Tuesday, June 15, 2010

Frank Knight- The Capitalist system is not Ethically Defensible

Knight was an avid proponent of a cosmopolitan laissez-faire – but he did so on unique, "non-consequentialist" grounds. As is evident in his famous Ethics of Competition (1923) and in other works on ethics throughout his life, Knight does not regard the capitalist system as ethically defensible. Capitalism, he claims, does not produce what people want but merely creates the wants for what it produces – "the freest individual. ..is in large measure a product of the economic environment that has formed his desires and needs, given him whatever marketable productive capacities he has, and which largely controls his opportunities." (Knight, 1923). Furthermore, he argued that there was a tendency in market systems towards monopoly, that the "efficiency" of markets was misleading for there was no sense of "usefulness" of its output to society, that the marginal productivity thesis had erroneous ethical implications as "the income does not go to "factors" but to their owners. ..and ownership of personal or material productive capacity is based upon a complex mixture of inheritance, luck and effort, probably in that order of relative importance" (Knight, 1923).

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