Although the managerial practice of cheating spans complex and heterogeneous situations, most business ethics scholars consider that the very idea of cheating is indefensible on moral grounds, and quickly dismiss it as wrongdoing. This paper proposes to fine-tune this conventional moral assessment by arguing that some forms of cheating can be justified—or at least excused. To do so, it starts with a value-free definition of cheating that covers a wide diversity of situations: “breaking the rules while deliberately leading or allowing (...) others to think they have been respected.” While using this definition at the metaethical level, the paper contends that the moral assessment of cheating depends on the obligation to comply with the rules. There are rules which do not entail moral obligations, and there are special circumstances where other more important obligations override the obligation to comply with the rules. Furthermore, the paper argues that respecting the penalty rules also influences the moral assessment of cheating on the rules. The key interest of this endeavor lies in contributing to building a more solid theoretical framework for the study of cheating in management, which may replace our common prejudices and basic intuitions on this matter. (shrink)

In the present paper we argue that the theory of contracts embraced by many libertarian scholars and relied upon by them in sundry important debates (e.g. over morality of the fractional reserve banking or loan maturity mismatching etc.), that is, the title transfer theory of contracts (TTT) should be rejected as not being able to account for the binding force of future-oriented contracts, including contracts deemed enforceable by those scholars themselves. The TTT claims that the only contracts that should be (...) legally binding are these where the debtor’s failure to abide by them constitutes a violation of the creditor’s private property rights. However, as we argue, no default of the debtor in a future-oriented contract can in itself amount to such a violation. (shrink)

In a number of recent articles, the debate on the ethics of fractional reserve “free” banking has been extended to loan maturity mismatching, specifically the banking practice of borrowing short and lending long. Barnett and Block :711–716, 2009; 2010) claim the practice is illicit, because like fractional reserve banking it creates duplicate property titles. They argue there is a continuum in the time dimension between the two kinds of activities. Bagus and Howden :399–406, 2009; 106:295–300, 2012a; Eur J Law Econ, (...) 2012b; Bus Ethics 22:235–245, 2013) maintain that loan maturity mismatching does not create duplicate titles and is not illicit, and that from an economic and legal perspective there is no continuum with fractional reserve banking. Cachanosky and Evans enter the debate from the free-banking standpoint and view both practices as legitimate. In this paper, I agree with the conclusions of Bagus and Howden, but adopt a different approach to support this position. Using the title-transfer theory of contract, I demonstrate from first principles why loan maturity mismatching does not create duplicate property titles and is a legitimate practice. Employing this same theory, I then present a novel argument to show why the contractual arrangements found in fractional reserve banking are logically contradictory and illegitimate. (shrink)

Barnett and Block claim that Bagus and Howden support indirectly the concept of market failure. In this paper, we show that maturity mismatching in an unhampered market may imply entrepreneurial error but cannot be considered a market failure. We demonstrate why fractional-reserve banking leads to business cycles even if there is no central bank and why maturity mismatching does not per se lead to clusters of errors in a free market. Finally, in contrast to the examples provided by Barnett and (...) Block, we assure that maturity mismatching does not imply the creation of two incompatible contracts due to the fungible nature of money. (shrink)

Libertarian philosophy asserts that only the initiation of physical force against persons or property, or the threat thereof, is inherently illegitimate. A corollary to this assertion is that all forms of speech, including fraudulent advertising, are not invasive and therefore should be considered legitimate. On the other hand, fraudulent advertising can be viewed as implicit theft under the theory of contract: if a seller accepts money knowing that his product does not have some of its advertised characteristics, he acquires the (...) property title to the customer’s money without voluntary consent, which is theft. The balance between these two logical extensions of property rights—the right of free speech and the right of contract—lies somewhere in the area of communication philosophy, and can be explained through understanding the role of communication in human interactions. Advertising is a form of communication that may convey important information about the conditions of the proposed contract. These conditions are expressed in particular words that may have different meanings in different circumstances. Therefore to determine whether a particular example or “misinterpretation” is mere sophistry or a type of fraud, the judicial system has to approach each issue on a case-by-case basis. The border between legal and illegal should be determined by precedents and by expectations based on commonly accepted definitions of terms—what people commonly understand by the words and other forms of communication they use. (shrink)