In this essay I evaluate Milton Friedman’s essay: “The Social Responsibility of Business Is to Increase Its Profits” in 1970, on the Social Responsibility of a business and his theory, which is called the “Efficiency Perspective”. In every article and book that I have read about social responsibility, Friedman’s “Efficiency Perspective is placed centrally. During my research I found that Friedman is often criticized for being too classical. Friedman believes that manager’s foremost objective or even moral obligation to the firm should be to maximize profits always. There is however one condition that makes his perspective more complicated, not only for me, but also for several well-known authors. According to Friedman, the managers’ …show more content…
It can argue that both Friedman’s thesis and the current practice of CSR lead to a lack of professionalism. Imagine we ask the question: what makes a good shoemaker? For Friedman, it is making plenty of money. For the CSR zealot, it is spending Saturday afternoon volunteering in the local animal shelter. Yet common sense tells us that neither is true, that the good shoemaker is the one who makes good shoes at affordable prices, because shoes are something that everyone in the community needs.
Medieval philosophers – unlike early Christian writers who generally took a dim view of mercantile trade – appreciated that merchants perform a useful social function, not by maximizing the profits of their shareholders, but by relocating goods from areas of abundance to areas of scarcity, contributing to a more equitable distribution of the earth’s resources and to the satisfaction of legitimate wants. The function of a business – mercantile or otherwise – is not, according to this reading, to maximize private profit by making as much money as possible, but to maximize the common good by making goods and services available to those who are in need of them. True corporate social responsibility is not an ‘extra-curricular’ activity, but the practice of the virtues proper to a particular occupation and the will to act in accordance with the truth that the purpose of one’s profession is to fulfill as perfectly as possible some definite function within the community.
Milton Friedman argues that persons may choose to undertake social responsibilities to their communities, churches, or nations, and devote their own incomes to causes that they deem morally worthy. But, he adds, if corporate executives attempt to take such social responsibilities or to direct the corporation’s profits to such personal causes, without approval from the shareholders, then:
When most of us think of the words opportunity cost, price, production, and service, we think of something related to obtaining or giving something. According to Merriam-Webster, opportunity cost is defined as, the added cost of using resources (as for production or speculative investment) that is the difference between the actual value resulting from such use and that of an alternative (as another use of the same resources or an investment of equal risk but greater return). Price, is defined as the amount of money that you pay for something or that something costs. Production, is defined as the process of making or growing something for sale or use, and lastly, service, is defined as, the occupation or function of serving. Milton Friedman, an American economist, would say, nothing in live is free, that is, if you want something, you have to give something. These four words can all be tied together and used to give and receive. We can either use it to our benefit or simply perform it. We could get the most out of life using these four words, opportunity cost, price, production, and service, by primary accepting that everything in life is obtained at a cost, acknowledging that they can be used as forward-looking concepts, and agreeing to do everything yourself instead of hiring someone to do it in your place.
Friedman, M. (1970, September 13). The social responsibility of business is to enhance its profits. The New York Times Magazine.
First thing let us start with a little overview of what Milton Friedman exposed in his article. It seems that the whole point of his essay revolves around one basic statement which clearly says that the only social responsibility of business is to use its resources and engage in activities designed to increase its profits so long it stays within the rules of the game (Milton Friedman, the social responsibility of business is to increase profit).
The prevalent view of business’ social responsibility is Milton Friedman’s agent-owner theory. His thesis mainly says that“ There is one and only one social responsibility of business – to use its resources and engage
What Friedman implies is that shareholders should only be concerned with maximizing profits and not be obligated to be “socially responsible.” In that case, the manager would only have one priority, to maximize profits. However, what if that manager determined that social endeavors is the best option to maximize profits? This would make the corporation socially responsible while still maintaining maximum profits. The argument presented by Friedman in this case is that while the manager is performing as expected by maximizing profits, this type of “social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.”
Milton Friedman’s shareholder theory of management says that the purpose of a business is to make money for the owner or the stockholders of the business. Friedman says that there is only one social responsibility for the business: to use its resources in order to increase
Nevertheless, Friedman pointed out that the profits has taken the firms in to the hand of business intellectuals by which Friedman recommend that the financial system by which the organisation run its business is in the restricted responsibility protection which makes the organisations to privatise their profits (Friedman 1970 pp. 177-184). Friedman also suggested that according to him the shareholder theory in terms of socially responsible can only increase the profit. But on the other hand shareholder theory of Edward Freeman completely support the theory of shareholder towards its role to be socially responsible in the society and maximising the profits for the benefits of shareholders within the firms and society as well (Freeman 2008 pp. 162-165).
Throughout the nineteenth century many economists have had a great amount of influence on domestic and international policies with the United States (US). With events like the Great Depression, the Post-War Boom, the “stagnant seventies,” and Reaganomic Era, a variety of economists have been able to take part in economic movements and policies. One of the most popular economists was Milton Friedman, who argued in favor of monetarist economics and stabilized policies.
Milton Friedman. “The Social Responsibility of business is to increase its profits” from business ethics: A Philosophical reader, Thomas I.White, ed(s)., Maxwell Macmillan Canada, 1993, 162-167
Milton Friedman was an American economist, statistician and writer, who had a massive impact on the research agenda of the economics profession. His famous words “the only responsibility of business is to increase its profits” (Friedman, Milton. 1970) led to many controversial debates on whether businesses should have ethics or if profit should be their main goal. Corporate social responsibility has many definitions, as its interpretation is quite loose, so I have chosen one that relates the most to this essay, given by the World Business Council for Sustainable Development, in 2000: “Corporate social
The Milton Friedman paper strongly supports my views on "what is economics", and the importance of science in acquiring and presenting economic knowledge.
a. Milton Friedman’s philosophy of corporate responsibility is that “social matters are not the concern of business people and that these problems should be resolved by the unfettered workings of the free market system”. As harsh as it may sound, what he mean course to say was that a business has “to make as much money as possible while conforming to basic rules of society”. Meanwhile, Archie Carroll’s philosophy states that a business has “four kinds of social responsibilities” that a firm must address in their corporate social responsibility, which are economic, legal, ethical and philanthropic duties. Clearly they have two very different views. Friedman sees that a business’s ultimate goal is to generate profits, then comes the legal and ethical responsibilities it must fulfill. To Friedman, there is no need to be philanthropic because the firm’s job is only to make money for the economy, and it is the economy’s obligation to be philanthropic with the profits. Carroll agrees with Friedman that a company must be profitable, then be legal by obeying the law, and be ethical to avoid harm. However, Carroll believes it is also desired and in the best interests of the company to be philanthropic because it will “create a good corporate citizen”. Friedman has an economic view whereas Carroll has a social view. In my opinion, Archie Carroll’s philosophy on corporate social responsibility is more accurate. The social pyramid model he made to go with his views makes
For a long time now, there has been much debate over the social responsibility of a business. Friedman is one of the most influential
Milton Friedman wrote in his famous 1970’s article in The New York Times Magazine, that “the one and only social responsibility of business, is to increase profits for shareholders.” Milton Friedman's view on business responsibility accentuates the importance of maximizing firm's value. He pointed that the “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, engaged in open and free completion without deception or fraud’’ and by taking on the burden of social cost, the business becomes less efficient (Milton Friedman, 1962).