Day 1: course intro, capitalism, agency theory, "the corporation"

“groundwork for the course”
updates to syllabus (point allocations, upcoming assignments, project)

Who’s in the class? any thoughts on this title? “can we use business and ethics in the same sentence?”

I need your help
*This is always a challenging class.
*Even more so this time since I haven’t had a lot of time to prepare, plus I’m in another country
*Sometimes we’ll look at info and keep in mind it’s obviously good for the U.S, with limited applicability to other countries (at least Panama), sometimes “business” is generic. I don’t care where you are in the world, what your religion is, what your culture and customs are, what your local laws may say, there are some universal “codes” or understandings we all share.
*Keep an open mind and share. I’m going to do my best to create an interesting and meaningful class. And I can’t do it alone.
*Small stuff: show up time, stay with me (I have to be here, those that are also here win my respect and will be rewarded. those that aren’t...
*also, keep the phones off... and other websurfing.

Dalai Lama’s take on the financial crisis: BW, 5/18/2009, p. 16

“What caused the current collapse?”
I’m telling people including some businessmen who are my friends what this global economic crisis was caused by: One, too much greed. Second, speculation. Third, not being transparent enough. That’s my view. These are moral and ethical issues.”

Conditions of capitalism. (“problems arise from the failures in one or more of these conditions”- p. 14)

three key people on their ideas:

1. Milton Friedman
2. Kenneth Arrow
3. Oliver Williamson

1. Friedman, “chicago school”, champion of the free market, critic of government regulation social responsibility

Wood: “3 elements of social control”. according to Friedman, the market controls itself, though must stay within “the rules of the game”

2. Arrow
-tension between individual wants and society’s
-tension between ends and means (some ends are not achievable)
-price is an efficient allocation of scarce resources, sometimes.
* not bad for soccer games and music concerts
* but what about education and health care?


3. Williamson
-agency theory: problems of 1. moral hazard and 2. bounded rationality

imagine the situation of a U.S. citizen who comes to Panama to work with an local real estate agent: (the reverse could also be true)
moral hazard: Can the the local agent advance his/her interest at the expense of the principal? (the answer should be “of course” though it may not always be easy).
bounded rationality: Is the U.S. principal aware of all they ways he/she can be taken advantage of? (“of course not”)
"if I come from the U.S. with a lot of money and I want to buy real estate in Panama,
is it possible a real estate agent (they're called "brokers" here) will rip me off?
the students said of course, there are many ways, such as selling you land or projects that are undesireable and/or at inflated prices.
"but I thought we were working together?, you were going to help me find a good deal and I will pay you to help me."
this helps set up "moral hazard", the brokers may advance their interests at my expense... particularly if I don't know much "bounded rationality". other examples?

This could also be a good example of Question 2.3: “cheating isn’t always in the actor’s interests, even if he/she can get away with it.”

showed the film the corporation... it’s long (two hours/ 25 minutes, we didnt’ have much of a chance to discuss this.