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Business Ethics

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Business Ethics ­MGT610
VU
LESSON 37
THE SOCIAL COSTS VIEW OF THE MANUFACTURER'S DUTIES
The third theory of the duties of the manufacturer extends beyond what the other two theories
impose. It maintains that a manufacturer must pay the costs of any injuries sustained through
any defects in the product, even when the manufacturer exercised due care and took all
reasonable precautions to warn users of every foreseen danger.
This theory, which forms the basis of the legal doctrine of strict liability, is utilitarian. It says
that the external costs of injuries resulting even from unavoidable defects constitute part of the
cost society must pay for producing and using a product. Having the manufacturer bear these
costs is the most efficient use of society's resources: that way, the price of the good will reflect
its real cost and it will not be overproduced. Additionally, manufacturers will take even greater
care since they will be responsible for paying for all of the costs of injuries. When they include
the cost of injuries in the price of the product, they also will be distributing the real cost of the
item among all users, which is more fair than making just the unlucky injured parties bear the
entire cost of the injury themselves.
The major criticism of this theory is that it is unfair because it violates the basic canons of
compensatory justice: a person should not be forced to compensate an injured party if he or she
could not have foreseen and prevented the injury. Critics also contend that the theory will not
actually reduce the number of accidents. Instead, it may have the unintended effect of
encouraging carelessness in consumers, which would cause even more accidents. Finally, such
critics argue that liability suits will increase and impose heavy losses on insurance companies,
forcing insurance rates to rise precipitously.
Social cost theorists counter by pointing out that, in reality, the costs of consumer liability suits
are not large. Less than 1% of product-related injuries result in suits, and successful suits
average only a few thousand dollars in any case. Moreover, the insurance industry has
remained quite profitable, despite the warnings of the critics.
Advertising Ethics
Advertising is a huge industry, which imposes great expense on manufacturers and service
providers. Commercial advertising is sometimes defined as a form of "information" and an
advertiser as "one who gives information." The implication is that the defining function of
advertising is to provide information to consumers. In the end, consumers must cover the costs
of advertising, but what do they get for this extra expenditure? Most consumers say that they
get very little. So is advertising a waste, or a benefit? Does it help or harm consumers
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Table of Contents:
  1. INTRODUCTION:Business Issues
  2. INTRODUCTION (CONTD.)
  3. THEORY OF ETHICAL RELATIVISM
  4. MORAL DEVELOPMENTS AND MORAL REASONING
  5. MORAL REASONING:Arguments For and Against Business Ethics
  6. MORAL RESPONSIBILITY AND BLAME
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  9. UNIVERSALIZABILITY & REVERSIBILITY:Justice and Fairness
  10. EGALITARIANS’ VIEW
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  15. FREE MARKET & PLANNED ECONOMY:FREE TRADE THEORIES
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  21. PERFECT COMPETITION
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  28. THE ETHICS OF POLLUTION CONTROL
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  33. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:DSA Comments
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  35. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS
  36. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory
  37. THE SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  42. ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom
  43. ADVERTISING IN TODAY’S SOCIETY:GENERAL RULES, Substantiation
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature