banks or mortgage brokers—making unethical business
decisions and thereby earning profits at the expense of other
parties? Isn’t simple profit maximization in these cases socially
irresponsible?
One response is that it is the duty of governments to set rules
in the public interest and then leave firms free to maximize their
profits within the constraints set by those rules. For example,
the government can design and enforce environmental, labour,
banking, accounting, and tax regulations deemed to be in the
public interest. Faced with these laws and regulations, private
firms are then free to take whatever action is expected to
maximize their profits; violations of the established laws or
regulations will be met with appropriate penalties. Such a
division of responsibilities—the government setting the rules
and the firms maximizing profits within the implied constraints
—recognizes that although private firms are usually not good
judges of the public interest, they are quite good at making
decisions about how best to use scarce resources in order to
satisfy consumers’ desires. Government policymakers, through
a process that involves consultation with various groups in
society, and the trading off of competing demands, are usually
better placed to judge what is and is not in the overall public
interest.
This position still recognizes two methods for modifying
corporate behaviour. Those who believe that certain corporate
actions are not in the public interest can try to convince