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| The money that is invested for the purpose of making more money. |
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| Defined ideally as an economic system in which the major portion of production and distribution is in private hands, operating under what is termed a “profit” or “market” system. Its main features are: (1) the existence of companies; (2) profit motive; (3) competition; and (4) private property. The U.S. is the world’s leading capitalistic economy. |
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| The equal access to raw materials and markets in the sale of goods and services; according to Adam Smith, when a community is activated only by self-interest, it is the regulator that keeps that community from degenerating into a mob of ruthless profiteers. |
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| A system that protects many businesses from true marketplace competition; subsidies for farmers and tariffs on steel, sugar, and ethanol are contemporary examples of this protection from competition. |
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| Companies that in years past were identified with making goods of all sorts, and are now likely to produce only the package and the label while outsourcing the rest. |
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| Adam Smith’s economic case for capitalism, suggesting that when people are left to pursue their own interests, they will unintentionally produce the greatest good for all, as if guided by an unseen force. In this way, each person’s individual and private pursuit of wealth results in the most beneficial overall organization and distribution of economic resources. |
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| The economic condition that results when traditional restraints are removed from selling goods and setting wages, and when all individuals have equal access to raw materials and markets; from the French meaning "to let [people] do [as they choose]," it means we are all free to pursue our own interests. |
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| Natural Right to Property |
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Definition
| A complex, socially shaped phenomenon, an intrinsic element of the American socioeconomic system, and a common defense of capitalism—the argument that people have a fundamental right to owning things, and that our capitalist system is simply the outcome of this right. We cannot own other people, but we are free to own land, buildings, plants, animals, machines, objects, etc. |
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| A concentration of property and resources, and thus economic power, in the hands of a few; argued by Marx to be the result of capitalism, as high costs, complex and expensive machinery, intense competition, and the advantages of large-scale production all work against the survival of small firms |
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| Central to capitalism, the assumption that human beings are basically economic creatures motivated by their own economic interests; and that since profit in the form of money is the lifeblood of the capitalist system, companies and capitalists alike are motivated by a robust appetite for money profit. |
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| An economic system characterized by public ownership of property and a planned economy, in which a society’s government, not its individuals, owns equipment and makes business decisions; a system that depends primarily on centralized planning rather than on the market for both its overall allocation of resources and its distribution of income. |
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| Broader View of Corporate Responsibility |
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| The view that there is nothing wrong with corporate profit, but that corporations have other responsibilities as well—to consumers, to employees, to suppliers and contractors, to the surrounding community, and to society at large. |
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| Corporate internal decision (CID) structures, referring to established procedures for accomplishing specific goals; the framework in which policies and decisions are determined, formed, and shaped in order to affect corporate goals. |
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| The set of standards, ideas, or moral codes, both explicit and implicit, both formal and informal, that create a unique atmosphere or environment in an organization; these elements are accepted as intrinsic and are incorporated into the general work climate. |
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| The debate as to whether a corporation is the kind of entity that can make moral decisions and bear moral responsibility for its actions. Philosophers disagree about whether CID structures allow corporations to be seen as morally responsible agents. |
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| The dominant institution of American economic society, a structure that can endure beyond the natural lives of its members. It is a legal business framework that has incorporators who may sue and be sued as a unit and who are able to consign part of their property to the corporation for ventures of limited liability. |
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| Diffusion of Responsibility |
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Definition
| The theory that nearly everyone in a modern corporate organization is able to share moral accountability for what it does, but that in practice, no particular person or persons are held morally responsible for a company's decisions, policies, or actions. This results in a masking of accountability rather than a distribution of accountability. |
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| A key feature of the modern corporation in which its members—unlike the members of a partnership or the proprietors of a business—are financially liable for the debts of the organization only up to the extent of their investments. |
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| Narrow View of Corporate Responsibility |
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Definition
| The idea that business has no social responsibilities other than to maximize profits, and that private enterprises should therefore not be forced to undertake public responsibilities that properly belong to government; advocated by the economist Milton Friedman. |
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| A business structure in which a small group of investors owns all the outstanding shares of a privately owned, profit-making corporation. |
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| A business structure in which a company is not completely owned by private investors, and its stock may be traded among the general public. |
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| Social Entity (Stakeholder) Model |
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Definition
| A broad view of responsibility, the idea that a corporation has obligations not only to its stockholders but also to all the other constituencies that affect or are affected by its behavior (i.e., to all parties that have a stake in what the corporation does or does not do). |
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| Those who provide the capital, own the corporation, and enjoy liability limited to the amount of their investments. |
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| Literally, "let the buyer beware," an outdated doctrine now dismissed in most legal policy, it was no longer the guiding principle as the concept of due care spread. |
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| Consumer Product Safety Commission (CPSC) |
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Definition
| An agency created by Congress in 1972 to protect the public “against unreasonable risks of injury associated with consumer products.’’ A five-member commission sets standards for products, bans products presenting undue risk of injury, and makes policy for the entire consumer-product marketing process from manufacture to final sale. |
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Definition
| The idea that consumers and sellers do not meet as equals and that the individual consumer's interests are particularly vulnerable to being harmed by the manufacturer, who has knowledge and expertise that the consumer does not have. |
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| Federal Trade Commission (FTC) |
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Definition
| The government organization created in 1914 as an antitrust weapon, though its mandate was expanded to include protecting consumers against deceptive advertising and fraudulent commercial practices. Although not the only regulatory body monitoring advertisements, its efforts have spared Americans the most blatant abuses of advertising. |
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| Food and Drug Administration (FDA) |
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Definition
| An agency of the U.S. Department of Health and Human Services responsible for the safety regulation of most types of foods, dietary supplements, drugs, vaccines, biological medical products, blood products, medical devices, radiation-emitting devices, veterinary products, and cosmetics. |
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Term
| The Ignorant Consumer Stand |
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Definition
| An FTC standard that prohibits an advertisement that might mislead anyone, no matter how ill informed and naive. However, if the FTC used such a standard, it would handle a lot more cases and greatly restrict advertising; but in spending its time and resources on such cases, it is not clear that the FTC would be proceeding in response to a substantial public interest, as it is legally charged with doing. |
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Term
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Definition
| All factual affirmations or statements about the goods being sold, as dictated by the Uniform Commercial code of 1968. (See express warranties and implied warranties.) |
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| The idea that the law may justifiably be used to restrict the freedom of individuals for their own good; refers to those laws that attempt to prevent people from running risks that affect only themselves. |
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Definition
| The unethical and illegal agreement among competitors to adhere to a set price schedule, not to cut prices below a certain minimum, or to restrict price advertising or the terms of sales, discounts, or rebates. This eliminates open and fair price competition and is against the law. |
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Term
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Definition
| A seller’s exploitation, by raising prices substantially, during a short-term situation in which buyers have few purchase options for a much-needed product. |
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| Reasonable Consumer Standard |
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Definition
| A standard which, if used by the FTC, would prohibit only advertising claims that would deceive reasonable people, thereby failing to protect people who are more gullible, less intelligent, or less perceptive or aware regarding the marketplace. |
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Definition
| A doctrine that holds that the manufacturer of a product has legal responsibilities to compensate the user of that product for injuries suffered because the product’s defective condition made it unreasonably dangerous, even though the manufacturer has not been negligent in permitting that defect to occur. |
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Definition
| Advertising that communicates at a level beneath conscious awareness, where, some psychologists claim, the vast reservoir of human motivation primarily resides. |
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Definition
| Those claims that sellers explicitly state; this may include assertions about the product’s character, assurances of product durability, and other statements on warranty cards, labels, wrappers, and packages, or in the advertising of the product (e.g., that a product is “shrinkproof’’ or will require no maintenance for two years). |
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Definition
| Those claims, implicit in any sale, that a product is fit for its ordinary, intended use. |
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Definition
| Language used to evade or retreat from a direct or forthright statement, alluding to vague claims while aiding and abetting ambiguity. |
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Definition
| The unethical and sometimes illegal agreement among manufacturers and retailers—as opposed to direct competitors—to set certain prices on certain goods, thereby eliminating open and fair price competition. This was unquestionably against the law until 2007, when courts were advised to rule on a case-by-case basis. |
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Term
| MacPherson v. Buick Motor Car |
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Definition
| The landmark 1916 case that expanded the liability of manufacturers for injuries caused by defective products. Previously, injured consumers could recover damages only from the retailer of the defective product—that is, from the party with whom they had actually done business. |
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