Abstract

In a liberal democracy, there are limits to the extent to which socially responsible behavior can be ordered by law. Beyond a certain point, the costs of expanding the apparatus of state control become prohibitive, in terms of abridged liberties, bureaucratic hypertrophy, and sheer inefficiency. This fact probably accounts for the lasting appeal of the concept of self-regulation, the idea that one would be better off if one could rely on the promptings of a corporate "conscience" to regulate corporate behavior instead of the heavy hand of government regulation. "Responsible" corporate conduct cannot simply be willed or exhorted into existence by appeals to the public interest or firms' so-called enlightened self-interest. Instead, it depends on the creation and maintenance of particular institutional conditions under which business can behave responsible as a matter of self-interest. In the atomistic market economy, firms are bound to take a partial or parochial view of their behavior and its consequences. For the most part, their actions, seen in isolation, have imperceptible impacts for better or for worse on the general welfare.