Discussion: Implications of Ariely’s Arguments for Business Regulation
Ariely’s Honest Truth develops an ethical examination of business ethics and the need for government regulation in business practice. The basic premise of the principle is that no matter how hard it is for businesses to ensure a corporate ethical standard, regulation by the government agencies may not usually serve the public interest. The concept of the principle acts as a continuance of other behavioral economics theories such as Predictably Irrational. It raises the question of the general agreement in behavioral science on whether regulations can rationalize the conduct of business practices. Generally, the principle develops a narrative of human behaviors from attempts to justify a dishonest action and promotion of dishonesty through benefits accrued from a fraudulent act.
Based on previous Ariely’s works on behavioral economics, we develop an understanding of irrational economic decisions, on both micro and macro levels, to occur in a secure environment of logic and consistency of irrationality in human thinking and action (Hajdu, 2016). In this regard, Ariely develops a scientific experiment where money and soda cans are kept in a college corridor. Students choose to take cans over money, which in their judgment call would not account as much theft as stealing money. How would such a decision rule apply from a macroeconomic perspective? Consider an instance where a country is trying to limit or regulate an industry such as the Big Tobacco scandal of the United States in the late 1990s. Due to the high tax revenues accrued from the industry, the government was reluctant to impose public health measures on the industry, leading to a catastrophic loss of lives. Similar regulatory incidences have occurred across the world and thus raise the question of when a government may fail to act in public interest out of dishonesty to self. Do the government regulations across business conduct meet the ethical standards meant to be achieved?
The government, as an entity, gains both directly and indirectly from the business activities within its geographical location, and this may affect its regulatory bodies in the creation and enforcement of policies. Due to sectorial dependence, most economic decisions by a government occur from a cost-benefit analysis, and thus regulation adopts a taxation system. One of the most common of these involves ethical decisions in a public health dilemma where the human demand for an unhealthy commodity is high, and thus creating revenue benefits. Based on individual ethical perspectives of an organization or an individual, we should be skeptical of regulations by the centralized powers and enforce personal moral values or corporate cultures while in the business practices. Not every action that is legal is rational or ethical, based on the arguments by Ariely in Honest Truth about Dishonesty.
References
Hajdu, C. (2016). On The (honest) truth about dishonesty. How we lie to everyone–especially ourselves by Dan Ariely (2013, London, Harpercollins). Corvinus Journal of Sociology and Social Policy, 7(1), 117-123.