Bgs Models

1872 Words Mar 22nd, 2013 8 Pages
Business, Government Society Models
Interactions among business, government, and society are infinite and their meaning is open to interpretation. Faced with this complexity, many people use simple mental models to impose order and meaning on what they observe. These models are like prisms, each having a different refractive quality, each giving the holder a different view of the world. Depending on the model (or prism) used, a person will think differently about the scope of business power in society, criteria for managerial decisions, the extent of corporate responsibility, the ethical duties of managers, and the need for regulation.

The following four models are basic alternatives for seeing the BGS relationship. As abstractions
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The classic explanation of how a market economy works comes from the Scottish professor of moral philosophy Adam Smith (1723–1790). In his extraordinary treatise, The Wealth of Nations, Smith wrote about what he called “commercial society” or what today we call capitalism. He never used that word. It was adopted later by the socialist philosopher Karl Marx (1818–1883), who contrived it as a term of pointed insult. But it caught on and soon lost its negative connotation. Smith said that the desire to trade for mutual advantage lay deep in human instinct. He noted that the growing division of labor in society led more people to try to satisfy their self-interests by specializing their work, then exchanging goods with each other. As they did so, the market's pricing mechanism reconciled supply and demand, and its ceaseless tendency was to make commodities cheaper, better, and more available.

The beauty of this process, according to Smith, was that it coordinated the activities of strangers who, to pursue their selfish advantage, were forced to fulfill the needs of others. In Smith's words, each trader was “led by an invisible hand to promote an end which was no part of his intention,” the collective good of society. 20 Through markets that harnessed the constant energy of greed for the public welfare, Smith believed that nations would achieve “universal opulence.” His genius was to demystify the way markets work, to frame market capitalism in…

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