Richard Endörfer

In our article “What’s the point of efficiency? On Heath’s Market Failures Approach”, we argue that Heath’s Market Failures Approach makes excessive epistemic demands on market participants when markets are not perfectly competitive. Stabell attempts to salvage the MFA by supplementing it with an excusability principle. He claims that managers may be excused when they cannot uphold their duty, either because of epistemic uncertainty or as a result of problems posed by the Theorem of Second Best. In reply, we argue that Stabell’s excusability principle cannot save the MFA from the overdemandingness objection: when the MFA is overdemanding, agents cannot have an obligation to act upon its recommendations. However, if there is no obligation, there is no need for an excuse.

Financial crises are severely destructive events. The Global Financial Crisis of 2008 sent sovereign states into a spiral of political unrest and caused millions of people to lose their homes, their jobs, their life savings, their health, and in many cases even their lives. But financial crises are not unavoidable natural events. They are the consequences of intentional human behaviour. To be more precise, they are unfortunate side-effects of everyday financial practices. If these practices are not carefully monitored and reined in, they can, in words borrowed from Warren Buffet, become “weapons of mass destruction”. This thesis is an attempt at an interdisciplinary investigation of financial crises. It combines arguments from normative ethics, political philosophy, economics and law in order to discuss three questions at the heart of the public debate on financial crises: “Who is responsible for bringing about financial crises?”; “What precisely is wrong with practices that contribute to the risk of financial crises?”, and “What can be done to mitigate the risk of financial crises?” A few key insights offered in this thesis are as follows: First, financial crises do not emerge because of the misbehaviour and greed of a few “bad apples”, rather, they are the result of “business as usual” within financial markets. Second, there are strong reasons for states to regulate financial markets heavily in order to prevent severe harm. Third, there are few good reasons to believe that consumers can be held morally responsible for contributing to financial crises.

This chapter discusses the virtue ethical, consequentialist, and contractualist perspectives on bank contributions to financial crises. It begins from the observation that a central wrong-making feature of bank contributions is simply that they constitute causal contributions to a collective harm. Both the virtue ethical and the consequentialist perspective can capture this wrong-making feature, but each perspective comes with significant drawbacks. The virtue ethical perspective is likely to consider too few bank contributions as wrong, while the consequentialist perspective considers bank contributions permissible insofar as the costs imposed on to victims of financial crises are offset via benefits that accrue to some other party. By avoiding the issues of both the virtue ethical and the consequentialist perspective, the contractualist perspective is able to capture the central wrong-making feature of bank contributions in a much more satisfying manner than its rivals.

The world we inhabit is full of risks, many of which come about due to socially beneficial activities we undertake. Compensation is often invoked as a necessary element in the justification for why we are permitted to engage in these activities despite the risks they pose to ourselves and others. In this article, I discuss how Scanlonian contractualists ought to think about compensating the victims of socially beneficial yet risky practices that we engage with every day. I consider how two prominent risk-sensitive accounts of contractualism, ex ante contractualism and ex post contractualism, ought to take compensation into account. My main point is that ex ante contractualism fails to deliver the conclusion that victims of risky social practices ought to receive a reasonable amount of compensation for the harm they eventually suffer. Roughly, this is so because ex ante contractualism cannot explain why these victims ought to prefer compensation for harm rather than mere compensation for risk. I call this the callousness objection to ex ante contractualism. I argue that the callousness objection provides us with a strong reason to favor ex post over ex ante contractualism. Furthermore, I expand on the implications that the possibility of compensation has regarding the demandingness of ex post contractualism.

This article reviews and criticizes Joseph Heath’s market failures approach (MFA) to business ethics. Our criticism is organized into three sections. First, we argue that, even under the ideal assumptions of perfect competition, when markets generate Pareto-efficient distributions, Heath’s approach does not rule out significant harms. Second, we show that, under nonideal conditions, the MFA is either too demanding, if efficiency is to be attained, or not sufficiently demanding, if the goal of Pareto efficiency is abandoned. Finally, we argue that Heath’s appeal to regulations and specific moral requirements as a remedy for market failures is unlikely to safeguard efficiency and exposes a number of general worries regarding the moral force of the MFA. We end this article with a constructive suggestion on how to adjust the MFA to avoid these problems while preserving its contractualist and Paretian spirit.

Many proponents of the Harm Principle seem to implicitly assume that the principle is compatible with permitting the free exchange of goods and services, even if such exchanges generate so-called market harms. I argue that, as a result, proponents of the Harm Principle face a dilemma: either the Harm Principle’s domain cannot include a large number of non-market harm cases or market harms must be treated on par with non-market harms. I then go on to discuss three alternative arguments defending the status of market harms as exceptions to the Harm Principle and discuss why these arguments also fail.