University of Pennsylvania, USA email@example.com
The efficiency argument for profit maximization says that corporations and their managers should maximize profits because this is the course of action that will lead to an ‘economically efficient’ or ‘welfare maximizing’ outcome (see e.g. Jensen 2001, 2002). In this paper, I argue that the fundamental problem with this argument is not that markets in the real world are less than perfect, but rather that the argument does not properly acknowledge the personal sphere. Morality allows each of us a sphere in which we are free to pursue our personal interests, even if these are not optimal from the social point of view. But the efficiency argument does not come to terms with this feature of social life.
Waheed Hussain is Assistant Professor of Legal Studies and Business Ethics at the Wharton School of the University of Pennsylvania, and has a secondary appointment in the Department of Philosophy. His work has appeared in a variety of academic journals, including Journal of Business Ethics, Journal of Moral Philosophy, Journal of Social Philosophy, Philosophy & Public Affairs and Social Theory and Practice. He is currently working on a book about the relation between markets and human freedom.
For their helpful comments on previous drafts of this paper, I would like to thank Jeff Moriarty, Nien-he Hsieh, Martin Sandbu, N. Craig Smith, Jamie Dow, Christian List, Norman Bowie, as well as audiences at INSEAD, The Wharton School, the Annual Meeting of the American Philosophical Association (Eastern Division) and the Annual Meeting of the Society for Applied Philosophy.