Market Failures & Professional Dilemmas

Based on the Edwards article which market failures or imperfections are present in the “Lobster Thermidor” case? And can you identify any in your professional life? Based on the Halbert & Ingulli reading (“Making An Ethical Decision”) apply the methods of ethical reasoning to these situations. Two market failures can be observed in the “Lobster Thermidor” case, a tragedy of public goods and informational deficiencies. First of all, the divers have to dive deeper, to the limit of diving safety, since overfishing has made the lobsters rare and to catch the lobster less than 30 meter down is getting harder and harder.

This is the very typical case of public goods, where the public resources such as the lobsters under the sea are usually over-consumed by the individuals who try to maximize one’s interest. Deforestation, which has destroyed the entire farming industry and forced Miskitos out to entirely rely on diving, was another tragedy caused by the overconsumption of the public goods, forest. Secondly, both the divers and the end-consumers make wrong, irrational decisions cause of the lack of information.

Divers, who do not recognize the true market price of lobsters as well as the true price of potential risks, bargain away their goods with little danger pay allowances. Also, the consumers, who have no idea about the severe fishing environment in Honduras, are reluctant to pay more than current prices, formed lower than it should be at the cost of human lives. The company where I worked prior to school has always tried its best to remove any little elements of competition in its area.

If there were a small but promising start-up with innovative idea and technology, that company used every means –most were legal or grey while a few were nearly illegal- to get rid of the potential threats. For instance, it quickly imitates the new technology of the start-up, take out the similar patent, scout the core human resources, block off the critical suppliers and seed funds, cut the price of competitive goods to the minimum level, and do hostile M&A. This case also showed the issues related to public goods and informational deficiencies.

The company attempted to minimize the production/dissemination of new technologies, which can be considered as public goods, and the newborn ventures could not protect themselves cause of the limited access to the information. From the utilitarianism perspective, these are reasonable and desirable attempts because the larger number of stakeholders can be satisfied. My company had more than 20,000 employees while the average start-ups have no more than 100 employees.

Considering the families of employees, shareholders, subcontractors, and the related industries, maximizing profit of my company could bring higher utilities than the success of small ventures. Even in long-term, my company’s decision would not be wrong since the possibility of success of start-ups are extremely low compared to the global conglomerates. My company, which has the global network, huge infrastructure, and accumulated knowhow can exploit the new technology better and thereby encourage the social progress.

In contrast, from the deontological view, it was absolutely wrong. My company not only hindered the fair competition but also committed illegal acts. Whether the result proved positive or negative is not important for the deontologists. Finally, it was not proper when applying the concept of virtue ethics since the motives of the actions of the company was not correct and contributes nearly nothing to the harmonious relationship with the community it belonged.