1. Ethical Principles in Business
Chapter 2
Section 2.1
Ganesh Jayakumar

2. Utilitarianism : Weighing Social
Costs and Benefits

3. Case on Ford Motors (1970)

4. Cost-Benefit analysis
 No of cars = 12.5 million
 Cost of repair/car = $11
Total cost to be incurred = $137 million
 180 burn deaths * $200,000
 180 severe burns * $67,000
 2100 burned vehicles * $700
Total = $ 49.15 million

5. Utilitarianism
 A general term for any view that holds that
actions and policies should be evaluated on the
basis of the benefits to the society.

6. Utility
 The inclusive term used to refer to any net
benefits produced by an action.

7. Traditional Utilitarianism
 Jeremy Bentham and John Stuart Mill
 An action is right from an ethical point of view,
iff, the sum total of utilities produced by that
act is greater than the sum total of utilities
produced by any other act the agent could have
performed in its place.
• -Utilitarian principle

8. 3 important mistakes

9. Mistake 1
 When the U.P. says that the right action for a
particular occasion is the one that produces more
utility than any other action, it doesn‟t mean
most utility for the person performing the
action, instead for all persons affected by the
action.

10. Mistake 2
 U.P. not only requires us to consider the direct
and immediate consequences of our actions but
also all foreseeable future costs and benefits
that each alternative will provide for each
individual, as well as any significant indirect
effects.

11. Mistake 3 (most important)
 U.P. doesn‟t say that the right action is the one
in which its own benefits outweigh its own
costs, rather it says that, the right action is the
one whose combined benefits and costs outweigh
the combined benefits and costs of every other
action the agent could carry out.
 To determine the morally correct action, we
must compare the utility of all actions that one
could carry out in that situation; only then can we
determine which action will produce more utility
than the others.

12. Utilitarianism
 Advocates maximizing utility
 Matches well with moral evaluations of public
policies
 Appears intuitive to many people
 Helps explain why some actions are generally
wrong and others generally right
 Influenced economics

13. Measurement Problems
 How can the utilities, diff actions have for diff
ppl be measured and compared ?
 There are certain costs and benefits that seem
almost impossible to measure ,eg: health, life.
 It is unclear as to what should count as a benefit
and what as a cost…
 The utilitarian assumption that all benefits are
measurable implies that all benefits can be
traded for equivalents of each other i.e., we
should be willing to trade any one good for some
quantity of another good.(noneconomic goods
concept)

14. • Utilitarianism is the system that holds the
action on the benefits and costs they will
impose on society.
• Rights is an Individual entitlements to freedom
of choice and well – being.
• Justice is distributing benefits and burdens
fairly among people.

15. Case…
Should Companies Dump Their Wastes In Poor
Countries??
 Its best for every one if pollution is shipped
to the country where its health effects will
have the lowest cost. So it best to dump
wastes in lowest wages countries.
 Transferring pollution into a clean environment
where it will disappear rather than pollution
the same place.

16.  Pollution will cause more harm to people who
have „long life span‟ rather than where people
who die young, so if we dump waste in poor
country we can reduce the disease in the
countries where people have long life span.
 Pollution can cause “aesthetic” damage, such
as dirty-looking air that may have very little
direct health impact, this will enhance
welfare enhancing between countries.

20. Questions??
 Explain which parts of the reasoning in this
memo a utilitarian would have to accept and
which parts a utilitarian could reject?
 Do you agree or disagree with the conclusion
that those wastes in rich countries should ship
to poor countries?