Rationality and Morality belong together

Gerhard Minnameier has held the Chair of Business Ethics and Business Education at Goethe University Frankfurt since April 2011. His research encompasses the development of moral thought and behavior in business and professional contexts, business education in the context of individual, business, and organizational ethics, teach-learn research, didactics of vocational education, as well as skill acquisition and development. Before coming to Frankfurt, Minnameier held the Chair of Business and Economics Education at RWTH Aachen from 2005 to 2011. He has held further positions at Johannes Gutenberg University Mainz and Universität Erlangen-Nürnberg. 

Your chair focuses on “business ethics and business education”. This means that your research lies at the crossroads of business administration, pedagogy, philosophy, and psychology. Which field do you feel most comfortable with?

All of them. Depending on the current research topic, the focus continually shifts from one direction to another. I started out in the field of Business Education. Through my work in business ethics and questions related to development of morality and skills, I naturally found overlap with the fields of psychology, philosophy, and to some extent also with the natural sciences.

You deal specifically with the development of moral thought and action in business and professional contexts, among other things. How are these developments influenced?

In business education it is assumed that economic activity influences morality rather negatively, if at all. Competition leads individuals to think more about their own interests than the interests of others. There are many studies that show that people with an education in business administration make more decisions in their own self-interest than others. But one must also acknowledge that this type of behavior is expected in a market economy. In this regard, the question of what the goal of educational processes should be is anything but trivial. 

The idea of the market economy, according to Adam Smith, is that the individual acts in his or her own interest, but through this also contributes to the common good of the society.

This is still fundamentally correct. Activity in a market economy and competitive structures are also legitimized by ethical means. Competition is desired in a market economy system. One must differentiate broader social structures from smaller units as well. Principles that are valued in private circles, such as mutual care, would often lead to nepotism or corruption in the public arena. However, we are also aware that the market sometimes fails. At the same time, we cannot rely on the state to create a system free from undesired effects of economic activity through governance.

In one experiment, the economists Alain Cohn, Ernst Fehr und Michael André Maréchal examined whether bankers are fundamentally dishonest people or whether they only tend to act dishonestly in an occupational context. They find that the latter is true. How can we interpret this?

We know that most people are very prone to act in their own self-interest in certain situations or contexts. The tendency to seek financial advantages through immoral behavior is exhibited especially in contexts where social status within the professional sphere depends on income and performance, or if this is perceived to be the case. It is no wonder that individuals behave this way in such an environment. As these people in other circumstances demonstrate that they are capable of acting according to a different type of morality, it is clear that the problem is related rather to the situational conditions than the personal ethical development of the individual.

This means that immoral behavior, for example during the financial crisis, is not necessarily an ethical problem, but rather a structural one?

I think so. Most of the “immoral” behavior that we observed had more to do with misguided incentives than with messed up morality. If you look at the famous cases of fraud, you will observe that formally the in-house rules were broken, but informally basically everyone was acting this way. And it was completely acceptable if one was successful with this fraudulent behavior. To this extent it was very unclear which rules should actually apply on the informal level. Ultimately, it is always about striving for recognition for individuals. For this reason, particularly financial institutions must carefully consider what they give recognition for. If it only has to do with income, bonuses, and a place in the hierarchy, and not what someone really contributes to the success of the company, there is no need to wonder. The banks should be concerned with how to give their employees a different orientation – how they define “acceptable behavior” with respect to their organization.

How can this be achieved? Every now and again, there are attempts to dictate moral behavior through ethics codices. Does this work?

A codex alone generally does not work. It can definitely serve the purpose of reminding people of moral principles. For this effect it is not so important what is in the codex. The simple reference can motivate people to not just follow their own interests. This effect generally does not last long and cannot be repeated indefinitely. A codex can make sense if the goal is to change practices in a certain area and to a certain extent redirect the flow in a positive direction, pulling people from their old path. For a sustainable impact, it is necessary to systematically and credibly implement an institutional philosophy or business culture based on cooperative efforts for the good of the company.

How can this be achieved?

First of all, in the business context, it has to be in the interest of the employer to change something. In many companies, especially in the financial industry, having employees in competition with each other is, to a certain extent, absolutely desired. If an employer would like to foster cooperative behavior within a department or a team, the following three steps should be followed: the employer must first hire employees who bring the corresponding moral competence with them and place more importance on the interests of the group than on their own interests; he must secondly create a structure that supports team spirit; and thirdly, he must make sure that individuals cannot exploit the cooperativeness of others and “free-load”. We know these issues from games with public goods or also from the prisoner’s dilemma: If one behaves cooperatively and there is no safety mechanism to protect him or her, it can be advantageous for others not to cooperate. An employer who would like to create a cooperative environment must also be sure that black sheep do not go unnoticed and have no incentive to “break away” and corrupt the morality of the others.

You deal with the moral and psychological concept of the “happy victimizer” in several of your publications. This concept refers to people who, although they know a moral principle, do not always act in accordance and even see this violation positively. Is this the phenomenon that is observed in the day to day market economy, i.e. in banks?

The concept of the “happy victimizer” originally describes a behavior of children between the ages of around 4 to 6 years. One assumed that they would “grow out” of this behavior. The goal of my work in this area is first to show that this phenomenon definitely still exists into the adult years: people who know that moral behavior is right but are not motivated to act accordingly. On the other hand, I find the conclusions of the “happy victimizer” advocates to be wrong. They measure the moral behavior of participants for example with a prisoner’s dilemma according to the principle: whoever cooperates is morally motivated; whoever does not cooperate lacks moral motivation. From the field of economics we know, however, that in this type of situation it is absolutely rational not to cooperate if no security measures are built in. From my perspective, it is pedagogically problematic to teach people to act in a way that is economically irrational and makes themselves exploitable in the process. This would lead to a disadvantage for those who are morally motivated, which can be neither ethical nor pedagogically wise in the business context. Bringing people in restrictive situations to harm themselves has nothing to do with morality. The existence of “happy victimizers” is not to be overcome through moral education, it is rather justified in certain situations.

If how people behave ultimately depends on the structures and the situation, which moral competencies can business education convey?

You can demonstrate behavior models and specific skills for certain situation. If everyone is against everyone in the business context, one should have the moral skill first to recognize, second to want a change, and third to know strategies to come to new “rules of the game”. If you take the situation of a prisoner’s dilemma as an example, one must first be able to understand the restrictions correctly and to resist cooperation if it is a “one-shot-game” and there are no indications that the other will cooperate. In this type of situation it is absolutely appropriate for everyone to act in his or her own interest, which is incidentally also a moral principle, although a very simple one. From a higher moral perspective, cooperation is to be preferred; one should not enrich himself at the expense of others. Whoever is capable of seeing things from this perspective does well to try to influence and change the situation and the factually existing rules. In the framework of a repeated prisoner’s dilemma, a “tit for tat” strategy is possible through which one can negotiate an implicit contract to the advantage of both parties if they play cooperatively. The possibility to be penalized for behaving uncooperatively to one’s counterpart by “breaking out” at one’s own cost is an example of the aforementioned safety mechanism that would have to be introduced in order to promote cooperative behavior in companies and protect from exploitation.

In one publication you compare the concept of the “happy victimizer” with the concept of the homo oeconomicus. Is the latter still applicable for you?

It depends on how you understand it. The image of the homo oeconomicus has changed a lot in the last twenty years. The construct of the homooeconomicus was judged as being completely out of touch with reality and the idea that real people behave completely differently was advocated around the turn of the century. In the last several years, opinion has been drifting in the other direction. Studies from the field of social psychology as well as experimental economics have shown that people are often “moral hypocrites”. They are only moral if they can show externally that they fulfill the social standards and therefore assume a social reward or the avoidance of social sanctions. Researchers call this “moral hypocrisy”. This way, the homo oeconomicus comes back in a disguise, so to speak. 

Of course, no one assumes or assumed that real people are solely motivated by their own interests  as the model of the homo oeconomicus implies. I understand the concept of the homo oeconomicus more abstractly in the sense of a model for the analysis of human behavior. According to rational choice theory, human behavior is understood as utility maximization under restrictions. This also goes for the pursuit of moral goals and the realization of moral expectations. This demonstrates that rationality and morality belong together. In my opinion, it is wrong to bring the two in opposition to each other in the context of business ethics and business education. This point implies the possibility, however, that people act irrationally or inefficiently with regard to their own goals. This brings up the question of how this is recognized and processed in the thoughts of individuals. This aspect is also a part of my research within the framework of the “inferential learning theory”. 

Questions by Muriel Büsser