When entrepreneurs break the law
What do you think about entrepreneurs bending the rules when borderline or actually illegal?
When is it okay and when is it NOT okay?
Quite obviously, many if not most laws are absolutely NOT okay to break. You shouldn’t break laws against murder, fraud, human trafficking etc.
If your answer is "it is never okay to break the law", then here are a few examples of entrepreneurs that did illegal things during the covid-19 pandemic:
- Distilleries started producing hand sanitizers to address shortages while average folks began sharing DIY sanitizer recipes online.
- A few doctors converted breathing machines to ventilators themselves using 3‑D printed parts to address shortages for their patients even though the FDA had not yet authorized it.
- A 17‐year‐old used his coding skills to build one of the most popular coronavirus-tracking websites in the world (ncov2019.live) after noticing how hard it was to use government sites
- Philanthropists like Bill Gates were also funding their own testing solutions. Federal bureaucrats actively tried to prevent it - something that even the New York Times criticized as government overreach
"A pandemic is no time for bad governance." (Adam Thierer)
Know who else broke the law?
Galileo, Gandhi, Mandela, Jesus, Schindler … you get the point.
We heroize people who broke the law and were morally right, we don’t heroize people who broke the law but were wrong, like Ted Bundy.
The simple ethical principles:
- Morality is independent of law; the law can be right and just, and the law can be wrong and unjust - therefore you are not excused from doing what's right instead of what's wrong just because it's the law
- It can be OK to break rules that are wrong, immoral or ineffective; otherwise, you'd have to say "might is right", when might = the law
- You are only excused if what you did was indeed morally correct; if you are, you might become a hero - if you weren’t, you might become a villain
But you are never excused from exercising good moral judgment, especially not if you are in a position of power or responsibility.
Yet often it is the other way around: people in positions of power and responsibility spent little to no time thinking about the moral implications of the rules they make, while people not in positions of power are expected to follow the rules regardless.
Putting aside social morality and civil disobedience, let's look at rules governing entrepreneurs and markets, most of which revolve around information and its manipulation (fraud in worst case).
1. asymmetric information between seller and buyer - aka the lemon problem
2. front-running ... where the market/settlement mechanisms is not independent
3. moral hazard ... behaviour based on privatising profits and socialising losses (cough GFC).
You have to design specific mechanisms to counteract ... eg the various types of auctions (english/dutch) to try to foster fair and efficient transaction markets. So rules are to shape these economic exchanges for price discovery which is not-distorted and therefore feed into decision making for resource allocation. Bad data (eg hidden inflation) screws up everything.
Very interesting topic!
And something I bang my head against often...
"Morality" is a vague term that can only be understood in a specific context of time and place, as refers to a specific group of people. So I will intentionally not comment on that.
I'm a positivist that think laws are product of the social contract, so nothing good can come out of just "not respecting them". Laws and regulations are our way of molding the society to our desires. In our democratic society, they are meant to be changed by the majority or at least in agreement with them.
That said, it is not "forbidden" to break the law (there's no uber-law punishing the individual for breaking any law), but breaking it implies consequences that need to happen in order for our societies to function properly.
Now a consequence of breaking a law might be punishment... or the law being changed.
Without the rule of law, there will be other types of ruling, which most of us agree it didn't help humanity as much...