Question

3) How does Sen describe the benefit that results from the kind of organizational behavior envisioned by Paine? Is it consistent or inconsistent with classic economic theory as articulated by Adam Smith?

Does Buisness Ethics Make Economic Sense- Article by Amatya Sen

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Answer 1

Sen tell us that an agreeable, conscientious and positive behaviour by an organization helps the community through reinforcing the positive externalities and reducing the costs associated with negative externalities. Through such positive organizational behaviour, the overall impact on the community is better and there is betterment of the community as a whole. The quality of public goods improve and also since the firm does not act only to further its self-interest but also takes a holistic view, there is an improvement in the lives of the people and also helps in nation building.

While classic economic theory articulated by Adam Smith postulates that individuals and firm tend to act in selfish interest and seeks to maximize wealth for themselves, acting only in their self interest proves detrimental to the whole society in which individuals tend to live. So the negative externalities due to acting in self interest alone tends to cancel out some of the positives of wealth creation for themselves. Thus taking a holistic view is useful for the firm and individuals as well as it mitigates negative externalities while emphasizing positive impacts.