value through mutually beneficial exchanges. Principle 1 makes explicit the basic presupposition of honorable business: free responsible agency that is morally accountable, and which is capable of accepting or rejecting any particular offer. Principles 2 and 3 proscribe actions that through force or fraud limit the freedom of potential exchange partners. Principle 4 counsels businesspersons to respect the free choices of others, and principle 5 states that agreements should be kept.
Arguably, Otteson is correct to claim that some perspectives in business ethics have focused too extensively on altruistic considerations, i.e., corporate social responsibility (CSR) or communal relations within firms, overlooking, to some extent, the ethical considerations inherent in the purpose of business, such as is articulated in his code. But having said this, Otteson’s code amounts to a minimalist approach to business ethics, since he does not identify or defend any duties or obligations of businesspersons beyond pursuing profitable business through mutually beneficial exchanges. Otteson argues that CSR is inefficient, and that honorable business, involving mutually beneficial exchange, is the best way to promote increasing prosperity. But this view does not account for situations where political institutions are inadequate or lacking, for negative externalities, or for cases of urgent need where specific firms may have a unique ability to benefit stakeholders.
In chapters four, six, seven, and eight, the author attempts to address various objections to business and capitalism. The topics addressed range from inequality and externalities to exploitation and commodification. At times, one gets the impression that Otteson has not taken specific criticisms seriously. For example, when discussing the problem of negative externalities—situations where mutually beneficial exchanges harm a thirdparty—the author suggests that we should let the “parties bargain with each other for the rights to do what they want with their property” (91). Bargaining may produce an efficient outcome given certain conditions, but this suggestion does not speak to the ethical problem that managers confront when their firm is engaged in activities that are clearly harmful but not illegal. Similarly, the discussion of alienation does not seem to take seriously the possibility that some forms of work may be intrinsically destructive of the human capacity for rational agency. In this type of alienating work, it becomes hard to see how the notion of a “mutually beneficial exchange” can gain adequate traction.
Chapter five extends the themes addressed in chapter two concerned with the political implications of Otteson’s vision of business. The author defends a version of libertarianism, stating at one point that to demand that social welfare programs “be provided by the government, rather than through private and voluntary initiative, would also be to violate justice toward those required to pay but who did not want to because it would violate their property and possessions” (54). While chapter two provides a relatively straightforward account of Smith’s political economy by criticizing most forms of government intervention in the economy, Otteson defends similar views throughout the book. Thus, aside from the minimalism noted above, I would offer a second major objection concerning the author’s link between the libertarian political theory and his account of honorable business as a theory of business ethics. It seems entirely possible to endorse Otteson’s account of the purpose of business as a mutually beneficial exchange while also defending a robust role for government regulation in the economy.
Otteson’s account of honorable business is based upon the idea of freedom, and he suggests that only insofar as governments refrain from interfering with free exchange can persons be free. But Otteson does not raise the question of the social conditions needed for free agency. For example, can the choice of a hungry and impoverished individual with no other options, who agrees to work in a factory under dangerous and inhumane conditions, really be considered free? One might argue that in this example extreme poverty and lack of options decreases or eliminates the employee’s freedom. Thus government intervention, by providing a social safety net, potentially facilitates freedom by giving the impoverished potential employees an increased range of options. This means that the state may have a positive role in promoting freedom beyond that of defending property rights, thereby calling into question the author’s link between honorable business and libertarian political theory.
A final objection that I would raise concerns the book’s underlying metaethical framework. Otteson asks the question of why one ought to refrain from opportunistic behavior even when it is sure to be undetected (57). But his answer is that we should promote a culture where this does not happen. While this might be true, it fails to provide a normative basis for rejecting opportunism since Otteson’s question concerns the reasons why someone ought to adhere to the norms of such a culture. At other key points, Otteson adopts a similar approach suggesting that sympathy (62) and reputation (63) can provide an answer to this question but they clearly cannot. A sympathetic person may be less likely to cheat but one can still ask for the reason why one ought to acquiesce rather than resist such sympathetic urges. Likewise, a concern for one’s reputation is irrelevant in cases where opportunism cannot be detected. These concepts point to mechanisms that may reduce the frequency of opportunism but they do not provide reasons to refrain from such behavior. What is needed is some explanation of why opportunistic behavior, or any other form of injustice, is harmful to the person who engages in this type of behavior.
This problem is ultimately linked to the fact that while Otteson discusses rules and virtues, his account is essentially a form of utilitarianism (131), specifically a mixture of rule and motive utilitarianism where such norms are justified in terms of their beneficial consequences for individuals and society. But when cases arise in which the individual can benefit from dishonesty while causing harm that is widely distributed throughout society (57), it is not clear that Otteson’s framework can provide an adequate reason to reject dishonesty. In other words, for Otteson, rules and virtues seem ultimately to be merely of instrumental value. Otteson even says at one point that “the idea that things have intrinsic value is difficult to sustain” (188). At this point, it would have been worthwhile for Otteson to compare his ethical framework with the MacIntyrean approach to the role of the virtues within the economy (see Moore Reference Moore2017). According to this latter approach, acts of virtue are seen as intrinsically valuable, facilitating the achievement of goods that are intrinsic, or internal, to the activities comprising the productive process. Thus, this framework provides a ready answer to Otteson’s opportunist (57): failing to be virtuous prevents a person from achieving goods that are potentially inherent in one’s actions, goods that are partially constitutive of human flourishing.
Despite these criticisms, Otteson’s core claim that the purpose of business is a mutually beneficial exchange is a powerful idea that has been surprisingly ignored by other perspectives in business ethics, which often seem to assume that business is in need of redemption, typically by appeal to some extrinsic ethical principle. Otteson rightly reminds us that honorable business is an inherently virtuous activity aimed at mutually beneficial exchange. Honorable business eschews violence and other forms of extraction, limiting itself to those activities that are beneficial to both parties to the exchange. Otteson’s book could helpfully inform other work in business ethics and will likely further reinforce the need to understand business on its own terms as a morally salient activity that is in need of guidance but not redemption.
