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Milton Friedman: Social Responsibilities Are of Individuals, Not Businesses

Milton Friedman argues that the social responsibility of businesses is to increase profits for their shareholders. He makes three key points: 1) Corporate executives are employees of shareholders and have a responsibility to maximize profits within legal boundaries, not pursue social causes. Doing otherwise would be imposing taxes without democratic consent. 2) Using corporate funds for social causes denies shareholders control over how their investments are spent and substitutes executive judgment for market mechanisms. 3) Businesses are not effective vehicles for social responsibility compared to democratic political processes, and invoking social responsibility is an inappropriate way for businesses to bypass democratic will formation.

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Zakiah Abu Kasim
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45 views1 page

Milton Friedman: Social Responsibilities Are of Individuals, Not Businesses

Milton Friedman argues that the social responsibility of businesses is to increase profits for their shareholders. He makes three key points: 1) Corporate executives are employees of shareholders and have a responsibility to maximize profits within legal boundaries, not pursue social causes. Doing otherwise would be imposing taxes without democratic consent. 2) Using corporate funds for social causes denies shareholders control over how their investments are spent and substitutes executive judgment for market mechanisms. 3) Businesses are not effective vehicles for social responsibility compared to democratic political processes, and invoking social responsibility is an inappropriate way for businesses to bypass democratic will formation.

Uploaded by

Zakiah Abu Kasim
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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Milton Friedman

Social Responsibility of Business Is to Increase Its Profits (Friedman)


-a corp executive is an employee of the owners of the business. He has a direct
responsibility to conduct the business in accordance with owners desires, which
generally will be to make as much money as possible while conforming to the basic rules
of society
-an executive is also a person in his own right and as a person he may have other
responsibilities that he recognizes or assumes voluntarily (family, society, charity) but in
these respects he is acting as a principal, not an agent. He is spending his own money or
time, not the money of his employers. Social responsibilities are of individuals, not
businesses
-stockholders can separately spend their own money on a particular action if they wished
-the exec is exercising a distinct social responsibility rather than serving the stockholders
if he spends the money in a diff way than they would have spent it. But this is then
imposing taxes and deciding how taxes are to be spent. Then he is a government!
-this directly contradicts how we set up our gov: executive then becomes simultaneously
legislator, executive, and jurist and all guided by general exhortations. If this is how we
want society, then we should elect exec thru a political process
-the doctrine of social responsibility involves the acceptance of the socialist view that
political mechanisms, not markets, are the appropriate way to determine the allocation of
scarce resources to alternatives uses
-another point is how is an exec to know how to best spend the money? His main
expertise is in running his co, but not about charity or inflation. Not economically
efficient
-others yet say that problems are too urgent to wait on the slow course of the political
process and that social responsibility by businessmen is quicker and surer but this is
exactly against democracy! They didnt attain majority favor and are doing something
that they cant do thru democratic procedures
-social responsibility is one way for a corp to generate goodwill as a byproduct of
expenditures that are entirely justified in its own self-interest. If a corp uses social
responsibility for its own interest then ok!
-businessmen are shortsighted and muddle-headed in matters that are outside their
business and arent efficient carriers of social responsibility
-unanimity is the political principle that governs markets: no individual can coerce any
other, all cooperation is voluntary, not everyone needs to participate vs. conformity is the
pp that underlies the political mechanism: individual can vote but if he is overrules then
he must oblige. Social responsibility of the corp would extend the scope of political
mechanism to every human activity
-the only social responsibility of a business is to use its resources and engage in
activities designed to increase its profits so long as it stays within the rules of the
game. It should engage in open and free competition without deception or fraud

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