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Flashcards in Exam 2 Deck (40)
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1

Capitalism

Production and distribution that is in private hands and the operations are funded by profits

Strength: allows new products and businesses, free market, provides social services, customer driven, competition gives variety

Weakness: allows top 1% to get all the wealth, classes are spread out, lowers work ethic and want for american dream

2

Socialism

Production and distribution that is in public hands and the operations are funded by profits; value made belongs in hands of society

3

*Difference between capitalism and socialism

public vs. private hands

4

5 historical components of capitalism

-Mercantile
Based on mutual dependency between state and commercial interest.
-Industrial
Large scale industry
-Financial
Characterized by trust, banks, money
-State welfare
Provides welfare services to employees
-Globalized
Transcends national borders

5

4 elements/functions of capitalism

-Companies
Promotes creation of companies or business organizations that exists
-Competition
Makes individual pursuit of self interest socially beneficial
-Profit motive
Lies in the motive that the company is which to make a profit
-Private property
Capitalism requires private ownership of the means of production

6

Keynes (British)

Government regulated capitalism

Spend money to spread economic growth

FDR and Obama

Most accepted/popular in early 20th century

Specifically during Roosevelt’s new deal time period

Giving 300-400 dollars to families to spend

Government bailouts

7

F. A. Hayek (Austria in the early to mid part of the 20th century)

free market capitalism
Save money to help economic growth
Friedman and Reagan

8

Milton Friedman (relates to Nozick)

Move towards socialism

Barbara Thaten as prime minister in Britain

9

Monopolies

single seller

Ex: apple owns phone and laptop.. They can buy out Nike and sell computers

10

Oligopolies

market shared by a small number of producers

Ex: Apple buying Nike and Patagonia but keeping their products but owning them

11

Karl Marx

workers taking power could be a problem

No one should have power over another majority of wealth

12

Broader view

Goodpaster and Matthews

Business has social responsibility to stakeholders, consumers, environment, workers

13

Donaldson’s social contract theory

business owes society because it allows for the business to exist

14

Multiple stakeholders argument

other stakes in business besides profit

15

Velasquez’s argument

companies are about moral ethics

16

Employment at will

either party may fire/quit and hire/apply without reasoning

17

Narrow

Friedman

Business has no social responsibility except to maximize profit

18

Fiduciary responsibility

get most amount of money for the shareholder as possible

Maximize profits through shareholders

19

Adam Smith invisible hand

if people were left to pursue their own interests they would unknowingly create the most good and benefit

20

Visible hand

“let government do it” government has the resources and ability to hold the responsibility they should

Government has everything they need in order to appeal to social responsibility which is why they should do it and not businesses

21

Inept

businesses are like a custodian trying to handle a responsibility “government doesn’t know what to do”

22

Economic efficiency

hating broad view; wrong bc it’s inefficient and does not maximize shareholders values

23

Materialization of society

if social responsibility is imposed it will increase materialization in society

Ex: clean up ocean to get in newspaper

24

Compatibility of self interest and social responsibility

if companies are to put their shareholders first that they will automatically be fair to workers and society

25

Ford v. Pinto case

1970s

Ford ran a cost benefit analysis and determined that people’s lives are worth the price that they’d pay for the car

Unsafe gas tank situation

26

Macpherson v. Buick

Wheel of car fell off and sued manufacturers

Moves us to the idea of manufacturers acting under the process of due care

Due care: consumers and sellers do not meet as equals
Let the buyer beware
Consumer misuse

27

Greenman v. Yuba Power Products

Liability and safety case

28

Hemington v. Bloomfield

Legal responsibility to compensate for injury

Caveat emptor- let the buyer beware
*Switched to Due care- consumers and sellers do not meet as equals

29

Business Responsibility (6)

Business should give safety the priority warranted by the product

Business should abandon the misconception that it is exclusively product misuse and they are therefore responsible

Business must monitor manufacturing process

When a product is ready to be marketed, business should have a product safety staff review it

When products reach marketplace, firms should offer information about the product

Companies should investigate consumer complaints and do it quickly

30

Advertising

*Ambiguity
Ad can be understood in two or more ways
*Concealment of facts
Not giving all the information about a product
Ex: pain reliever
*Exaggeration
Claims that are unsupported by evidence
*Puffery
Making product sound better than it is
Ex: company claiming they have the best blanket on the market
*Psychological appeals
Aimless effort swayed at a motion
Ex: puppy ads
*Subliminal ads
Communicate at a level beneath conscious awareness
Ex: coke in romantic comedy