Ethics in Economics and Finance Essay Example for Free

Ethics in Economics and Finance EssayEthics is defined as a standard of human manner that offers how to act in m whatever situations with friends, family members, employees, business people, professionals, etc. It is necessary to mention that to make really honorable decision means to use trained sensitivity to honest issues. In other words, moral philosophy is associated with unexceptionable human behavior in this or that everyday or scientific field. Ethics incorporates norms of conventional pietism to distinguish wrong behavior from right behavior.Generally, honorable norms suggest honesty, truthfulness, fairness, integrity, justice and respect for others. Ethics is apply to all aspects of tone as, for example, medicine, psychology, business, finance and political economy. Financial and scotch moral philosophy is considered subset of general ethics. (Frowen, 1995, p. 46) Ethics and honorable Norms Researches entreat that ethical norms and values play important rol e in maintaining harmony and stability in societal life as ethics suggests proper ways of human-human interactions.Ethics recognizes human needs and aspirations, as surface as cooperative efforts, fairness and truthfulness. Ethics contributes social stability and ensures balance in all orbital cavitys of life and business. Social evolution has developed instinct c atomic number 18 in humans to take c atomic number 18 of ourselves and of others. Ethical norms argon necessary for guiding human behavior and it is refereed to when it is necessary to resolve conflicts between selfishness and selfishness, between scruples and temporal needs. In finance and sparings ethical violations are associated with inconsistency in newfangled financial-economic surmisal.Violations are also attributed to inconsistencies in use if principal-agent model of relations in economic and financial transactions. It is noned that the financial-economic theory is based on the coherent-maximizer figure which promotes capitalist system stressing that individuals are egoistic and they tend to behave rationally when looking for ways of maximizing their own elicit. The problem is that modern financial-economic theory contradicts ethical norms of loyalty, fidelity, trustworthiness and stewardship. honorable values are the core of traditional concept of agency, but if humans are claimed to be rational maximizers, then traditional sense is impossible. (Frowen, 19995, p. 47-49) For example, Duska argues that to do something for another in a system geared to maximize self-concern is foolish. Such an answer, though, points come out an inconsistency at the heart of the system, for a system that has rules requiring agents to look out for others while encouraging individuals to look out only for themselves, destroys the practice of looking out for others. (Duska, 1992, p. 61) Ethics in FinanceEthics in finance plays important role as it aims at ensuring fair deals and transactions. Moreove r, ethics in finance addresses corporate governance, and agency relationships which should be purely contractual. In financial sphere, ethical demeanour should be based on carrot-and-stick approach. In corporate governance the conflict between stockholder and solicitude is described as agency problem. To deal with this problem an agency theory was developed. It stresses that the principal and agent are both(prenominal) self-interested aiming at generating their gain. (Dobson, 1993, p. 7)Researchers say that we tend to entail our needs as, for example, management of retirement savings or stock and bond investing, to financial services as we may fail to carry them effectively. We are not as organized as financial managers, but we are not aware of agency problem. miss of necessary information limits our ability to monitor managers behaviour. Therefore, modern world is characterized by selfish behaviour as people are willing to get their things done by others. Such paradoxical situa tion explains ethical problems in financial sphere stressing that declining in morality is observed. (Dobson, 1993, p. 8)Ethical violations in finance are rather frequent nowadays and that mainly associated with stakeholder interest, insider trading, investment management and camping financing. Loyalty and trust in humans and private dealings are often violated. The most common occurrences are fraudulent financial dealings, turpitude in government and public institutions, influence peddling, cheating nodes about their trading profits, insider trading, unauthorized transactions, misuse of customer funds in order to obtain personal gain, larceny and degeneration in banks, improper determine of customer trades, etc.Most frequently, unethical behaviour is associated with insider trading which is defined as trading in securities of mapicular company or organization with an effort to take advantage of information about material side of the company. In such a way, trade is provided with unfair advantage over other competitors in the same security. (Dobson, 1993, p. 59) Therefore, ethical codes are very important in financial filed as they set standards of congenial behaviour, fair dealing and honest relations with customers.Ethical codes in finance tends to replace egoistic paradigm and to create such system which would promote, honesty, altruism and virtuous traits. It is rather common to fid ethical codes in modern financial markets and financial corporation. In financial markets such ethical codes are established by authorized regulatory agencies which are trying to ensure ethical and responsible behaviour as important part of all operations and transactions. Furthermore, re-examining of the core principle of capitalist society helps to address ethical problems in both financial and economic fields.Financial ethics suggests that individual should be presented as honest and altruistic promoting honesty and fairness in public and private dealings. The prima ry purpose of ethic in financial sphere is to set standards of internal good. (Dobson, 1993, p. 60-61) Ethics in Economics Ethics is related with economic sphere in three ways economists should follow ethical values trying to shape the way they are doing economics economic actors have ethical values which shape their own behavioural standards finally, ethical values are important for economic policies and institutions as they affect people differentially.However, from economic perspective ethics is defined as a matter of choice for everyone. Many economists argue that ethical values contribute positively economic welfare. However, there are ideas that economics is ethically neutral. Economists are interested in implication of Adam metalworkers idea that all human are driven by self-interest and egoism. Smith argued that self-interest led to the common good of nation. (Wilber, 1996, p. 135) However, he agreed that human should act in terms of internationalized moral law and police po wer of the state.Therefore, it is recognized that in economic sphere all figures should act on the basis of acknowledged ethical norms as economy of every country needs efficient ethical behaviour to improve countrys reputation at the world scene. In economics ethics suggests avoiding corruption in government and promoting fair decision-making. It is a matter of fact that ethics is not an mild task for economic system and business as there will be always interest groups which will challenge ethical standards and values.Therefore, economics should pay more attention to ethics and social responsibility, as well as to set ethical codes of behavior. For example, businesses are defined as important institutions in any economic structure. Therefore, they are expected to follow ethical norms when deciding how to organize the work and to produce necessary goods and service. Businesses reflect the overall economic system and unethical behavior may create unfavorable reputation. (Wilber, 199 6, p. 139) endEthics plays crucial role in all aspects of life, especially in financial and economic sphere. In financial field ethics is associated with fair transactions and dealings, honest buyer-customer relations and avoidance of corruption. In economic field ethics is associated with social responsibility, ethical decision-making as the whole nation depends on them, and, of course, with no corruption on national level. Ethics is necessary not only for maintaining balance and harmony, but also for improving reputation of company, organization, and even country. (Frowen, 1995, p. 68)