What is Milton Friedman’s position on the social responsibility of a business? Discuss two (2)
assumptions and 4 problems with this position.
According to Milton Friedman, a company's social responsibility is to increase profits. Friedman's controversial idea heralded a new era in American economic life, one in which "Greed is Good" and profit is the only true purpose of business. Many others, on the other hand, saw it as a relevant capitalist manifesto that highlighted the correct function of executives in our free market economy.
Friedman's central assumption is that all shareholders are solely concerned with generating economic profits. This is not the case in reality. Because they are human, the stockholders show sympathy for others. He fails to show that corporate social responsibility is inherently an unjust and socialist practice. If these are essential, and regulating them is a key social goal, then the political process and the legal system are the best places to “establish a legal framework.” Property rights and liability regulations that hold a company liable for pollution push the company to account for external costs; companies internalize the costs. The firm's earnings are still maximized, but they also include pollution expenses as part of the cost of doing business.
How are businessmen to know what their social responsibility is if it isn't to maximize profits for stockholders? Is it possible for self-selected private individuals to determine what is in the public interest?” Imposing vague social responsibilities that can be interpreted arbitrarily by company executives is neither efficient nor dependable. It is far preferable to create a legal structure that encourages firms to internalize expenses in a clear and transparent manner. Friedman's argument focused on the methods rather than the goal. He was suggesting that, despite the fact that such concepts may appear contradictory at first, single-minded profit maximization (together with an adequate legal framework) is more likely to achieve social good than exhortations for companies to be socially responsible.