Ethics in Economics and Finance Essay

morality is delimitate as a standard of human being behavior that offers how to lick in many government agencys with friends, family members, employees, business people, professionals, etc. It is necessary to mention that to make sincerely good decision means to use trained sensitivity to ethical issues. In other words, morality is associated with acceptable human behavior in this or that everyday or scientific field. moral philosophy incorporates norms of conventional morality to distinguish wrong behavior from right behavior.Generall(a)y, ethical norms suggest honesty, truthfulness, gracefulness, integrity, justice and respect for others. Ethics is applied to all aspects of life as, for example, medicine, psychology, business, finance and frugal science. Financial and economic ethics is considered sub garment of general ethics. (Frowen, 1995, p. 46) Ethics and respectable Norms Researches argue that ethical norms and set play most-valuable role in maintaining harmo ny and stability in affectionate life as ethics suggests proper ways of human-human interactions.Ethics recognizes human needs and aspirations, as well as cooperative efforts, fairness and truthfulness. Ethics contributes social stability and ensures balance in all empyreans of life and business. Social evolution has developed instinct lot in humans to take c ar of ourselves and of others. Ethical norms atomic number 18 necessary for guiding human behavior and it is refereed to when it is necessary to resolve conflicts amongst selfishness and selfishness, between conscience and material needs. In finance and economics ethical violations are associated with inconsistency in current pecuniary-economic theory.Violations are to a fault attributed to inconsistencies in use if principal- agent model of relations in economic and financial transactions. It is none that the financial-economic theory is based on the rational-maximizer paradigm which promotes capitalist system stres sing that individuals are self-centered and they tend to persuade rationally when seeing for ways of maximizing their own interest. The problem is that modern financial-economic theory contradicts ethical norms of loyalty, fidelity, trustworthiness and stewardship.Moral values are the core of traditional concept of place, but if humans are claimed to be rational maximizers, then traditional sense is impossible. (Frowen, 19995, p. 47-49) For example, Duska argues that to do something for another in a system gear to maximize self-interest is foolish. Such an answer, though, points out an inconsistency at the heart of the system, for a system that has rules requiring agents to look out for others while encouraging individuals to look out only for themselves, destroys the practice of looking out for others. (Duska, 1992, p. 61) Ethics in FinanceEthics in finance plays important role as it aims at ensuring fair deals and transactions. Moreover, ethics in finance addresses corporate go vernance, and agency relationships which should be purely contractual. In financial sphere, ethical behaviour should be based on carrot-and-stick approach. In corporate governance the conflict between shareholder and management is described as agency problem. To deal with this problem an agency theory was developed. It stresses that the principal and agent are both self-interested aiming at generating their gain. (Dobson, 1993, p. 7)Researchers say that we tend to entail our needs as, for example, management of retirement savings or stock and bond investing, to financial services as we may fail to carry them effectively. We are not as organized as financial managers, but we are not aware of agency problem. Lack of necessary information limits our ability to monitor managers behaviour. Therefore, modern world is characterized by selfish behaviour as people are willing to get their things done by others. Such paradoxical situation explains ethical problems in financial sphere stress ing that declining in morality is observed. (Dobson, 1993, p. 8)Ethical violations in finance are rather frequent nowadays and that mainly associated with stakeholder interest, insider profession, investment management and camping financing. Loyalty and trust in public and private dealings are often violated. The most common occurrences are fraudulent financial dealings, corruption in government and public institutions, influence peddling, cheating customers or so their trading profits, insider trading, unauthorized transactions, slander of customer funds in order to obtain personal gain, larceny and corruption in banks, uncomely pricing of customer trades, etc.Most frequently, unethical behaviour is associated with insider trading which is defined as trading in securities of particular company or organization with an effort to take advantage of information about material side of the company. In such a way, trade is provided with unfair advantage over other competitors in the sa me security. (Dobson, 1993, p. 59) Therefore, ethical codes are very important in financial filed as they set standards of acceptable behaviour, fair dealing and honest relations with customers.Ethical codes in finance tends to replace egoistic paradigm and to create such system which would promote, honesty, altruism and virtuous traits. It is rather common to fid ethical codes in modern financial markets and financial corporation. In financial markets such ethical codes are established by official regulatory agencies which are trying to ensure ethical and responsible behaviour as important part of all operations and transactions. Furthermore, re-examining of the core principle of capitalist society helps to address ethical problems in both financial and economic fields.Financial ethics suggests that individual should be presented as honest and unselfish promoting honesty and fairness in public and private dealings. The primary purpose of ethic in financial sphere is to set standar ds of internal good. (Dobson, 1993, p. 60-61) Ethics in Economics Ethics is related with economic sphere in three ways economists should follow ethical values trying to shape the way they are doing economics economic actors have ethical values which shape their own behavioural standards finally, ethical values are important for economic policies and institutions as they affect people differentially.However, from economic perspective ethics is defined as a matter of choice for everyone. Many economists argue that ethical values contribute positively economic welfare. However, there are ideas that economics is ethically neutral. Economists are interested in implication of raptus metalworkers idea that all human are driven by self-interest and egoism. Smith argued that self-interest led to the common good of nation. (Wilber, 1996, p. 135) However, he agreed that human should act in name of internationalized moral law and police power of the state.Therefore, it is recognized that in e conomic sphere all figures should act on the basis of acknowledged ethical norms as economy of every country needs economical ethical behaviour to improve countrys reputation at the world scene. In economics ethics suggests avoiding corruption in government and promoting fair decision-making. It is a matter of fact that ethics is not an easy task for economic system and business as there will be continuously interest groups which will challenge ethical standards and values.Therefore, economics should pay more attention to ethics and social responsibility, as well as to set ethical codes of behavior. For example, businesses are defined as important institutions in any economic structure. Therefore, they are expected to follow ethical norms when deciding how to organize the work and to wee necessary goods and service. Businesses reflect the overall economic system and unethical behavior may create admonishing reputation. (Wilber, 1996, p. 139) ConclusionEthics plays crucial role i n all aspects of life, especially in financial and economic sphere. In financial field ethics is associated with fair transactions and dealings, honest buyer-customer relations and avoidance of corruption. In economic field ethics is associated with social responsibility, ethical decision-making as the whole nation depends on them, and, of course, with no corruption on national level. Ethics is necessary not only for maintaining balance and harmony, but also for improving reputation of company, organization, and even country. (Frowen, 1995, p. 68)