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CORPORATIONS, PROFIT MAXIMIZATION AND THE PERSONAL SPHERE

CORPORATIONS, PROFIT MAXIMIZATION AND THE PERSONAL SPHERE The efficiency argument for profit maximization says that corporations and their managers should maximize profits because this is the course of action that will lead to an ‘economically efficient’ or ‘welfare maximizing’ outcome (see e.g. Jensen 2001, 2002). In this paper, I argue that the fundamental problem with this argument is not that markets in the real world are less than perfect, but rather that the argument does not properly acknowledge the personal sphere. Morality allows each of us a sphere in which we are free to pursue our personal interests, even if these are not optimal from the social point of view. But the efficiency argument does not come to terms with this feature of social life. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economics & Philosophy Cambridge University Press

CORPORATIONS, PROFIT MAXIMIZATION AND THE PERSONAL SPHERE

Economics & Philosophy , Volume 28 (3): 21 – Nov 28, 2012

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Publisher
Cambridge University Press
Copyright
Copyright © Cambridge University Press 2012
ISSN
1474-0028
eISSN
0266-2671
DOI
10.1017/S0266267112000260
Publisher site
See Article on Publisher Site

Abstract

The efficiency argument for profit maximization says that corporations and their managers should maximize profits because this is the course of action that will lead to an ‘economically efficient’ or ‘welfare maximizing’ outcome (see e.g. Jensen 2001, 2002). In this paper, I argue that the fundamental problem with this argument is not that markets in the real world are less than perfect, but rather that the argument does not properly acknowledge the personal sphere. Morality allows each of us a sphere in which we are free to pursue our personal interests, even if these are not optimal from the social point of view. But the efficiency argument does not come to terms with this feature of social life.

Journal

Economics & PhilosophyCambridge University Press

Published: Nov 28, 2012

References