My country (India) is a mixed economy but is gradually shifting towards capitalism. Can someone please throw some light on the part that ethics play in a market driven economy and suggest some measures that a country like Russia or China should take if they decide to shift from being communist or socialist towards being capitalist ??

  • And please try to ask one question per question. Right now, you seem to have 2 questions. The first is Are ethics lost in a market-driven economy?, and the second question seems to be asking for a solution to crony capitalism. When you split your questions up into multiple questions, It's easier to understand what you're looking for, and it's easier to answer them. – Sam I am says Reinstate Monica Apr 3 '14 at 22:18
  • I suspect the second portion of the question, about how to switch systems, would probably be best answered by a targeted regime of incentives to discourage old "crony" behaviors and encourage new "market" ones. I'm not sufficiently familiar with the problems to attempt that, but the idea may be useful. – Grault Aug 8 '19 at 20:33

Ethics are rules that constrain human behavior because of some inherent or instrumental value that the rules serve. The main distinction of greater central control (rule by authorities) and greater external control (rule by people other than the parties to a transaction) will ever eliminate the ethics of transactions or the presence of unethical transactions.

Ethical problems are questions of how humans should behave and interact, so they are present whenever you put more than zero humans into a given situation. Government regulation, collective ownership, social codes, and other rules foisted on transactional parties are all going to have their own ethical implications and problems. The people writing and enforcing those rules will all have the opportunity to behave unethically in a myriad of ways.

The main value to switching away from a system that involves centralized or external control of people's decisions is that it tends to reduce the need to placate or bribe officials. If someone has no right to operate a business, then they must bribe any officer or agent who comes by with a veiled threat. But if a system clearly presumes the right to operate a business, then it's more difficult to look for bribes.

Then you have the body of ethical issues outside corruption, such as whether it's ethical to shutter a business for failure to file a given bureaucratic form, whether it's ethical to require one's competitors to approve your business locations, and whether it's ethical to set the terms of other people's decisions and choices.

  • I don't think this addresses the 'market driven' aspect of the question. – user1530 Apr 6 '14 at 1:49
  • Paragraph 3 is about reduced government control, i.e. market behaviors. – NL7 Apr 6 '14 at 2:46
  • You can have market driven economy with or without government regulations. – user1530 Apr 6 '14 at 3:03
  • But a system of reduced centralized or external control is a synonym for market driven. – NL7 Apr 6 '14 at 3:11
  • eh...semantics, perhaps. I'd argue the concepts are related, but certainly not synonyms. That said, yes, the more planned an economy, the less the markets will drive it--but there are still market driven aspects of most economies (see China, for example.) – user1530 Apr 6 '14 at 3:24

One of the oldest and most established arguments for a market economy is the concept of the Invisible hand


Without going into too much detail The idea is that when people try to make themselves successful in a free market, they may also be benefiting society.

as it apples to your ethics example:

Suppose a company has poor ethics, and people find out that they're using poor ethics. Suppose they're knowingly producing a lower quality product, and are trying to advertize it as a higher quality product.

Word gets out that their product is low quality, and people don't want to do business with the company anymore, so therefore it's in their best interest to keep the customer happy.

In this case, the ethics are imposed by the customer.

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    @mcAfeeI don't understand what you mean by "a few try some untested drugs without the knowledge of patients" – Sam I am says Reinstate Monica Apr 3 '14 at 20:26
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    @mcAfee do you mean to say that they tested the drugs on the patients without their permission? – Sam I am says Reinstate Monica Apr 3 '14 at 20:54
  • I've cleaned up some of the comments on this answer. I'll just say that the part of your question about crony capitalism is the more broad and less clear part of the question. I decided to address the more clear part of the question about how ethics apply to market economies. – Sam I am says Reinstate Monica Apr 3 '14 at 22:11

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