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Dr. Milton Friedman

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Submitted By Adrianne
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Dr. Milton Friedman

1. The Social Responsibility of Business Is to Increase Its Profits." that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution

In 1970 Milton Friedman wrote that "there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." That's the orthodox view among free market economists: that the only social responsibility a law-abiding business has is to maximize profits for the shareholders.
The most successful businesses put the customer first, ahead of the investors. In the profit-centered business, customer happiness is merely a means to an end: maximizing profits. In the customer-centered business, customer happiness is an end in itself, and will be pursued with greater interest, passion, and empathy than the profit-centered business is capable of.

2. Friedman is careful to note that the corporate executive has direct responsibility to his employers, the shareholders. He is also careful to argue that this is not necessarily the manager's sole responsibility; there is, after all, the duty to conform to the basic rules of the society. It is not clear if the latter is a moral responsibility or a social responsibility--i.e., if it is a duty the manager has as a moral person, or if it is a duty the manager has as a result of institutional obligation. I think we can safely conclude Friedman intends the former.

In either case, however, Friedman emphasizes the concept of agency in arguing that the manager's most direct obligation is to conduct the business in accordance with the desires of shareholders. Friedman is here reinforcing the free-market view that desires' are not the appropriate subject of moral scrutiny. If shareholders
'desire' profit, so be it; if consumers 'desire' high-fat foods, or environmentally-destructive products, or sex-for-hire, so be it. While I might like to think that shareholders 'desire' more than profit--that many are concerned about the social consequences attending the creation of corporate wealth--I am not that naive.

3. So on to political consequences. This argument depends for its force largely on the claim that corporate managers are ill-equipped to make tough allocation decisions. Yet this is largely what managers do: decide how, on what basis, and to what direct purpose to apply the scarce corporate resources of land, labor and capital. While the ambiguities attending controlling inflation might be daunting to even the best trained macro-economist--how many of us really understand how Alan Greenspan develops monetary policy?--why ought not managers to be subject to simpler prescriptions along the lines of those imposed by professions on their membership, such as that they not knowingly do harm? Recent notable cases of moral lapses on the part of corporate leadership--Dow
Corning, for example--suggest that managers who simplify their decision processes to a single-minded profit objective do so to their own peril...and to the peril of the companies they manage, and to the peril of the owners whose interests they represent. And--it is news to me that union leaders have raised more vociferous objections to Government interference with labor markets than have corporate managers.…...

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