Lecture 1 Ethics
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| Adam Smith cont Feb 25 APPLICATION → How do we do it The Rule Two parts to his rule. Part 1 Take those actions that maximize your utility Purpose to determine if a contemplated project will be profitable (increase your org’s utility) Part 2 → provided you remain within the rules of the game 1. Cost benefit analysis → take those actions that maximize our utility Purpose to determine if a contemplated project will be profitable (and can increase your org’s utility) Steps List all costs and benefits and compare. Take those actions that provides the greatest net gain (or smallest net loss) Further considerations Intangibles complicate the analysis – they must be quantified or estimated Don’t double count either cost or benefits by confusing cause and effect or rephrasing the same item Do the analysis from the viewpoint of the firm (do not include costs and benefits accruing to other parties) The final comparison of costs and benefits will most likely require an argument (an explanation as to why) |