Milton Friedman on the Social Responsibility of Business

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The Fourth Argument Against Social Responsibility
If business persons support the idea of social responsibility, this may well give a wrong signal to the government, which may then wrongly assume that business persons do not oppose social responsibilities, and which may then put those social responsibilities into law—for example, the laws of price and wage controls. Once political mechanism is extended to the market and private human activities, the foundation of free market and free society will be threatened.
Milton Friedman on the Social Responsibility of Business
Friedman, “The Social Responsibility of Business Is to Increase Its Profits”
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Introduction
The main problem addressed in the essay is: Does business have any social responsibility? The concept of social responsibility may be defined as follows: Businesses or business persons have social responsibility if, and only if, they should expend business resources for socially beneficial purposes even when such expenditures are not designed to help the business achieve the ends for which it was organized. Milton Friedman’s answer to the above problem is: No, business does not have any social responsibility.
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Friedman’s answer may be put in terms of two theses:
a.
Generally speaking, business corporations and their GEOs should not expend their business resources for socially beneficial purposes when such expenditures are contrary to the ends for which the businesses are organized—i.e. the maximization of profits; The only proper thing for businesses or business persons to do is “to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom”.
b.
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By “the basic rules of the society as embodied in ethical custom”, I understand the term as meaning the most basic moral principles, such as
a. b. c. d.
Be fair; Be honest; Keep your promise; Do not trespass (the first generation) human rights.
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Friedman said, “[There] is one and only one social responsibility of business—to use its resources and engages 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.” What are Friedman’s arguments for his view?
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The Second Argument Against Social Responsibility
If a GEO spends business’ money for the purposes of social responsibility, he would be playing the role of a government in collecting taxes and redistributing them to the poor. But he is doing something inappropriate, since unlike government officials, he is not elected by people, since how he handles the taxes is not checked or monitored by people, and since there is no machinery to assess the ways he collect and spend taxes.
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If the corporate executive spends money for socially beneficial purposes even when such expenditures are not designed to fulfill the tasks assigned to him by his employers, he is using others’ money without their authorization (or even against their will). And this is something he ought not to do. Similarly, if stockholders require their corporations to spend resources for the aforementioned socially beneficial purposes, they are also using other stockholders’ money without their authorization (or even against their will). And this is also something they ought not to do.
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The First Argument Against Social Responsibility
A corporate executive is an employee. “He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom”.
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The Third Argument Against Social Resቤተ መጻሕፍቲ ባይዱonsibility
If a GEO spends money for ‘social responsibilities’, he will bring about very bad consequences:
a.
b.
Since the GEO is not an expert on helping the poor, he will spend those ‘taxes’ in an inefficient way; Since he will reduce the business’ profits and the price of the stock, his employers may well fire him, and his customers and employees may desert him for other producers and employers.
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Friedman’s reply:
a.
Adam Smith’s idea of the invisible hand: In a free market, each individual, by pursuing his own interest, often promotes the interest of the society more effectively than when he really intends to promote it. It is therefore unnecessary and counter-productive to exhort businesses to act directly to promote the common good. The critics take business donation as a quicker and surer way to help solve pressing current problems. But this is inappropriate. They fail to persuade the majority of citizens to make the government to direct substantial resources to solve what they take to be pressing problems. They fail to attain their ends by democratic means, and they then seek to attain their means by undemocratic means.