Decision-Making as Navigational Art: A Pragmatic Approach to Risk Management

Abstract

Subsequent to recent economic and financial crises, claims for institutional interventions have been raised. Although it may be desirable to unchain the Leviathan, to escape into some socialistic or paternalistic comfort zone, the more reasonable answer seems to be the “economically mature citizen”. The reason for that lies in the assumption that risk/uncertainty are irreducible – neither in economic theory nor in moral philosophy, and thus remain an individual task. Navigating through risky waters metaphorises the pragmatic approach and recommends cross-bearing of different moral principles. The underlying idea is that risk-handling (not elimination!) is inherent to any prominent moral principle and that by combining two or more of them, a maximum of cases can be covered. The article challenges the economistic view towards moral behavior as well as non-contradiction as a moral meta-principle, and tries to bridge between liberalism and virtue ethics.

Some dramatic events in history of mankind are not referred to by specific names, but are identified with a generic term only, such as “The Great Depression”, “The War”, “Nine Eleven” or currently “The Crisis”. Some see the economic breakdown we are facing since September 2008 not as a severe single incident, but as the dawning of the end of capital based free market economy as such. Were the 89/90 turn in Eastern Europe and the German Reunification then interpreted as the final victory of capitalism over socialism, we can now observe a revival of Marxian theory or at least parts of it. Although, in the face of economic turmoil, it may be desirable to unchain the Leviathan, to escape into some socialistic or paternalistic comfort zone, the more reasonable answer to me seems to be the “economically mature citizen” (“mündiger Wirtschaftsbürger”). The reason I have for that lies in the assumption that risk/uncertainty are irreducible – neither in economic theory nor in moral philosophy. I will also reject institutionalized solutions to the risk problem like CSR. This does not mean that binding rules are no good thing at all; our individual moral deficiencies truly require an enforced framework of rules and laws, but I do question the notion that such a framework (and be it the most sophisticated one) alone could eliminate the risk of economic failure. “Enlightenment”, Kant wrote in his famous essay, is “man’s emergence from his self-imposed immaturity”. And once man was pushed through this door, out of the dark fatalistic world into the cold light of individualism, he was in need of a guiding principle showing him his way as reliably as the laws of nature. In Kant’s opinion, reason was this principle, expressed in the categoric imperative. Some 200 years later, man sees himself again pushed through some door, now into the world of globalized economics where old certainties seem to be overruled and crisis becomes a permanent resident. Since the birth of moral philosophy out of the silencing of the gods, any ethical principle aimed at reducing life’s risks, be it Aristotelian virtues, Stoic retreat, utilitarian calculus, or just Kantian universal reciprocity. With this article, I like to show that either of these most prominent first-order ethical principles can be converted into a respective advice for economical conduct. Secondly, we will see that risk limitation is the overall second-order principle from which the first-order ones can be derived, and as well calls for a combination of them (cross bearing) (1977). First-order principles are, according to John L. Mackie, the meters with which one measures moral right and wrong (e.g. the categoric imperative, the christian ‘love thy neighbour’, the Golden Rule, and so on). Second-order principles deliver the justification for the former. Whilst the different universalist theories of morality have to be considered incompatible on the level of theoretic deduction (e.g. Kantian deontic ethics vs. utilitarianism, contractualism vs. virtue ethics), on a pragmatic level, which I focus here, we will find each of the principles a useful guideline towards the objective of maturity.

Thesis: Only the combination of several moral principles will yield a desired limitation of risk in business.