Business Ethics Chapter 12 Question & Answer

If both business people and business corporations develop character traits that dispose them to protecting the environment, then this will help sustain development for future generations.

GDP growth has weaknesses both as an indicator of increasing human welfare, and as an indicator of sustainable development.

Cost-benefit analysis consider the interests of future people, but uses a discount rate for future environmental costs. We have reasons to discount future costs within our own individual lives, but we also have ethical reasons not to discount costs for unborn generations. The choice of a discount rate is an ethical decision; using a high discount rate for future costs may unfairly privilege the interest of the present generation.

Environmental economics uses cost-benefit analyses to find ways of fixing environmental problems with the highest net benefits for all concerned. Such analyses can generate winners and losers, and thus problems of distributive and compensatory justice.

Environmental economics aims to produce the socially optimal level of pollution. This level is not zero. Instead, it balances the benefits of producing pollution against the costs of preventing it.

The Coase Theorem shows that, in the absence of transaction costs, free-market environmentalism will deal efficiently with external costs. However, transaction costs are very high in environmental problems such as non-point-source pollution, and, as usual, this utilitarian approach raises questions of fairness.

Open-access resources lead to tragedy-of-the-commons situations. Free-market environmentalism suggests that privatizing all environmental resources will prevent their over-use. Privatizing the environment, however, raises questions of fairness and liberty.

Libertarian and contractarian reasoning both suggest market fundamentalism as an approach to environmental problems, whereas economic utilitarian reasoning suggests either free-market environmentalism or an environmental economics approach.

The existence of negative externalities such as pollution will result in the inefficient production of too many goods at too low a price.

A comprehensive view of moral standing in business ethics reminds us to consider the interests of the global community, posterity, and the environment in making ethical decisions.

External costs will fall on local people participating in the market, on distant people outside the market, on future people not yet able to participate in the market, and on the non-human environment.

Environmental problems often arise from market failures such as negative externalities, open-access resources, and the failure to provide public goods.