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The naturalistic fallacy was identified by G. E. Moore (1873–1958) in Principia Ethica, where it provides the grounds for his rejection of evolutionary and hedonistic ethics. The fallacy is important to consider in business ethics since evolutionary and hedonist positions are still endorsed by some contemporary theorists in this area.

The fallacy includes a failure to distinguish between identifying a property that good things have in common and providing a general account of moral goodness. This failure prompts a fallacious assumption that by identifying a property shared by good things, one has succeeded in providing an account of goodness. For example, good things may have in common that they are desired or natural. Being desired or being natural, then, would be properties shared by good things. The fallacy is committed in accepting that because good things share either of these properties, good means the same as desired or natural.

The naturalistic fallacy is often conflated with the is-ought fallacy. The is-ought fallacy arises on assuming that a claim concerning what should or ought to be the case follows directly from a claim about what is the case. For example, one would commit the fallacy in assuming that because a business does or can make a profit by price-gouging, a business should or ought to make a profit by price-gouging. While the naturalistic fallacy is related to the is-ought fallacy in that it concerns a faulty assumption that prescriptive claims follow directly from descriptive claims, it is more specific in its focus. The naturalistic fallacy includes only those cases in which it is assumed that because good things all have a certain property in common, the property is the same as goodness.

As its name indicates, the naturalistic fallacy is usually identified in cases in which the property in question is a natural property. However, the same conflation may occur concerning nonnatural properties. For example, the fallacy would be committed in reasoning that since businesses that are good are also those that make a profit, making a profit or profit making means the same as good. While it may well be that businesses having the property of being profit making also have the property of being good, to assume that profit making means the same as good is to commit the fallacy.

Moore uses his well-known open-question argument to support the claim that this is a fallacy. This argument brings into relief a finer point about the linguistic source of the conflation occurring in the fallacy. Assuming that a single property, such as in the example of being profit making above, is the same as being good commits one to claiming that the words profit making and good have the same meaning. But if two words have the same meaning, then in any claim stating that profit making and goodness are the same, the is must assert their identity. For example, the is in the statement “profit making is profit making” asserts that profit making is identical with profit making. This statement is uninteresting because it is not informative. In contrast, in the statement “profit making is good,” the is works to attribute a quality or property of goodness to profit making. This claim is informative, indicating that the word is is that of predication rather than identity. As Moore explains this difference, we can see that the is in “profit making is good” is not the is of identity, because we can ask a significant question about this assertion that we cannot of the other. While it is not a significant question to ask whether profit making is, after all, profit making, to ask whether profit making is, after all, good is to ask a significant question. But this question must remain open; the question always has significance because profit making is not the same as goodness.

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