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Milton friedman s views on business and

Of course, I'm talking about Miltnot Tom. In a 1970 Times magazine article, the economist Milton Friedman argued that businesses' sole purpose is to generate profit for shareholders.

Moreover, he maintained, companies that did adopt "responsible" attitudes would be faced with more binding constraints than companies that did not, rendering them less competitive. The occasion of Friedman's recent passing offers an opportunity to revisit that argument. It remains the basis for many companies' contention today that "corporate social responsibility," "sustainable business," and other such monikers are a distraction from their core obligation: That is, acting "responsibly" risks reducing profits or forgoing revenue in the name of social good.

For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire 'hardcore' unemployed instead of better-qualified available workmen to contribute to the social objective of reducing poverty.

Insofar as his actions in accord with his 'social responsibility' reduce returns to stockholders, he is spending their money.

  1. Keynes argued that these unfair punishments would make the region politically unstable. He advocates that the shareholders can then decide for themselves what social initiatives to take part in rather than having their appointed executive, whom they appointed for business reasons, decide for them.
  2. Friedman's View A reader asks.
  3. Key Tenets of Milton Friedman's Theories The following are some lessons that can be taken from Friedman and his economic theories.
  4. He graduated from college in 1932 and went on to earn a Ph. Keynesian Economics John Maynard Keynes and Milton Friedman were two of the most influential economic and public policy thinkers of the 20th century.
  5. Please help improve this article by adding citations to reliable sources.

Insofar as his actions raise the price to customers, he is spending the customers' money. Insofar as his actions lower the wages of some employees, he is spending their money. They can do good -- but only at their own expense. For example, we understand that ignoring environmental and social issues can be bad for business.

Companies that pollute their local communities risk poisoning their customers.

Milton Friedman

Ignoring the state of the local school system risks depleting the pool of qualified workers. Abusing workers risks higher turnover and training costs, not to mention greater difficultly attracting the most qualified candidates. It's never that simple, of course. In a globalized world, companies are free to exploit or pollute a local community, then move on to the next place.

Unfettered markets and exploitation-friendly tax schemes reward companies for acting in their own interests in the name of economic growth and competitiveness. So, Friedman's philosophy still reigns supreme. Friedman's philosophy is far from universally shared, even in the business community. In 1979, for example, Quaker Oats president Kenneth Mason, writing in Business Week, declared Friedman's profits-are-everything philosophy "a dreary and demeaning view of the role of business and business leaders in our society.

Friedman doctrine

Getting enough to eat is a requirement of life; life's purpose, one would hope, is somewhat broader and more challenging. Likewise with business and profit. What American business leaders too often forget is that this means all the assets employed -- not just the financial assets but also the brains employed, the labor employed, the materials employed, and the land, air, and water employed.

Action, and even discussion, on some of these issues would be decades in coming. Even when it did take place, the discussion involved only big companies.

There are signs that companies are somewhat more enlightened today when it comes to understanding their social responsibility.

  • Friedman brought about a renewed emphasis on prices, inflation and human incentives, a direct counter to Keynes' focus on employment, interest and public policy;
  • Only 11 percent say there is no board review on these issues;
  • Keynes' theories gave rise to a new dominant paradigm in economic thought, which was subsequently dubbed Keynesian economics;
  • After his work on income inequality , he focused on tax research and statistical analysis;
  • Government failures can be as bad, or worse, than market failures.

Among the key findings: Two-thirds say corporate citizenship and sustainability issues are of growing importance for their businesses. Another 35 percent without formal programs conduct regular reviews of these activities.

Most companies—71 percent—report publicly on citizenship and sustainability performance. Only 11 percent say there is no board review on these issues. It's progress, to be sure, but painfully slow, given the scope and urgency of some of our planet's social and environmental ills. So the debate continues unabated: What, exactly, is businesses' responsibility?

Milton Friedman and the Social Responsibility of Business

To "do well by doing good"? A simple, universally accepted answer is unlikely. The good news is that in the nearly four decades since Milton Friedman elevated the question, the conversation has become robust. And there is clear support for the idea that companies can operate in a way that strengthens their various stakeholders and still provide solid, sustainable returns for their shareholders.

There's a growing case to be made that they can, they should, and eventually must.