Aristotle on Economics and Ethics

Abstract

Over the last several decades, we have witnessed seismic changes in corporate America: the increasingly myopic perspective of American managers, the relentless pursuit of short-term paper profit, reckless disregard for the interests of the non-shareholder community, a rise in hedge fund activism, and an ever-increasing use of incentive compensation, which arguably motivates managers to take on riskier investments. By revisiting Aristotle’s properties of ethics and economics, and considering their implications for accounting and finance, we try to learn guiding principles of economics, and by extension accounting and finance, from a great philosopher. We then discuss whether we have made progress, stood still, or even retreated from the philosopher’s propositions of more than two millenniums ago.