This volume, part of the St. Andrews Studies in Philosophy and Public Affairs, contains fifteen essays by a broad range of (mostly) academics on the state of business education and contemporary management thought. Except for four essays dealing with the current financial crisis, the contents of this volume were published previously in the book Rethinking Business Management: Examining the Foundations of Business Education, which was the product of a project undertaken jointly by the Social Trends Institute of New York City and the Witherspoon Institute in Princeton, New Jersey. The motivation for the project and the resulting books was the belief that business management is facing an ethical crisis with profound consequences for business education. Business schools, which are largely an American invention but are increasingly prevalent in Europe, not only bear some responsibility for the inculcation of a management outlook that may have contributed to recent scandals and the current financial crisis, but also have a responsibility to respond to the ethical crisis in business management in their role of educating future managers. The message of Profit, Prudence and Virtue is that business education must change.
This book may look toward the future, but the resources for its proposed response to the alleged ethical crisis lies far in the past. According to the contributors, we need to update the eternal verities of traditional ethics, especially the teachings of Aristotle and the natural law theorists. Although business has changed much, especially in the past few decades, some truths about the ethical life remain constant, though they may have become lost. The president of the Social Trends Institute writes in the foreword to Rethinking Business Management, "It is therefore pertinent to ask whether modern business education has successfully tied together the discoveries of the present with the wisdom of the past, the ephemeral with the permanent."
After a useful introduction by the editors, the essays are divided into four sections on Foundations, Practical Challenges for Ethical Management, Teaching Ethics in Business School, and After the Credit Collapse. The four essays on the foundations of business and the business system touch on similar themes: that business activity contributes powerfully to the moral development of humans as individuals and social beings, and that the resulting moral development -- which includes the cultivation of virtues and the conceptions of well-being, justice, and the common good -- are critical for the success of business. Drawing heavily on Aristotle and natural law theory, these authors (Harold James, Roger Scruton, David Novak, and Robert P. George) do not question the technocratic and bureaucratic nature of modern business nor the profit motive, but they stress that businesses are still composed of people whose decisions matter, and that business is conducted within and has profound impacts on a community of individuals and a political and legal order. In a world in which the business system takes on an impersonal character, they affirm that individuals still matter as decision makers and that ultimately success should be defined in terms of the extent to which business contributes to human flourishing.
The three essays in the second section on practical challenges, written by a physician, (Anthony Daniels) a historian (Wilfred M. McClay), and a management consultant collaborating with a philosopher (Thomas R. Krause and Sean Kelsey), explore some of the subtle dynamics of managing institutions, both public and private. The essay by Daniels, the physician, notes that incentives, which are the chief instrument for motivating desirable conduct in economic systems, often have perverse consequences and that some use must be made of a sense of professionalism and other non-incentive-based sources of motivation. Krause and Kelsey, the management consultant and philosopher, emphasize the necessity of leadership that can articulate a vision for an institution that is noble but still true to its core mission. For a business this means accepting the economic nature of its activity but finding a broader vision in a humanistic understanding of business as a cooperative venture that should benefit everyone.
The third section on business schools contributes to an ongoing dialogue about the state of business education and the need for reform. There is no lack of critical ideas in this dialogue but little agreement on either the problems or the solutions. There are as many conceptions of the ideal business school as there are business school professors. This volume explores two different, though not wholly incompatible, sources of inspiration: stakeholder theory and -- yes, again -- Aristotle. R. Edward Freeman, a noted developer of stakeholder theory, and his colleague, David Newkirk, usefully outline the history of business schools and survey the recent critics, such as Sumantra Ghoshal and Henry Minzberg, who argue that business education has been led astray by its focus on (bad) theories and its attempt to be "scientific." Two of the essays argue that business leaders must have a broadly humanistic education and be able to address business problems within a broader set of concerns in which business is a human enterprise. The other two essays are by writers -- Edwin Hartman and James O'Toole -- who have written extensively on what business and business education would be in an Aristotelian framework. Their essays, while valuable, do not go beyond their previous writings.
The final four essays, written for this volume, appear under the heading "After the Credit Collapse." Readers looking for a close analysis of the technical causes of the current financial crisis will be disappointed. The writers of these essays take the view that the particular faults that may have led to this crisis are of less interest than the more general moral failings that lie behind most economic troubles. This leads Christopher Megone, the author of the section's first essay, to explore the ways in which the effort to maximize shareholder value threatens integrity and virtue. The essay by Samuel Gregg, one of the editors of this volume, focuses more specifically on how, after the crisis, business schools could better prepare their students for the ethical challenges of the contemporary business world. His recommendations would not add significantly to the range of topics considered in business education but would entail placing them in a broader, more humanistic context, so that students would understand both the ethical and economic assumptions involved in the concept of credit, for example. Of the four essays in this section, only the one by Philip Booth attempts to analyze the underlying causes of the current financial crisis, and his recommendations call, interestingly, for more rigorous education in economics, although he argues that the subject should be expanded to include economic thought that seeks to understand market failures and sources of disequilibrium, such as the Austrian school and public choice theory.This volume addresses two important present-day concerns. The current financial crisis has exposed serious deficiencies in our banking system and perhaps in capitalism as an economic system. And business education faces a crisis of confidence that is reflected in widespread dissatisfaction with the current curriculum and the kind of research being conducted. However, finding the ethical failings in either context is a difficult and controversial enterprise, and proposing remedies for either one is even more challenging. The essays collected here represent a sincere and high-minded attempt to bring the broadest possible perspective to the task by questioning the most basic assumptions and underlying values of our economic system. The result, unfortunately, is an unconvincing set of generalities that invite little disagreement but also provide little basis for concrete change. Aristotelian and natural law ethics, as well as stakeholder theory, have an intuitive appeal but a limited usefulness in ethical analysis of business life, and an economic system or a business education built on these foundations has yet to be fully articulated. Few readers are going to find much fault with the impulses of these writers -- they appeal, after all, to "the wisdom of the past" -- but they also do not provide much effective guidance for dealing with the complexities of the contemporary business world or the challenges of business education.
For other uses, see Prudence (disambiguation).
"Imprudence" redirects here. For the French short story, see Imprudence (Maupassant short story).
Prudence (Latin: prudentia, contracted from providentia meaning "seeing ahead, sagacity") is the ability to govern and discipline oneself by the use of reason. It is classically considered to be a virtue, and in particular one of the four Cardinal virtues (which are, with the three theological virtues, part of the seven virtues). Prudentia is an allegorical female personification of the virtue, whose attributes are a mirror and snake, who is frequently depicted as a pair with Justitia, the Roman goddess of Justice.
The word derives from the 14th-century Old French word prudence, which, in turn, derives from the Latin prudentia meaning "foresight, sagacity". It is often associated with wisdom, insight, and knowledge. In this case, the virtue is the ability to judge between virtuous and vicious actions, not only in a general sense, but with regard to appropriate actions at a given time and place. Although prudence itself does not perform any actions, and is concerned solely with knowledge, all virtues had to be regulated by it. Distinguishing when acts are courageous, as opposed to reckless or cowardly, is an act of prudence, and for this reason it is classified as a cardinal (pivotal) virtue.
In modern English, the word has become increasingly synonymous with cautiousness. In this sense, prudence names a reluctance to take risks, which remains a virtue with respect to unnecessary risks, but, when unreasonably extended into over-cautiousness, can become the vice of cowardice.
In the Nicomachean Ethics, Aristotle gives a lengthy account of the virtue phronesis (Ancient Greek: ϕρονησιϛ), traditionally translated as "prudence", although this has become increasingly problematic as the word has fallen out of common usage. More recently ϕρονησιϛ has been translated by such terms as "practical wisdom", "practical judgment" or "rational choice".
As the "mother" of all virtues
Prudence was considered by the ancient Greeks and later on by Christian philosophers, most notably Thomas Aquinas, as the cause, measure and form of all virtues. It is considered to be the auriga virtutum or the charioteer of the virtues.
It is the cause in the sense that the virtues, which are defined to be the "perfected ability" of man as a spiritual person (spiritual personhood in the classical western understanding means having intelligence and free will), achieve their "perfection" only when they are founded upon prudence, that is to say upon the perfected ability to make right decisions. For instance, a person can live temperance when he has acquired the habit of deciding correctly the actions to take in response to his instinctual cravings.
Its function is to point out which course of action is to be taken in any concrete circumstances. It has nothing to do with directly willing the good it discerns. Prudence has a directive capacity with regard to the other virtues. It lights the way and measures the arena for their exercise. Without prudence, bravery becomes foolhardiness; mercy sinks into weakness, and temperance into fanaticism. Its office is to determine for each in practice those circumstances of time, place, manner, etc. which should be observed, and which the Scholastics comprise under the term "medium rationis". So it is that while it qualifies the intellect and not the will, it is nevertheless rightly styled a moral virtue.
Prudence is considered the measure of moral virtues since it provides a model of ethically good actions. "The work of art is true and real by its correspondence with the pattern of its prototype in the mind of the artist. In similar fashion, the free activity of man is good by its correspondence with the pattern of prudence." (Josef Pieper) For instance, a stockbroker using his experience and all the data available to him decides that it is beneficial to sell stock A at 2PM tomorrow and buy stock B today. The content of the decision (e.g., the stock, amount, time, and means) is the product of an act of prudence, while the actual carrying out of the decision may involve other virtues like fortitude (doing it in spite of fear of failure) and justice (doing his job well out of justice to his company and his family). The actual act's "goodness" is measured against that original decision made through prudence.
In Greek and Scholastic philosophy, "form" is the specific characteristic of a thing that makes it what it is. With this language, prudence confers upon other virtues the form of its inner essence; that is, its specific character as a virtue. For instance, not all acts of telling the truth are considered good, considered as done with the virtue of honesty. What makes telling the truth a virtue is whether it is done with prudence.
Versus imprudence, cunning and false prudence
In Christian understanding, the difference between prudence and cunning lies in the intent with which the decision of the context of an action is made. The Christian understanding of the world includes the existence of God, the natural law and moral implications of human actions. In this context, prudence is different from cunning in that it takes into account the supernatural good. For instance, the decision of persecuted Christians to be martyred rather than deny their faith is considered prudent.
According to Thomas Aquinas, judgments using reasons for evil ends or using evil means are considered to be made through "cunning" and "false prudence" and not through prudence. However "imprudence" was not be considered a sin since it was not voluntary.
The Ancient Greek term for prudence is synonymous with “forethought". People, the Ancient Greeks believed, must have enough prudence to prepare for worshiping the Olympian gods. Exceptional were the foolish Bacchic cult, who lived an emotional and passionate lifestyle. Believing the antisexual Olympian traditions to be shameful, professors of the Bacchic cult celebrated the irrationality that governed their religion.
Prudence is the application of universal principles to particular situations. "Integral parts" of virtues, in Scholastic philosophy, are the elements that must be present for any complete or perfect act of the virtue. The following are the integral parts of prudence:
- Memoria : accurate memory; that is, memory that is true to reality; an ability to learn from experience;
- Docilitas : an open-mindedness that recognizes variety and is able to seek and make use of the experience and authority of others;
- Intelligentia : the understanding of first principles;
- Sollertia : shrewdness or quick-wittedness, i.e. the ability to evaluate a situation quickly;
- Ratio : Discursive reasoning and the ability to research and compare alternatives;
- Providentia : foresight – i.e. the capacity to estimate whether particular actions can realize goals;
- Circumspection : the ability to take all relevant circumstances into account;
- Caution : the ability to mitigate risk.
In ethics, a "prudential judgment" is one where the circumstances must be weighed to determine the correct action. Generally, it applies to situations where two people could weigh the circumstances differently and ethically come to different conclusions.
For instance, in the theory of just war, the government of a nation must weigh whether the harms they suffer are more than the harms that would be produced by their going to war against another nation that is harming them; the decision whether to go to war is therefore a prudential judgment.
In another case, a patient who has a terminal illness with no conventional treatment may hear of an experimental treatment. To decide whether to take it would require weighing on one hand, the cost, time, possible lack of benefit, and possible pain, disability, and hastened death, and on the other hand, the possible benefit and the benefit to others of what could be learned from his case.
Phronesis, or practical wisdom, holds an important place in rhetorical theory as a central aspect of judgment and practice. Aristotle's notion of phronesis fits with his notes on rhetoric because neither, in his estimation, could be reduced to an episteme or a techne, and both deal with the ability to deliberate about contingent, variable, or indeterminate matters.
Cicero defined prudentia as a rhetorical norm in De Oratore, De officiis, De Inventione, and De re publica. He contrasts the term with imprudens, young men failing to consider the consequences before they act. The prudens, or those who had prudence, knew when to speak and when to stay silent. Cicero maintained that prudence was gained only through experience, and while it was applied in everyday conversation, in public discourse it was subordinated to the broader term for wisdom, sapientia.
In the contemporary era, rhetorical scholars have tried to recover a robust meaning for the term. They have maintained consistency with the ancient orators, contending that prudence is an embodied persuasive resource. Although sets of principles or rules can be constructed in a particular culture, scholars agree that prudence cannot be derived from a set of timeless principles. Instead, through gauging the situation and through reasoned deliberation, a speaker should determine the set of values and morals by which to base his or her actions. Furthermore, scholars suggest the capacity to take into account the particularities of the situation as vital to prudential practice. For example, as rhetorical scholar Lois Self explains, "both rhetoric and phronesis are normative processes in that they involve rational principles of choice-making; both have general applicability but always require careful analysis of particulars in determining the best response to each specific situation; both ideally take into account the wholeness of human nature; and finally, both have social utility and responsibility in that both treat matter of the public good".Robert Hariman, in his examination of Malcolm X, adds that "aesthetic sensibility, imitation of a performative ideal, and improvisation upon conventions of presentation" are also components of practical reasoning.
Small differences emerge between rhetorical scholars regarding definitions of the term and methods of analysis. Hans-Georg Gadamer asserted that prudence materializes through the application of principles and can be evaluated accordingly. In his analysis of Andrew Cuomo's speech to the Catholic Church of Notre Dame, James Jasinski contends that prudence cannot be calculated by formal matters like consequences[clarify] as it is not a episteme or techne; instead, it is judged according to embodied rhetorical performance. Thus, while Gadamer would judge prudence based on the execution of contingent principles, Jasinski would examine the artistry of communication in its cultural milieu between accommodation (compromise) and audacity (courage).[clarification needed]
In his study of Machiavelli, examining the relationship between prudence and moderation, rhetorician Eugene Garver holds that there is a middle ground between "an ethics of principles, in which those principles univocally dictate action" and "an ethics of consequences, in which the successful result is all". His premise stems from Aristotle's theory of virtue as an "intermediate", in which moderation and compromise embody prudence. Yet, because valorizing moderation is not an active response, prudence entails the "transformation of moderation" into a fitting response, making it a flexible situational norm. Garver also asserts that prudential reasoning differs from "algorithmic" and "heuristic" reasoning because it is rooted in a political community, the context in which common problems regarding stability and innovation arise and call for prudential reasoning.
Economists describe a consumer as "prudent" if he or she saves more when faced with riskier future income. This additional saving is called precautionary saving.
If a risk-averse consumer has a utility function over consumption x, and if is differentiable, then the consumer is not prudent unless the third derivative of utility is positive, that is, .
The strength of the precautionary saving motive can be measured by absolute prudence, which is defined as . Similarly, relative prudence is defined as absolute prudence, multiplied by the level of consumption. These measures are closely related to the concepts of absolute and relative risk aversion developed by Kenneth Arrow and John W. Pratt.
In accounting, prudence was long considered one of the "fundamental accounting concepts" in its determination of the time for revenue recognition. The rule of prudence meant that gains should not be anticipated unless their realisation was highly probable. However, recent developments in Generally Accepted Accounting Principles have led academic critics to accuse the international standard-setting body IASB of abandoning prudence. In the British reporting standard FRS 18, prudence, along with consistency, was relegated to a "desirable" quality of financial information rather than fundamental concept. Prudence was rejected for IFRS because it was seen as compromising accounts' neutrality.
In a 2011 report on the financial crisis of 2007–08, the British House of Lords bemoaned the demotion of prudence as a governing principle of accounting and audit. Their comments, however, were disputed by some leading practitioners.
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- ^Prudence - Definition and More from the Free Merriam-Webster Dictionary. Merriam-webster.com (2012-08-31). Retrieved on 2013-07-19.
- ^ abDelany, Joseph. "Prudence." The Catholic Encyclopedia. Vol. 12. New York: Robert Appleton Company, 1911. 2 May 2014
- ^Although Aristotle himself would have considered this way of making money contemptible: "[T]hose who ply sordid trades...and those who lend small sums and at high rates...take more than they ought and from wrong sources. What is common to them is evidently sordid love of gain...[A]ll such forms of taking are mean." (Nicomachean Ethics 1121b31)
- ^St Thomas Aquinas Summa Theologica, Volume 3 (Part II, Second Section) 1602065578 2013 - p 1409 "It would seem that imprudence is not a sin. For every sin is voluntary, according to Augustine;* whereas imprudence is not voluntary, since no man wishes to be imprudent. Therefore imprudence is not a sin"
- ^Russell, Bertrand. History of Western Philosophy.Routledge, 1996, p. 25
- ^ abcMcManaman, Douglas. "The Virtue of Prudence", Catholic Education Resource Center
- ^David Summers (1987), The Judgment of Sense: Renaissance Naturalism and the Rise of Aesthetics, Cambridge University Press (ISBN 978-0-521-32675-9).
- ^Hariman, Robert (2003). Prudence: classical virtue, postmodern practice. The Pennsylvania State University Press. p. 37.
- ^ abJasinski, James (2001). Sourcebook on Rhetoric. Sage Publications. p. 463.
- ^Self, Lois (1979). "Rhetoric and Phronesis: The Aristotelian Ideal". Philosophy and Rhetoric. Penn State University Press. p. 14.
- ^Hariman, Robert (1991). Theory without Modernity. p. 28.
- ^Gadamer, Hans-George (1982). "Truth and Method". Crossroad: 7.
- ^ abGarver, Eugene (1987). Machiavelli and the History of Prudence. University of Wisconsin Press. ISBN 0-299-11080-X.
- ^Sandmo, A. (1970). "The Effect of Uncertainty on Saving Decisions". Review of Economic Studies. 37 (3): 353–360. JSTOR 2296725.
- ^Kimball, M. (1990). "Precautionary Saving in the Small and in the Large". Econometrica. 58 (1): 53–73. JSTOR 2938334.
- ^Tax and accountancy: 'fundamental accounting concepts', HMRC, UK. Retrieved 2011-04-12.
- ^IASB has abandoned prudence, professor warns, Accountancy Age, 24 August 2010.
- ^Tax and accountancy: development of accountancy concepts and new objectives: FRS18, HMRC. Retrieved 2011-04-12.
- ^ abRose Orlik, Lords took a leap on international standards, Accountancy Age, 4 Apr 2011. Retrieved 2011-04-12..