Archives for February 24, 2010

In an interesting coincidence I happened to be teaching about ethical egoism about the time that the Toyota problems were hitting a peak. Ethical egoism is, crudely put, the moral theory that people ought to maximize their own self interest. So, I should maximize my self interest and so should you. Famous theorists in this camp include Thomas Hobbes, Adam Smith, and Ayn Rand.

Interestingly, Hobbes argued that out of self-interest we should cooperate and obey the laws of the state. This was, of course, to avoid the horrors of the state of nature (a “war of all against all”). As such, our self interest is supposed to motivate us to keep our self-interest in check.

Adam Smith, the theorist who gave us the “invisible hand“, argued that market forces would sort things out between individuals who were acting on the basis of self-interest. What is often overlooked in Smith’s theory is his view that the end is to create social utility via the free market. Of course, the motivation to act well is based in self-interest.

Altruistic views, which are typically presented as the opposing views to the various forms of ethical egoism, enjoin us to take into account the interests of others and not just our own. In the case of altruism, it is often claimed that people should act well because it is the right thing to do and not merely a matter of self interest.

One obvious concern about taking the self-interest approach is that a person will (and should) act against the interest of others when doing so is in his interest. Put rather crudely, if a person can gain more by doing what might seem to be wrong, then that is what the person should do. Naturally, this takes profit to be the measure of right.

In the case of Toyota, there is evidence that the company might have taken deliberate action to avoid having to recall vehicles so as to keep their profits. While this certainly seems to have put people at risk (and perhaps even killed and wounded some people), it would be a prudent act on the part of the folks at Toyota, provided that their gain exceeds their losses. In fact, this seems to be a rather standard practice in numerous fields. For example, a drug might turn out to cause heart attacks, but this might simply be covered up (perhaps with the collusion of regulatory folks) so as to keep profits high.  Obviously, individuals use the same approach in their own lives, doing less than upstanding things so as to gain or to avoid a loss.

Getting back to Smith’s invisible hand, what is supposed to happen is that the misdeeds of businesses are supposed to create a loss for them. As such, they have an incentive to act well so as to maintain their profits. Toyota seems to have gambled that by avoiding recalls they could keep substantial profits. Currently, of course, Toyota is reaping what it has sown and is taking a massive PR hit. Of course, Toyota might still come out ahead. If so, delaying the recalls might turn out to have been a good decision.

One factor that allowed Toyota to do what it did (and perhaps helped motivate the action) is the fact that the folks responsible for making such misdeeds costly seems to have been under the sway of Toyota. This seems to be a general problem-all too often the regulatory agencies are very cozy with the companies they are supposed to regulate. Then again, if the goal in life is to maximize self interest, then the companies and the regulatory folks are acting as they should-they are all trying to get the biggest slice of money pie that they can. Naturally, the public is suffering because of this, but that is because the public seems unable to ensure that it is in the best interest of the regulators t0 make sure that it is in the best interest of companies to not act against the interests of the public.

When company decisions makers are acting prudentially in regards to profits, they elect to take the actions they believe will maximize profits. Naturally, the actions that maximize profits might be regarded as rather immoral (such as marketing a risky drug or not fixing defective vehicles). Since appealing to what is right seems to have little impact on people (this is why police carry guns rather than handbooks on moral philosophy) what needs to be done is to ensure that actions that are wrong will come with a high cost. For example, rather than allowing the regulatory folks to let Toyota get away with their alleged misdeeds, the cost of not fixing such problems needs to be increased until it is not prudent to allow them to persist.

Of course, it is reasonable to be worried that people are not prudent. After all, there are harsh penalties for crimes and for doing stupid things, yet people persist in doing both. So, maybe corporate folks would continue to do such things even when the cost outweighs the profit. It is also reasonable to be worried that the regulatory agencies will always slide into cozy relations with the industries they are supposed to regulate.

I won’t even argue that we should hope that people will do the right thing because it is right.