Ethics

Academic research is one of the major areas where methodology differs from one level to the next depending on the object of research. In particular, the evolvement and methodology of regulations has, by and large, been the subject of academic research. Notably, two fundamental schools of thought have evolved on the basis of regulatory policy. These schools of thought are regarded as theories, namely, public interest theory economic interest theory and capture interest theory just to mention a few. This study seeks to elaborate more on two theories namely capture theory and public interest theory as indicated above. A literature review will be accorded to certain academic journal articles and mainly to those articles which best explain the development of a particular piece of regulation. In so doing, a substantial explanation shall objectively capture the theory of regulation used by the author details of the regulatory phenomena examined by the authors and how the authors used the theory to explain the regulatory phenomena. This investigation shall not only dwell on the accounting function but shall extend to other relevant realms accordingly.

Before commencing on the main task it is important to have a background understanding on the two theories namely, economic interest theory and public interest theory. Again a comparison between the two theories shall also be considered in this section.

Public interest theory and as can be noted from its nominal connotation is geared towards the public good. It therefore accounts for regulation with a specific aim for public interest. This public interest can further be underscored as the preferred mode of distribution or better still the allocation of scarce resources both at the individual point of view and at the collective point of view. It is also worth noting that public interest theory and market failure have a relationship as they are both used in economic regulation. In this regard, public interest theory as an economic regulation is founded on the fact that government is responsible in regulating markets in those moments when markets cannot regulate themselves (Stigler 1971). Further to this market failure manifest itself in instances where the price mechanism that controls supply and demand breaks down, compelling government to take charge.

A market failure consists of the so called spontaneous monopolies and external overheads. The major indicator of natural monopolies is when the fixed costs of producing and distributing a good to the consumer are on high gear such that only one industry is fit to supply that product. This mainly occurs to sectors dealing with public utilities for example, electricity supply and water supply especially for domestic uses. It is indisputable that the supply of the aforementioned public utilities requires a great capital input both from the manpower point of view and money point of view. In other words, they are very expensive such that no firm will dare to engage in them unless it is sure that it can sustain the production and more importantly, satisfy the market demands.  According to Stigler (1971) the problem of such monopoly makes businesses use their market powers in adverse ways hence damaging the community at large this is where a government should reinstate regulations.

Market failure took center stage in traditional regulatory and its philosophical basis (Kearney et al. 1998). They note further that the public interest theory of regulation was materialized through the Interstate Commerce Act, 1987. The objective of the act was to establish an administrative agency that would have power to control both the price and distribution of services in the railroad industry. The agency used tariff billings and certification modalities to enhance public expediency and as a control measure in dealing with entry barriers and exit barriers.

The undesirable outcome of this monopoly emerges when costs or benefits of manufacturing a good or service fail to be included into their price. In deed, the principles of costing approve that the price of a commodity should help the business realize its ample profits at all times. For example, if Mr. Bill Gates spends 1000 in producing a one whole computer then he should consider selling it at 1200 and above to realize humble profits. This is the rationale behind all sales for any business

As indicated earlier, market failures have a direct impact to the public interest and hence its relatedness with public interest theory. As such, market failures, together with the overall need for proper systems of regular disclosure by businesses in the public domain, make regulation very fundamental in order to safeguard the public good. The objective of this regulation seeks to protect the public from the undesirable effects of the said market failures and other malignant business conduct.

In general and as elucidated above, public interest theory of regulation sheds more light on government involvement in market failure and the incorporated regulatory decrees as responses to market failures and deficient market intricacies. This theory actually demonstrates that regulation fosters the general wellbeing visa Vis the interests of selected stakeholders.

A lot has been mentioned on public interest theory as a regulatory measure therefore, the next task is to understand the capture theory. The enthusiastic vision of the public interest theory of regulation received systematic reactions from researchers in the early 1970s. The researchers were of the opinion that the sole governmental regulatory agencies had no public interest at heart as this was not reflected in their endeavors. Clearly, they worked for the interests of a few especially in the private sector so that they might realize large sums of profits. That aside, each government agency acted in total conformity to companies and other business associations.

It is argued that the political actors, most concerned in the control of a given industry are the companies in the same industry. A case study, in this regard, is at Texas where oil and natural gas sector is believed to be the single party most concerned with the forms of regulations that the Texas Railroad Commission promulgates and the Texas Farm Bureau is the most interested party as far the state agricultural policy is concerned.

The extent to which this interest orientation among economic actors stretches, it is argued that each regulating agency has been sidelined and as such overtaken by a single and influential interest where only the industrys interests are represented. In addition, it is argued that these influential interests manifested in one given industry, by and large, do not cross with the regulating activities in other industries. For example, referringto the example above, the Farm Bureau never interferes with the Railroad Commission and the oil and gas sector never interferes with the Texas Department of Agriculture. From this scenario it can be noted that there is minimal or zero competition over influence of public policy among economic interests. It is also evident that in such a scenario just one industry or company takes lead, and each industry sticks to its own business and taking a lot of caution not to interrupt with other sectors or companies and mainly their public agencies. This indeed, can be inferred by logical implication.

In the process of this economic regulation, citizens end up being the most marginalized, not even an opportunity to air their views. This discrimination is as a result of the complex issues and processes involved in the process where a single citizen would be of no significance. For instance, a citizen who pays only  5 as water bill is considered of no consequence compared to that company that pays  1,000,000. As such, priorities of the one paying large sums of money are given special consideration at the detriment of the fewer citizens paying simple bills. At the far end of the scope, this case invites the conflict between the rich and the poor, it seems. In this light it can be argued and justifiably so that the regulation is administered not because citizens desire it, no but because the regulated industry or company desire it, period

In general, the capture theory as another example of economic regulation provides some of the analytical foundations that in this case referred to as policy sub-governments. This brings about a triad composed of the government agency, the industry which this government agency is overseeing, and lastly the appropriate Committees of legislatures. It is however important to note that capture theory puts more emphasis on monopolistic influence of individual agencies by a particular association with stronger influence. This assertion has been refuted by research experts nonetheless. According to Peltzman (1976) a vast number of groups are in competition in taking control of an agencys operations and activities.

The works of Nirmala Dorasamy will be reviewed in order to analyze the development of public interest theory as an economic regulation. As will be indicated in her works the main theme centers on public interest or better still, from the point of view of self interest to the point of view of public interest within the pretext of evolved business ethics.

Development of Regulation
The works of Nirmala Dorasamy will be reviewed in order to analyze the development of public interest theory as an economic regulation. It will be noted in her works that the main theme centers on public interest or better still, from the point of view of self interest to the point of view of public interest within the pretext of evolved business ethics. The paper takes into account Lawrence Kohlbergs study on moral development in order to insightfully capture the diverse and unique levels of impact that self-interest and public interest may possess in a bid to promote ultimate levels of business ethics. By so doing, an illustration to show the significance of public interest in fostering quality levels of business ethics will be effected. Much focus centers on the capacity of businesses driven by public interest Vis a Vis self interest in lessening unethical behavior.

By and large, it is widely believed that some businesses are in operation with an egoistic objective or better still, characterized by self-interest. But on the other hand, it also widely believes that business aim at realizing certain public interests embedded in fundamental moral objectives. Nirmala states that a business that operates for the sake of self interest does so at stage 2, a premature stage of moral development and it is in this stage that egoistic businesses operate. This premature stage is also referred to as the preconvention stage. On the other hand, at stage 4 there will be found the dynamics of that business which operates in the best public interest of all. It is in this stage that one can talk of quality business ethics.

From the point of view of Nirmala, it can be argued and justifiably so that quality business ethics is only achievable if businesses work for the public interest and less on the egoistic interest. In this regard, businesses, if they are to be considered ethical must engage in moral judgments on what is morally desirable andor permissible either for reasons of self-interest or of the public interest. Again Nirmala sights as an example the case of Johnson and Johnson as an exemplar of a business which demonstrated higher levels of business ethics in regard to Kohlbergs stages of moral development by elevating public good and not the self oriented interest. Moral development is an intentional dynamism within the individual person that enables himher considers both oneself and others in moral reasoning (Feraell et al. 2004). The stages of moral development culminate in universal ethical principles. In addition, the gradual process leading to super levels of moral reasoning are fundamentally founded on the concrete moral experience of the person.

There are six stages involved in this process and they are as follows. These six stages are summarized within the pretext of business. The first stage is the pre-conventional stage which is comprises the integration of stage 1  2. Stage 1 connotes obedience and punishment inclination. Morality at this level is imposed externally by the external authorities. At stage 2, is when businesses differ in opinions. Due to this relativism of ideas, every business pursues its own interests. Again, every business seeks to avoid punishment which is connoted by punishment. Businesses at this stage do not identify with the societal values. Conventional morality is attained at stages 3  4. Here there are good interpersonal skills and businesses regard morality as something worth and as such act in the best interest of the common good. Eventually, post-conventional morality is achieved at stages 5  6. Here, the social contract and individual rights are highly considered and protected. In such stages, businesses never care about a smooth running society but it is more concerned with the fundamental rights and values that the society should seek to promote and defend.

Evidently it can be noted that the above assertion suits very well in the case of public interest theory whose overall tone is public interest. There is a clear moral growth and development in its approach and it exhibits a recommendable progression from egoistic tendencies to altruistic tendencies. Moral development entails a progression from mere self to the wider interest in the community. It is also indisputable that public interest as a form of regulation captures very high ethical standards and hence quality business ethics. Growing awareness of public interest is a very important ethical issue which is actually posing a very big challenge to the contemporary businesses today. Businesses operate in a liberal world and not in non-egalitarian world as all businesses are part of a social system and activities of which have a remarkable significance throughout the society. It is true that societies do expect businesses to hunt their good the same businesses, on the other hand, are expected to safeguard and promote public interest. Such businesses with the interests of the larger community at heart transcend mere profit realization and arbitrary corporate interests which are only short lived. In addition, such businesses develop their zeal within the framework of sound moral reasoning that has the public good as its sole goal.

It can also be argued and justifiably so that the interests of society mirror the interests of all its members, not excluding the businesses. Moral reasoning that guarantees the ultimate and achievable human welfare aims at fostering a firm social order. In this regard, the objective of a business is not merely maximization of profits, no but more so the promotion of the fundamental social desires and goals.

Conclusion
We can summarize by saying that public interest theory is linked to market failure and capture theory is linked to monopoly control and to add to that, special interest theory is linked to group competition. This study has also tried to illustrate how these theories have been used to elucidate on the perceived pattern of regulation by government in the economic framework. To reiterate, theories especially the public interest theory and capture theory have been used to shed more light on this. We have also seen how Nirmala develops her theory where we have seen the moral foundation of any business and its moral obligations. Still on that respect, we have seen how a business can grow from the miasma of egoism to the level of altruism and egalitarianism. It is a very brilliant development which shows clearly that corporate responsibility is a rational process. Businesses that are dedicated to fostering public good reflect the moral consciousness and recommendable maturity of its management function. Hence, we can justify that businesses still tied to their self interests are business with low moral maturity and especially the proprietors of the said businesses.