Question

For reasons that Heath demonstrates, the rise of large firms (functionally) represents an attempt to address the limitations or inefficiencies of free markets, by substituting large-scale cooperation within the firm for the adversarial relationships that constitute free markets.

Explain this point. What concerns of business ethics does this substitution raise?

Answer 1

According to Heath, there are nations which have a market based economy as opposed to the command economy because of the need and requirement of the selling of products in the markers. The large firms require investments which are generated through the management of capital in the markets with substantial investment. There are several factors which cause the failure of the market economy like the incorrect passing of information, externalities, transaction costs and other types of lack of communication which causes failure. There are rules and regulations for finding the correct information of the market economy for successful transaction in the business economy. There is understanding and analysis of the "market failure approach" as explained by McMahon in 1981. The rise of firms is attributed to the allocation of resources through market investment which gives rise to the generation of free markets for the selling of products after manufacturing. There are property rights which are emphasized by the presence of various features like rationality, voluntariness, specialisation, competition, mobility and transaction costs. The economic model consists of the deductive and inductive policies of the market economy. The free markets should be consistent with the rules and regulations which are governed by the policies of the market economies which decide the different factors for the selling of different manufactured products. Free markets are based on the model studies of competition under the pareto-optimal model of the transaction rules and regulations. Aberrant behavior should not interfere with the working of the free economy rules like theft, fraud, collusion of the prices and so on. Maughan and Copp in 1999 have explained the working of the pareto-optimal distribution of the resources for the working of the different market which are different from the selling of products in the free market. There are different property rights which must be acquired under the fundamental freedom rights for effectively setting up of market principles. There are principles of contract system in English and Wales and liberty tradition under rules and recommendations of applying the law principles. The rules for effectively running the market trends can be given the definition of law enforcement. There is power and ability in markets to set up their own rules and recommendations with the help of the governmental agencies. There are various laws which help in the efficient running and establishment of the free market trade like:

• personal security.
• protection of property rights.
• Voluntary contracting.
• free competition.
• ability to associate.

These are the concerns of the business ethics which must be interpreted and analyzed.