Consequentialist reasoning and neoclassical assumptions about perfectly competitive markets encourage business school faculty and students to overlook the role of ethics in a market system. In a perfectly competitive economy, self-interest suffices to bring about a desirable outcome. However, discrepancies between an economist''s assumptions and the realities of a market economy establish a need for business ethics. This essay, written as a lecture for MBA students, first reviews Pareto optimality as an argument in favor of market allocations. It then uses (...) the discrepancies between actual and hypothetical markets to derive a Rawlsian duty of civility. This neoclassical case for business ethics requires individuals to avoid exploiting the defects that are inevitable in any social structure. (shrink)

How do economists persuade their readers that one policy is superior to another? A glance at the literature on welfare economics quickly provides the answer to this question: Economists enter policy debates armed with mathematical models, evaluating options on the basis of their consequences. Economists typically classify a policy change as a welfare improvement with respect to the status quo if the gain realized by the winners exceeds the harm sustained by the losers. The best policy becomes the one that (...) generates the highest net benefit. (shrink)

Brief cases written as multiple choice questions can provide the basis for a classroom game based on business ethics. This teaching note describes the organization of such a game and provides five sample cases.