The role of law and ethics in developing business management as a profession

Currently, business management is far from being recognised as a profession. This paper suggests that a professional spirit should be developed which could function as a filter of commercial reasoning. Broadly, management will not be organised within the framework of a well-established profession unless formal knowledge, licensing, professional autonomy and professional codes of conduct are developed sufficiently. In developing business management as a profession, law may play a key role. Where the idea is that business management should be more professsionalised, managers must show that they are willing to adopt ethical values, while arriving at business decisions. The paper argues that ethics cannot survive without legal regulation, which, in turn, will not be supported by law unless lawyers can find alternative solutions to the large mechanisms of the official society, secured by the monopolised coercion of the nation state. From a micro perspective of law and business ethics, communities can be developed with their own conventions, rules and standards that are generated and sanctioned within the boundaries of the communities themselves.

The issue of macroeconomic closure revisited and extended

Léon Walras (1874) already had realized that his neo-classical general equilibrium model could not accommodate autonomous investment. Sen analysed the same issue in a simple, one-sector macroeconomic model of a closed economy. He showed that fixing investment in the model, built strictly on neo-classical assumptions, would make the system overdetermined, thus, one should loosen some neo-classical condition of competitive equilibrium. He analysed three not neo-classical “closure options”, which could make the model well determined in the case of fixed investment. Others later extended his list and it showed that the closure dilemma arises in the more complex computable general equilibrium (CGE) models as well, as does the choice of adjustment mechanism assumed to bring about equilibrium at the macro level. By means of numerical models, it was also illustrated that the adopted closure rule can significantly affect the results of policy simulations based on a CGE model. Despite these warnings, the issue of macro closure is often neglected in policy simulations. It is, therefore, worth revisiting the issue and demonstrating by further examples its importance, as well as pointing out that the closure problem in the CGE models extends well beyond the problem of how to incorporate autonomous investment into a CGE model. Several closure rules are discussed in this paper and their diverse outcomes are illustrated by numerical models calibrated on statistical data. First, the analyses is done in a one-sector model, similar to Sen’s, but extended into a model of an open economy. Next, the same analyses are repeated using a fully-fledged multisectoral CGE model, calibrated on the same statistical data. Comparing the results obtained by the two models it is shown that although, using the same closure option, they generate quite similar results in terms of the direction and – to a somewhat lesser extent – of the magnitude of change in the main macro variables, the predictions of the multi-sectoral CGE model are clearly more realistic and balanced.