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approaches such as total quality management, knowledge management, crisis ... and society and to draw important conclusions for business management.
Oikonomia versus Chrematistike: Learning from Aristotle about the future orientation of business management Claus Dierksmeier Michael Pirson

ABSTRACT. As a philosopher, whose theory about economics and business is systematically connected to a moral and political philosophy, Aristotle provides a rich conceptual framework to reflect upon personal well-being, the wealth of households, and the welfare of the state. Even though Aristotle has mainly been portrayed as an enemy of business, interest in his teachings has been on the rise among management scholars. Several articles have examined Aristotle’s position with regard to current managerial approaches such as total quality management, knowledge management, crisis management, and networking. Even though Aristotle is a constant reference point for business ethics scholars, only rarely have there been attempts to see what consequences his thinking would have for reorienting business philosophy and organizational strategy. In this article we will outline how Aristotle’s theory of household management can be applied to the management of modern corporations. We argue that conceptions of chrematistike and oikonomia provide a basis to discuss the relationship between business and society and to draw important conclusions for business management.

KEY WORDS: Aristotle, business ethics, strategy, corporate social responsibility, economics, management, sustainability, wealth, welfare, well-being

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Claus Dierksmeier is an associate professor at Stonehill College, Easton, Massachusetts. His main areas of research are (systematically) the philosophy of economics, law and religion and (historically) the philosophies of freedom of the 19th and 20th century.

Michael Pirson is an Assistant Professor at Fordham University and a Research Fellow at Harvard University. His main research area is humanistic management and he specifically focuses on organizational trust and organizational well being.

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For many, Adam Smith is the founding father of economics. In our judgment this is quite problematic a view. Through its reception and reinterpretation by Thomas Aquinas, Aristotle’s philosophy became paradigmatic for many centuries of academic thinking. “It is easy to forget that those who laid the foundation of modern economics in the eighteenth century were as familiar with the accumulated knowledge of scholastic analysis as the average twentieth-century economist is ignorant of it” (Langholm 1979, 11). Whenever we overlook the implicit premises from which Adam Smith and his contemporaries operated, we are bound to misunderstand their explicit arguments. A look backwards in time can thus be the very thing that brings us forward in our exploratory endeavors today (Lowry 1987, p.7). Moreover, Aristotle’s theory is still alive in the social teachings of the Catholic Church and it has had a strong comeback in philosophical circles in the last 50 years. In recent years, there has also been a surge in articles on Aristotle in business and management journals (Collins 1987; Wijnberg 2000; Dyck and Kleysen 2001; Solomon 2004). Several articles have examined Aristotle’s position with regard to current managerial approaches such as total quality management (Schoengrund 1996), knowledge management (Demarest 1997), crisis management (Darling 1994), and networking (Schonsheck 2000). There is also an increased discussion of Aristotelian conceptions in psychological literature on well-being (Waterman 1990). Even though Aristotle has always been a constant reference point for business ethics scholars (e.g. Solomon 1992; Wijnberg 2000; Fontrodona and Mele 2002; Solomon 2004; Gimbel 2005), only rarely have there been attempts to see what consequences his thinking would have for reorienting business philosophy and organizational strategy.

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For a critical examination of the conventional economic wisdom, Aristotle seems indeed an apt reference point. It has been in the comparatively short time-span from 1800 to date alone that economics has aspired and (to some degree) managed to sever itself from its cultural embedding and from its intellectual moorings in political philosophy. Increasingly, this dissociation of economics from its factual and symbolic contexts is seen more as a bane than a boon (Giddens 1991; Hart 2005; Scherer and Palazzo 2007). For this reason, too, it is worthwhile to turn to Aristotle, for whom economic concerns were firmly integrated into an overall socio-political context. Aristotle and other ancient thinkers such as Plato and Xenophon have at times been dismissed by modern economists because they did not observe certain features of the market economy, which, to a contemporary scholar, seem essential (Schumpeter 1954). Indeed, ancient authors have little to say on marginal utility theory and the non-zero-sum games of trade (Solomon, 2004, p.1023). We think, however, it is too easy to dismiss the ancients for this reason; rather we pose the question - why was their focus different? The fact that a thinker of the stature of Aristotle did not take too great an interest in the abstract allocation patterns of markets (while he did study, e.g., political governance systems in great detail) may well have to do with the fact that, strictly speaking, markets were not so dominant a phenomenon in his time as they are in ours. From Demosthenes (1930, XX, 31-32) we learn that in the ancient world about half of the grain coming into Athens was controlled by a single importer. In fact, most parts of the economy were in the hands of a very few merchants, landowners and government officials. Their impact on the overall allocation of goods was enormous. It distorted the price-building processes of


small-scale commercial transactions to such an extent that inductively one could hardly hit upon the generalities (such as Gossen’s Law) of modern marginal economics (Lowry 1987, p. 188). Instead of focusing on the abstract side of allocation through commerce, an acute observer of ancient trade would surely find the very concrete specificities of distributive action displayed by the then predominant economic power players and political administrators much more fascinating (Soudek 1952, p. 57). Theories to assess the impact of power on distributional questions are, however, political rather than economic. No wonder then that Aristotle discusses economic and business questions as a subordinate subject within his treatise on politics (Koslowski 1993, pp. 51-53). Still Aristotle was not blind to the logic of barter and trade. The fact that he politicized and moralized commerce does not mean that he did not understand that the economy had its very own regularities. Yet he did not want the rules of the economy to supersede all other human concerns. Aristotle was fully aware, for instance, that if one’s only goal is to make as much money as possible, a reasonably clear-cut code of conduct can be derived from this premise. He felt, however, that to outline a theory of such behavior was precisely what sound economics was not about (Aristotle, 2007, 1259a, 33-34). The rules of sheer money-making (chrematistike), he found simply too “tiresome to dwell upon (…) at greater length” (Aristotle, 2007, 1258b 34) for a philosophical mind. His predominant interest, instead, was with what rightfully should be considered economics (oikonomia): the concern for morally adequate individual and public household management (Aristotle 2007,1256b, 40-41). In other words, the very way in which Aristotle deals with economic affairs undercuts the modern separation of economics from ethics and all other concerns of life.


In this paper, we will examine Aristotle’s economic thinking within the framework of his overall philosophy. We follow his arguments from the beginnings in his theory of life (1) to his theory of the intrinsic moral (2) and the extrinsic social (3) relations to material goods, up to the point where consequences for business management today can be drawn (4). Since in Aristotles’ time business organizations other than the household did not matter greatly, we will outline how his thinking with respect to the household can be applied to modern corporations. We will argue that Aristotle’s conception of chrematistike and oikonomia provides a basis to answer questions raised by the current discourse on social and financial value creation (Carroll 1991; Carroll 1999; McWilliams and Siegel 2001), such as how should business view itself with regard to society, and whether social responsibility is a fundamental practice or a functional add-on only (Pava and Kraus 1996; Smith 2003; Scherer and Palazzo 2007).

Aristotle’s theory of life Aristotle’s ethics rests upon a (teleological) theory about life that ascribes to each living entity a certain goal (telos) to which it strives. Plants, for example, need specific environments (soil, water, sun, etc.) but will, given these conditions, predictably prosper and flourish in a certain way. Therein they realize their genetic program or what Aristotle describes as their final end (Aristotle 2001, 641b, 34-39). Human beings and organizations strive towards ends, too. Everything human, however, does not simply follow a predetermined path but relies in its course greatly upon human freedom and agency. Outward conditions can hamper the development of human life, of course, but


failure in human affairs also stems from misguided inner direction. The possibility to affect negatively one’s own well-being, e.g. through turpitude and vice, is endemic to every human being and organization. For successful self-management, a (teleological) concept of what constitutes true well-being (as an end) and of what brings it about (as means) is therefore needed. “Every art and every inquiry, and similarly every action and pursuit, is thought to aim at some good; and for this reason the good has rightly been declared to be that at which all things aim” (Aristotle, 1985, 1094a, 1-2). This is how Aristotle begins his main work on ethics, the Nicomachean Ethics. Compare this to the statement that introduces his treatise on politics: “Every state is a community of some kind, and every community is established with a view to some good; for mankind always act in order to obtain that which they think good” (Aristotle, 2007, 1242a, 1-2). In the pursuit of the human good, ethics and politics are conjoined, which elevates the political science (containing the theory of economics) to a position of highest importance. In all sciences and arts the end is a good; and the greatest good and in the highest degree a good in the most authoritative of all – this is the political science of which the good is justice, in other words, the common interest. (Aristotle, 2007, 1282b, 15-19). If economics forms part and parcel of said political science, the proper management of economic affairs can be seen as something central to Aristotle’s overall concerns (Dyck and Kleysen 2001, p. 562). What then is the contribution of the economy to the overall project of human life? What constitutes economic welfare? Which ends should business organizations pursue? What are appropriate measurements of economic success? It is


through addressing these fundamentals that Aristotle’s philosophy gains its practical importance even to the present day (Meikle 1994). Initially we need to come to terms with what constitutes value in human life. Reflecting upon what people commonly consider as good, or as a good, makes evident that most things are valued not absolutely but relatively. Most goods are held in esteem because they serve a certain function, i.e. they are being employed as means to other ends and goods. Aristotle concludes, If, then, there is some end of the things we do, which we desire for its own sake (everything else being desired for the sake of this), and if we do not choose everything for the sake of something else (for at that rate the process would go on to infinity, so that our desire would be empty and vain), clearly this must be the good and the chief good. (Aristotle 1985, 1094a, 17-23). What is this ultimate goal of human life? According to Aristotle, one thing is clear from the beginning, “wealth is evidently not the good we are seeking” (Aristotle, 1985, 1096a, 6). The answer instead has to be gleaned from the natural faculties of the human being (Aristotle, 1985, 1097b, 34). Whatever our private idiosyncrasies, certain capabilities are common to us all. In our most common faculties lay natural objectives. The quest for (goods such as) food, shelter, defense, and procreation, we share with animals. In addition, human beings seek communication, education, and cultivation (Aristotle, 2007, 1253a, 10-39). Yet even these higher goods can be declared functional; they are not necessarily sufficient in themselves, and neither are they necessarily sought after universally.


Happiness, however, is universally pursued, and, moreover, it is sought for its own sake. For formal reasons, it must hence be declared the ultimate good of human life (Aristotle, 1985, 1097a, 28-37). But what, materially, constitutes happiness? His is not a hedonistic theory. Aristotle’s term for happiness (eudaimonia) connotes a well-ordered state of affairs. Aristotle does not extol subjective states of euphoria, received passively through the senses. Rather eudaimonia describes an objective state of being, to be attained by rational activity (Aristotle, 1985, 1098a, 3-8). Individuals are “happy” (well-ordered), when they rationally harmonize their outer and inner world so as to live self-sufficiently (Aristotle, 1985, 1097b, 15-16). Not fortune or fortunes, but a communal and virtuous lifestyle makes for happiness. Yet striving for eudaimonia is not equal to achieving it. After all, to declare happiness one’s goal does not translate into a very specific program of action. How, concretely, is happiness realized then? Aristotle shuns an axiomatic answer, since he disagrees with the (Platonic) assumption one could “deduce” morality from principles (Koslowski 1993, p.26). Rather one must work from experience and develop an understanding of different customs and mores (Aristotle, 1985, 1142a, 18) so as to learn, gradually and habitually, to employ wise judgment in the management of one’s affairs. The good life can neither be defined nor attained in abstraction from the respective communities we live in (Wijnberg 2000, p.334). We need the paragon of concrete persons (phronimoi), who excel in judgment and wisdom. By observing how they master life we gain the requisite normative orientation and by imitating them we develop our own character (Aristotle, 1985, 1140a, 24-1145a, 13).


So, it is of utmost importance that communities and organizations follow good customs and offer decent role-models, since otherwise – instead of teaching us virtue and sound judgment – life will be a school of vice and folly. We must guard ourselves against this always imminent danger of cultural corruption through a constant critical examination of our common way of life. Reflective deliberation and continuous moral discussion are vital for a community so that it can properly assume its moral educative function; herein lies the importance of philosophy for life: thereby philosophy promotes true virtue and sustainable happiness (Aristotle, 1985, 1144a, 4).

Intrinsic and moral relations to material goods According to Aristotle, only by working out a shared understanding of what constitutes a good and dignified life can we, as a society, form an adequate notion of the necessities of life, and hence what to demand from the economy (Solomon 2004, p.1027). Most our pursuits require the intelligent use of resources and benefit from social cooperation. Community with others compensates for the deficiencies of each single individual, but it also provides us with the wherewithal for personal self-perfection. Humans come together in cooperative units, such as households and city-states (today we would add “corporations” to the list), in order to organize common efforts and to manage shared interests. For Man is by nature a political animal. And therefore, men, even when they do not require one another's help, desire to live together; (although) they are also brought together by their common interests in proportion as they severally attain to any


measure of well-being. This is certainly the chief end, both of individuals and of states. (Aristotle, 2007, 1278b, 18-24). For Aristotle the function of economics (oikonomia) is to demonstrate how to govern such public and individual households (oikoi) through adequate norms (nomoi) of conduct. It makes sense to extend this theory of individual and public household management to the management of today’s corporations as well, since they too are communities in which common purposes are pursued by organized efforts (Wijnberg 2000, p.334). Obviously, the differences between a modern, shareholder-oriented corporation and ancient households bar treating them alike. Yet as social organizations they also feature certain structural commonalities that allow the transfer of some insights about the successful management of one to the other. All households and organizations, for instance, must acquire the material wherewithal for their pursuits. As a sub-goal, therefore, the pursuit of wealth re-enters Aristotle’s theory. Hence, the “first question” in economics is “whether the art of getting wealth is the same with the art of managing a household or a part of it, or instrumental to it; (…)” (Aristotle, 2007, 1256a, 3-5). Aristotle’s answer is quite blunt and has brought him a reputation for being an “enemy of business” (Solomon 2004, p.1021): There are two sorts of wealth-getting, (…); one is a part of household management, the other is retail trade: the former necessary and honorable, while that which consists in exchange is justly censured; for it is unnatural, and a mode by which men gain from one another. (Aristotle, 2007, 1258a, 38-1258b, 2). It would, however, be wrong to stamp Aristotle as “anti-business” based upon such quotations (Collins 1987, p.567). In fact, compared to many of his contemporaries and


especially in direct comparison with his teacher Plato, Aristotle comes across as rather “pro-business.” Plato, it is true, aimed for unity-through-identity in the state and strove for commonality in all things. Hence he was suspicious of the exclusive nature of private property and advocated communistic lifestyles. Aristotle, however, advances a political model of unity-in-diversity, and accepts it as part of human nature to want to have secured and secluded areas of self-realization. He acknowledges and even endorses … the pleasure, when a man feels a thing to be his own; for surely the love of self is a feeling implanted by nature and not given in vain, although selfishness is rightly censured; this, however, is not the mere love of self, but the love of self in excess, like the miser's love of money; for all, or almost all, men love money and other such objects in a measure. And further, there is the greatest pleasure in doing a kindness or service to friends or guests or companions, which can only be rendered when a man has private property (Aristotle, 2007, 1263a, 40-1263b, 4). So, for Aristotle private property is an essential “part of the household, and the art of acquiring property is a part of the art of managing the household; for no man can live well, or indeed live at all, unless he be provided with necessaries.” (Aristotle, 2007, 1253b, 23-25) Whereas Plato mistrusted commercial relationships because the grammar of prices does not express the semantics of true value, and so engages the mind to an untruthful world, Aristotle has a rather positive view of commerce and the social relationships it engenders (Schonsheck 2000, p.905). He views trade as a relation where, at least potentially, both partners find their respective benefit (Aristotle, 1985, 1133b1520, 1164b13-23). It is not from anti-commercial sentiment, consequently, that he argues


against some forms of retail trade, but from a view upon what constitutes an appropriate as opposed to an excessive pursuit of wealth. Ideally, our internal concept of the good life defines our relationship with external goods, rather than that inversely material conditions dictate all our intents and purposes. Economic assessments have to be made from the critical evaluation of our needs, not vice versa. This is the understanding that is central to Aristotle’s economic philosophy; that the quantity of material goods we consume must be in proportion to the specific quality of our needs. Economic analysis is thus not free-standing; success in both business and economics cannot be defined by quantitative parameters alone but in reference to qualitative criteria (Wijnberg 2000, p.333). The standards for this assessment we glean from moral philosophy insofar as it deals with the heterogeneous and incommensurable nature of our values (Nussbaum 1990, p.59). Economics is hence fundamentally welded to the moral and political discourse in society. To Aristotle, there can be too much or too little of nearly everything; too much or too little sunshine for a plant, too much or too little food for an animal, and also, there can be too much or too little wealth for a person (Aristotle 1981, 1231b 31). For some, the idea of too much wealth may seem odd. Who would reject having more choices rather than fewer? And so, who would not prefer more rather than less from an all-purpose means such as money? Isn’t amassing property tantamount to stocking up freedom and well being? Aristotle teaches caution against these assumptions. In all realms of life, he advocates moderation and measure, defining virtue as the rational pursuit of a mean between harmful extremes (Aristotle, 1985, 1094b, 14-15). Excess, in other words, is bad in itself.


What constitutes excess depends, however, on a number of factors. Aristotle illustrates the point with an oft-cited example, referring to the very high meat consumption of Milo, a well-known wrestler of his time. It may be that, given his exercise schedule and physique, an enormous amount of meat intake is “good” for Milo; for everybody else it would be bad, because it would be excessive (Aristotle, 1985, 1106b, 5). Applied to the pursuit of wealth, this notion leads to the following characteristics: The man who is more pleased than he ought to be by all acquisition and more pained than he ought to be by all expenditure is mean; he that feels both feelings less than he ought to is prodigal. (…) And since the two former characters consist in excess and deficiency, and where there are extremes there is also a mean, and that mean is best, (…), it necessarily follows that liberality is a middle state between prodigality and meanness as regards getting and parting with wealth. (Aristotle, 1981, 1231b, 31-39).

Extrinsic and social relations to material goods Wealth, to repeat, is for Aristotle not an end in itself but a means to the good life: a subordinate end (Aristotle, 1985, 1096a, 6). As a functional good, wealth “consists in using things rather than in owning them; it is really the activity – that is, the use – of property that constitutes wealth” (Aristotle 1994 1361a, 23). Consequently, wealth is to be evaluated by how it facilitates the well-ordered or happy life. Wealth cannot be maximized, all else being equal. The pursuit of wealth changes the inner and outer conditions in which it takes place. In modern parlance, there are opportunity costs to its quest. Other endeavors are not undertaken; other – worthier – ends might not be pursued


(Lowry 1987, p.234). Such higher ends are, to Aristotle, the striving to perfect oneself internally, and externally, the active participation in one’s political community. Whether an increase in wealth is beneficial is therefore never to be answered in the abstract, but always by a concrete analysis of the foregone alternative uses of one’s time and energy. A crucial question to a modern reader is, how much is enough, and how much would be too much, for the good life (Bernstein, Brocht et al. 2000; Hawken, Lovins et al. 2000)? Aristotle suggests the formula that everyone should “have so much property as will enable him to live not only temperately but liberally; if the two are parted, liberality will combine with luxury; temperance will be associated with toil” (Aristotle, 2007, 1265a 2935). To achieve a balance of wealth that realizes this goal, the government has to intervene in the economy. Although Aristotle does not dwell much on the thorny technical problems of the issue, such as questions of the just measure and proportion of taxation, he makes clear that he means to facilitate fairness in opportunity through distributing and redistributing goods to those who have the most talent to use them (Aristotle, 2007, 1282b, 35-1283a, 2). Legislation, however, can only provide the political framework; it cannot make the individuals and the households “good” without their active contributions. A functioning political community relies also on self-moderation on part of the individuals and the households. There are satisfaction points for each economic unit. To strive beyond those in the pursuit of wealth documents a harmful desire of wanting ever more (pleonexia), that is, people show no moderation mostly because they lack virtue or follow a hedonistic conception of the good (Aristotle, 1985, 1129b 9-1130a, 17). Since


their desires are unlimited they also desire that the means of gratifying them should be without limit. Those (…) seek the means of obtaining bodily pleasures; and, since the enjoyment of these appears to depend on property, they are absorbed in getting wealth (…). For, as their enjoyment is in excess, they seek an art which produces the excess of enjoyment; and, if they are not able to supply their pleasures by the art of getting wealth, they try other arts, using in turn every faculty in a manner contrary to nature. (…), some men turn every quality or art into a means of getting wealth; this they conceive to be the end, and to the promotion of the end they think all things must contribute. (Aristotle, 2007, 1257b, 31-1258a, 18). Aristotle also had a keen sense that such limitless pursuit of riches on part of some impoverishes others and undermines society (Aristotle, 2007, 1323a, 35-1323b, 10). Property, while generally private, should therefore in its use also “be in a certain sense common” (Aristotle, 2007, 1263a, 25), he concluded, because society – as the enabler and guarantor of our possessions – has a stake in them. Like the sailor, the citizen is a member of a community. Now, sailors have different functions, for one of them is a rower, another a pilot, and a third a lookout man, a fourth is described by some similar term; and while the precise definition of each individual's virtue applies exclusively to him, there is, at the same time, a common definition applicable to them all. For they have all of them a common object, which is safety in navigation. Similarly, one citizen differs from another, but the salvation of the community is the common business of them all. (Aristotle, 2007, 1276b, 21-29).


Excessive riches are bad not only intrinsically but also extrinsically insofar as they contribute to the disenfranchisement of the citizen from their community (Putnam 2000; Kasser and Ahuvia 2002). The poor become too destitute to participate in the political functions, while the rich in turn have the opportunity to opt out of their communal duties. It is from this angle that wealth in moderation seems best for all “for in that condition of life men are most ready to follow rational principle” (Aristotle, 2007, 1295b a, 5-6). Aristotle calls on the lawgiver to moderate and mediate, because, in his terse statement, “The equalization of property is one of the things that tend to prevent the citizens from quarrelling” (Aristotle, 2007, 1267a, 37-38). Prophetic is his insight that “men of ruined fortunes are sure to stir up revolutions” (Aristotle, 2007, 1266b, 8-14). This latter view touches upon a broader theme in Aristotle’s thinking: that being too rich is just as problematic, if not more, than being poor. To be sure, Aristotle has no illusions about poverty’s inducements to vice. Yet the infractions of law caused by poverty are petty; they do not endanger society at large. Not so with the felonies of the rich. Their “ambition and avarice, almost more than any other passions, are the motives of crime” (Aristotle, 2007, 1271a, 16-17). “The fact is that the greatest crimes are caused by excess and not by necessity. Men do not become tyrants in order that they may not suffer cold; and hence great is the honor bestowed, not on him who kills a thief, but on him who kills a tyrant” (Aristotle, 2007, 1267a, 12-16). All in all, the state shall act as an enabler of personal perfection in communal interaction. Against the view voiced by some sophists at his time (and by today’s libertarians) that the state should be conceived merely as an insurance agency against violence and fraud, Aristotle states: “But a state exists for the sake of a good life, and not for the sake of life


only: if life only were the object, (…) brute animals might form a state, but they cannot, for they have no share in happiness or in a life of free choice. Nor does a state exist for the sake of alliance and security from injustice, nor yet for the sake of exchange and mutual intercourse; (…). Whereas those who care for good government take into consideration virtue and vice in states. Whence it may be further inferred that virtue must be the care of a state which is truly so called, and not merely enjoys the name” (Aristotle, 2007, 1280a, 31-1290b, 9). Yet a state, so understood, cannot arise from the calculus of barter. The public covenant is more but the inflation of the logic of private contracts to the proportions of a social contract. Let us suppose that one man is a carpenter, another a husbandman, another a shoemaker, and so on, and that their number is ten thousand: nevertheless, if they have nothing in common but exchange, alliance, and the like, that would not constitute a state. (…) an accurate thinker would not deem this to be a state, if their intercourse with one another was of the same character after as before their union. It is clear then that a state is not a mere society, having a common place, established for the prevention of mutual crime and for the sake of exchange. These are conditions without which a state cannot exist; but all of them together do not constitute a state, which is a community of families and aggregations of families in well-being, for the sake of a perfect and self-sufficing life. (…). The end of the state is the good life (...) (Aristotle, 2007, 1280b20-1281a, 1).

Consequences for the philosophy of business and management


We are now at a point where we can fully understand and appreciate Aristotle’s abovementioned distinction between chrematistike and oikonomia, which is central for our application of his theory to contemporary questions of business and economics. Let us begin by letting Aristotle himself illustrate his differentiation between the right and the wrong kind of economic practice.

Of the art of acquisition then there is one kind which by nature is a part of the management of a household, in so far as the art of household management must either find ready to hand, or itself provide, such things necessary to life, and useful for the community of the family or state (…). They are the elements of true riches; for the amount of property which is needed for a good life is not unlimited (…). But there is a boundary fixed, just as there is in the other arts (…) (Aristotle, 2007, 1256b, 27-34).

Money-making, or wealth-getting (chrematistike) are here still integrated into a purposebound and socially embedded household-economy (oikonomia). Yet they can also be torn apart from this context and turn into a boundless pursuit of profit.

There is another variety of the art of acquisition which is commonly and rightly called an art of wealth-getting, and has in fact suggested the notion that riches and property have no limit. Being nearly connected with the preceding, it is often identified with it. But though they are not very different, neither are they the same.” (Aristotle, 2007, 1256b, 40-42); “(…) in this art of wealth-getting there is


no limit of the end, which is riches of the spurious kind, and the acquisition of wealth.” (Aristotle, 2007, 1257b, 28)

Aristotle is fully aware that the unaccustomed eye, when looking at business transactions (chrematistike), cannot always easily make out which is which: “natural” versus “unnatural” chrematistike, in Aristotle’s terms; we might speak of an “embedded” versus “disembedded” pursuit of wealth. Since from the outside we cannot always assess correctly the (moral or immoral, “natural” or “unnatural”) end a given transaction serves, self-regulation becomes all the more important (Donaldson and Davis 1991; Block 1996; Davis, Schoorman et al. 1997). Legislation alone is futile when decision-makers on all other levels do not concur and reign in their chrematistic impulses in favor of genuinely oikonomic goals.

The source of the confusion is the near connection between the two kinds of wealth-getting; in either, the instrument is the same, although the use is different, and so they pass into one another; for each is a use of the same property, but with a difference: accumulation is the end in the one case, but there is a further end in the other. Hence some persons are led to believe that getting wealth is the object of household management, and the whole idea of their lives is that they ought to increase their money without limit … (Aristotle, 2007, 1257b, 31-1258a, 5).

For Aristotle, in the proper management of the economy at large and in regard to single households, everything hinges on the distinction between oikonomia and chrematistike. It


is what makes or breaks individual well-being, the wealth of households, and the welfare of the state. We think that with this distinction between two polar-contrary orientations of economic pursuits Aristotle provides a very helpful tool to think through contemporary dilemmas in the field of business ethics, corporate social responsibility, management theory and social entrepreneurship. This proves true, in our judgment, especially when it comes to questions of corporate self-regulation and corporate governance. Crucial, in our eyes, is not so much Aristotle’s commendation for specific business practices in household management but rather his overall condemnation of a view that privatizes the realm of economic life and severs it from moral or political concerns. Aristotle teaches us to conceive of households and organizations in a very instructive way. They are to him not atomistic entities first, that later and incidentally engage in relationships within their social, cultural, and political contexts but rather they are contextualized ab ovo. To wit, Aristotle sees the individual not as a burgher first and as a citizen later but he casts him immediately as a political being. The household accordingly is to Aristotle not an economic entity first and then a political community, but initially he conceptualizes it an integral unit of the polis. Likewise, we think, one should view the corporation not as profit-machines first and then pose the question how such “mechanical monsters” (Solomon 2004, p.1033) suddenly come to have social responsibilities. Rather, from the outset, we should view firms as corporate citizens with social responsibilities. Moreover, Aristotle’s framework allows for overcoming the unproductive bifurcation between selfish and altruistic transactions in business (Dyck and Kleysen 2001, p.563). By their very nature, business organizations are committed to the interest of their members while servicing the greater community that enables their activities (Solomon


2004, pp.1024-1028). The postulate for ethical conduct in the business field, consequently, neither entails undue self-sacrifice, nor does it require ordinary men to behave like saints. It only demands to realize what the corporation, in fact, is, i.e. a social institution, where behavior is modeled, customs are shaped, and people engage in forms of conduct with moral and political significance (Wijnberg 2000, p.340). To use the perspective of virtue and the lens of a philosophy of the good life in the business context is hence “a way of understanding or (re)conceiving what management is, not as a way to pass moral judgment on it” (Dyck and Kleysen 2001, p.565). Turning a profit and creating wealth, teaches Aristotle, are not the same. It is the latter that legitimizes and limits the former. From this angle, we can extend to the modern corporation the qualified approval of the pursuit of profit that Aristotle accords to all households (Collins 1987, p.570). For the latter a pursuit of profit is acceptable when it is not excessive, does not harm the community, and when it remains subordinated to the pursuit of goals that are economic and not merely chrematistic in nature. The same can be said for corporations.

Maximization versus balance orientation Viewed in that light, the currently prevailing norms and laws (nomoi) for business are strongly influenced by chrematistic ambitions. Scholars in economics and management posit that businesses and their managers adhere to maximization paradigms. Having one objective which can be maximized is hailed by system theorists and economists as the only viable strategy. Also, the chrematistic ambition of maximizing profit is viewed as legitimate because of the positive spillover effects for general society. Jensen (2002), for


example, argues that there has to be a single objective for the firm otherwise one could not purposefully manage it. In addition he claims “Two hundred years of work in economics and finance implies that in the absence of externalities and monopoly (and when all goods are priced), social welfare is maximized when each firm in an economy maximizes its total market value” (2002, p.2). This general principle has indeed yielded unprecedented increases in wealth and accordingly, has been encoded in laws. Current legislation strongly supports the rights of investors aiming to increase total market value. Fiduciary duty requires managers to act strictly on behalf of owners. As a consequence, investors have even been given preferential treatment over other interest groups such as employees, because investors are considered residual claimants. Such institutional logic undergirds the separation of the economic and the social realm. Longstanding management wisdom holds that fiduciary duty all but precludes environmental, social, or governance considerations in institutional investment decisions (Freshfields, Bruckhaus et al. 2006). In Aristotle’s view, such separation of the financial and the political realms signals danger. For him business is part of society and this embedded status needs to be reflected in all strategic decision making. Thus, oikonomic goal setting processes encompass ecological, social, financial, and intergenerational concerns. Oikonomic businesses aim at the creation of overall well-being rather than the isolated satisfaction of a special interest group. Whereas maximization strategies are inherently flawed, according to Aristotle, because they are excess-oriented, truly oikonomic strategies are, by contrast, virtue-based and moderation-oriented.


As maximization strategies are increasingly blamed for short-sighted wealth accumulation to the detriment of the natural and social environment, management scholars have attempted to create alternative management strategies. Several strategic concepts have been developed that aim at reorienting predominantly chrematistic organizations to oikonomic goals. Corporate Social Responsibility, for example, aims to attenuate the effects that financial maximization strategies have on society. Sustainability Management seeks to create a balance of financial and ecological imperatives so as to reign in harm to the environment. The concept of the Triple Bottom Line (TBL) intends to align economic, social, and ecological incentives to bring about an integrated value creation process. Stakeholder management advocates a balanced approach to satisfying all groups that are affected and can affect the success of the organization, not only shareholders. The Balanced Scorecard aims at a balance of general goals of interest (such as learning, financials, product quality etc.). These and further balance-oriented approaches strive for wealth-creation without reckless profit-maximization. Said management concepts have two sets of critics. One group states that it is impossible to manage potential trade-offs without having a primary objective. Therefore, achieving a balance cannot be fully operational as a strategic imperative (Jensen 2002; Sundaram and Inkpen 2004). Another group of critics is suspicious of the above mentioned concepts for normative reasons. They fear that they can be abused to mask profit maximization, for example through reputation management, window dressing or green washing (Swift 2001; Carrol and Buchholtz 2003; Donaldson 2003). This skepticism is not without justification. Since merely chrematistic organizations are conceived to maximize market value, they are geared to financial goals first and foremost. As a result attempts in


grafting social and moral goals upon them often prove futile because of a structural misfit. For that reason many of the balance-oriented strategies fail to transform predominantly chrematistic organizations into true oikonomic organizations, where - at times even at the expense of financial profit - tradeoffs must be made towards the overall balance of societal goals.

Wealth versus well being Maximization of any kind precludes moderation and stands in the way of achieving the golden mean, unless the calculus of maximization is tied to the goal of eudaimonia. The traditional view of neoclassical economics is that if profit is pursued, the utility of everyone is increased as a consequence. Utility is understood as a surrogate for happiness, and hence profit maximization seems causally linked to happiness increases, theoretically. Yet such a clear-cut causality does not exist. Already in Aristotle’s times it was evident that wealth and well-being were neither causally related, nor even highly correlated. It is precisely for this reason that Aristotle distinguishes between the notions of hedonic and eudaimonic happiness. The former, induced by the senses and pleasures, is rather short-lived, and can often be acquired by wealth. Produced by virtuous behavior, the latter aims at excellence in all its dimensions, is less immediate but longer-lived, and cannot be procured through wealth. Recent findings demonstrate that wealth and wellbeing are only correlated up to a certain wealth level. Easterlin (2001) for example notes that GNP growth and growth in well being are actually disconnected in developed societies. Layard (2005) states that beyond a certain income level, well being is influenced mainly by social factors rather than by income. Diener (2004) finds that a


materialistic attitude and a focus on income has a high negative correlation with individual happiness. And Freedman (1978 cited in ; Lane 1993) reports that “the rich are not more likely to be happy than those with moderate incomes; the middle class is not more likely to be happy than those with lower incomes… For the majority of Americans, money, whatever else it does, does not bring happiness.” Diener and Seligman (2004) find that life satisfaction for the richest Americans is as high as it is for the Pennsylvania Amish, who renounce the amenities of modern life. Having said that, it is also evident that poor people, who lack basic amenities such as shelter, are very unhappy. In Aristotle’s words: “no man can live well, or indeed live at all, unless he be provided with necessaries.” (Aristotle, 2007, 1253b, 25-26). Freedman argues that among the poor money does buy happiness and a greater sense of well-being: “within any one society richer people are happier than poor people.” This is in line with findings that show that income correlates with well-being as long as basic needs are not yet fulfilled. Still, a Conference Board study found that those earning more than $50,000 per year – generally considered a comfortable living – were only slightly happier than those making less than $15,000 per year – essentially living in poverty by North American standards. Martin (2005) argues that once a person passes the point of being able to afford ‘the normal cost of everyday life,’ more wealth can increasingly be accompanied by less happiness, not more. And with high levels of wealth come increased complications and worries, including concerns about losing one’s level of wealth.


As such, the connection of wealth and well-being is very unclear beyond the poverty level. How, then, can the economy and business be managed to support higher levels of eudaimonic well being? Many observers deplore the chrematistic spirit of current day businesses and call for corporations to serve society first and put profit second (Arena 2004). Business organizations, however, often understand themselves as legally bound to maximize profit (Ballou and Weisbrod 2003; Jackson and Nelson 2004). While there are several examples of nations adopting alternative objective functions (see Gross National Happiness in Bhutan (Mukherji and Sengupta 2004)), there are thus only few businesses espousing well-being oriented objectives. Moreover, by dint of prevalent governance structures they cater to shareholder interests rather than broader societal concerns. If we intended to create an oikonomic system in Aristotle’s terms, what might business organizations look like?

Consequences for corporate image and strategy Aristotle obviously never laid out blueprints for modern business organizations, but he did define the principles under which successful organizations in general are to operate. Based on these structural insights, we can delineate aspects that allow the construction of a model of oikonomic business organizations. First and foremost oikonomic businesses are embedded within the political and social fabric of the community and cannot stand apart. They view themselves as servicing society, rather than society serving their financial interests. Oikonomic businesses are thus actively pursuing strategies that integrate social responsibility, not as an add-on, but as integrative part of their day-to-day operations (see Porter and Kramer 2006).


Second, oikonomic organizations are guided by their overall contribution to societal wellbeing and thus aim for a balance of different imperatives. Instead of serving one special interest group alone, such as shareholders, they aim at serving all their stakeholders and society at large. Balancing different interests is, to be sure, a difficult task, but one that many evolutionary psychologists believe human beings are well capable of (Lawrence and Nohria 2002; Lawrence 2007). Managerial concepts such as shared-value creation, stakeholder-value creation or well-being creation are currently discussed in their ability to serve as alternative objective functions. As Layard (2005) and Diener and Seligman (2004) delineate, possibilities for measuring well-being exist and many organization could aim for balance in society by simultaneously increasing the dimensions of wellbeing, be they social, mental, spiritual, physical, or financial.

Third, oikonomic organizations need to reflect the balance orientation in their governance structure. Currently, investors are treated preferentially; in many corporate governance systems they are, in fact, the only representatives (e.g. Child and Rodrigues 2004). The governance structures of oikonomic organizations, instead, need to be geared to a fair representation of pertinent stakeholders, and include employee, customer, supplier and societal councils.

Fourth, the role of leadership is a decisive factor. Merely chrematistic organizations are often run by leaders (agents), who are inclined to maximize their own utility opportunistically. In contrast, the leadership of oikonomic businesses is actively interested in creating social value. Those leaders are most likely engaged in what Bass


and Avolio (1994) call transformational leadership: they perceive themselves as stewards of the polis, are guided by moral principles, and inspire their co-workers and followers to moral excellence. Leaders of oikonomic organizations are motivated to serve society at large through their work and want to promote their own utility only in such a manner.

Fifth, the cultures of oikonomic and merely chrematistic organizations are rather distinct. The latter rely on the maximization paradigm, are efficiency-driven and hierarchical. Top-down delegation of the maximization imperative leads to linear processes and rather mechanistic cultures (Schein 1985; Hofstede, Neuijen et al. 1990). Oikonomic organizations, in contrast, are more likely based on discursive reflection. Goals are set in dialogue with relevant stakeholders and together with the employees of the organization. The culture thus created is open, organic and very dynamic.

When looking for alternative business models that reflect the true oikonomic character there are several potential models. For one, it could be argued that the real oikonomic businesses are in fact non-profit organizations. As the term non-profit suggests, these organizations denounce the chrematistic spirit and pursue social goals instead. At the same time these organizations are often able to fund themselves at least partly through earned-income strategies (e.g. universities, museums). Many non-profit organizations, however, depend on outside funding either through the state government, for profit businesses or wealthy individuals. Thus they are wealth consuming and not wealth creating. In a macro-level type of division of labor, for-profit organizations fund nonprofit organizations to provide the social value needed for society to flourish. This goes


against the oikonomic idea, since every organization should be able to generate the necessary funds to remain financially sustainable and in addition provide direct social value.

To be considered an adequate model for oikonomic businesses, organizations need to check their inevitable chrematistic endeavors through truly oikonomic goals. Hence they will do both: create wealth and use it in morally acceptable ways. Shareholder value creation is hence not an illegitimate but a subordinated concern for an oikonomic enterprise. From a primary and exclusive objective of business policy the chrematistic aims of profitability are being dethroned to secondary and morally integrated goals.

So called Social Enterprises or for-benefit organizations certainly fit that bill, as they are driven by a social purpose and are economically self-sustaining. These businesses seek to be socially, ethically, and environmentally responsible (Jackson and Nelson 2004; Savitz and weber 2006). Like non-profits, these bodies can organize in pursuit of a wide range of social missions. Like for-profits, they can generate a broad range of beneficial products and services that improve quality of life for consumers, create jobs, and contribute to the economy (Strom 2007). Social Enterprises or for-benefits seek to maximize benefit to all stakeholders, but all economic surpluses generated are invested to advance social purposes. For-benefits are a hybrid of current businesses and non-profit organizations. They strive to be democratic, inclusive, open, transparent, accountable, effective, efficient, cooperative, and holistic. At all levels, they aim to link private interest and public benefit. Examples of such organizations can be seen in the Grameen bank, and the various Grameen businesses which Muhammad Yunus labels social businesses.


These businesses are basically non-loss businesses providing benefit to customers and society at large. Grameen Danone, for example, provides yoghurt with added nutrients to provide every child in Bangladesh with the necessary diet to grow up healthy. Grameen Bank provides the poor without access to credit with micro loans. Cooperatives of all kind also are highlighting oikonomic business alternatives, Mondragon in Spain, being one of the most successful (Kasmir 1996).

Conclusion Going back to the origins of economic philosophy, we can discover important ideas that help our understanding of current economic tendencies. Aristotle predicted the problems we are currently facing by simple psychological insight some two thousand years ago. With his guidance we can take a step back and examine the current economic landscape. The environmental damages and low levels of happiness can all be explained with Aristotle’s thinking. Aristotle’s contributions can therefore help us to reorient the discourse regarding the role of corporations in society. From his thoughts we can infer alternatives to right the current aberrations of excess that undermine our long-term survival. Based on his understanding we can conceive of alternative business organizations that create healthy wealth. The maximization of shareholder value is most likely not going to get us there. Examining the potential of alternative objective functions, specifically of well-being as an organizing principle seems promising. Such alternative organizing principles can bring about a fundamental shift in management. They can open new strategic approaches to business, create competitive advantages, open new venues for employee management, and thereby increase organizational and societal well-being. Wealth created in such a fashion is sustainable in the long run and conducive


to eudaimonic happiness of all participating stakeholders. Management and Leadership in the 21st century needs to learn that serving society while making financial profits is a requirement for the future. The decisive shift in strategy must come from a change in corporate philosophy. Any corporation that wants to sustain its reputation and ensure its long-term success needs to understand that. By moving from a merely chrematistic to an oikonomic perspective, managers can harness their powers to do good while remaining poised to do well financially.


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