I don't know if anyone else in the class is also having this difficulty, but I found myself at a loss for a real counterargument to Milton Friedman's point of view on social responsibility in business. I didn't want to agree with him, but I couldn't find a philosophically sound counterargument. This has been bothering me for a few days.
I just came up with one such counterargument, however, and I'd like to see if people agree with it. It goes like this: In an ideal world, corporations would seek only to maximize profit and shareholders would allocate their returns according to their conscience. The rate of economic growth would be maximized and social programs would be funded according to their perceived value, which is as close as we can get to a measure of their actual value. However, inherent limitations in the choice sets available to people and to companies make this balance impossible.
This dawned on me because I was hungry, and so I started thinking about different kinds of food. Just like Friedman says there are two activities that an organization can engage in (profitable activities and socially responsible activities) let's say that there are two types of food: delicious food, and healthy food. Milton Friedman would say, "When I want delicious food, I want my food to just be purely delicious. If I want healthy food, it should just be healthy. And if I want a combination of the two, I'll mix them together in whatever way I choose, but don't you go charging me for making my healthy food more delicious!"
In fact, some foods are both healthier and more delicious than others, and besides, nobody is going to calibrate food trade-offs exactly (try eat a seventh of a hamburger.) It's probably the same way with organizations allocating their resources: the trade-off is a false duality, and there does not exist a continuum between investments in social responsibility and in profitable investments.
Sorry for the wordy post... Any thoughts?
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I would still agree to what we discussed in the class - the environment is changing and in this changing environment, profit making strategies are changing (adapting to merge with social causes). This still validates Friedman's ideology.
ReplyDeleteIn your example - the primary responsibility of an individual is to satiate his hunger. Based on money he is willing to spend and the cost of the choices available he will make an automatic trade-off between healthy and tasty food. Now if someone comes with a new option to provide healthy and tasty food at a cheaper price then he can still make profits and help people chose healthy options.
I also found myself reluctantly agreeing with Friedman's argument and initially unable to counter it. I like Adam's analogy, but for me, the most convincing counter to Friedman came up in class when someone highlighted the slipperiness of Friedman's own terms. Friedman says that corporations should follow the law and social customs and norms. Depending on how you define social norms, this leaves a lot of room for socially responsible business. Also, if disruptive innovations are those innovations that create new markets, then socially responsible entrepreneurs are simply entrepreneurs who see a latent opportunity to introduce a product or service that meets a desire or need that customers don't even know they have yet. Before Ethos water, most people didn't know they wanted the water they drank to make them feel like they were in solidarity with people dying of cholera, but Ethos saw an opportunity to use people's desire to be good to sell their product.
ReplyDeleteThis still strikes me as a rather unappealing and self-serving argument, but then, that is what Friedman says the corporation is supposed to do - serve itself, which will serve its shareholders.