What Is the Role of Ethical Behavior in a Free Market?

Conventional wisdom views free markets as places where self-interest, rather than ethical behavior, reigns. But this is a narrow view, and your essay should explore the issue further. Keep in mind, for example, that people are also self-interested when they are outside the marketplace as when they are acting in the political arena.

Markets may actually encourage ethical behavior. The only way to make money in a market is to provide a service that other people value enough to pay for. This leads people to be cooperative and friendly and to try to provide a product or service that people want. In contrast, in politics, politeness and cooperation are difficult to achieve.

When corporate leaders act unethically (making false statements about the condition of their stock or illegally using money from their corporation) they generally suffer as a result. Their companies may be forced into bankruptcy or go out of business. In other words, markets themselves punish wrongdoers.

Another way to look at markets and ethical behavior is to argue that markets can operate only if people are ethical. Some say that markets are not themselves either ethical or not ethical. Rather, they are just a system of voluntary trade. Whether the actions are ethical depends on the people involved.

Does business have a special ethical responsibility to do good (to go beyond just following the laws and avoiding fraudulent behavior)? Doing good this way is sometimes called “corporate social responsibility”. Economists such as Milton Friedman argue that companies have one responsibility: to make a profit, following laws and acting responsibly but not taking on special charitable tasks. Others, such as John Mackey, CEO of Whole Foods, disagree.

Your essay can reflect any of these themes, or others that are relevant to the topic. The following essays will give you some ideas. You don’t have to agree with these ideas, but awareness of the arguments will improve your essay.

“Markets and Morality,” by Peter J. Hill. 1988. Bozeman, MT: Political Economy Research Center, at: www.perc.org/perc.php?id=820.

“The Free Society Requires a Moral Sense, Social Capital.” Interview with James Q. Wilson. 1999. Religion and Liberty , July/Aug, at: www.acton.org/publicat/randl/interview.php?id=313.

“Rethinking the Social Responsibility of Business,” by Milton Friedman, John Mackey, and T.J. Rogers. 2005. Reason , October, at: www.reason.com/0510/fe.mf.rethinking.shtml.