Lecture Notes: Milton Friedman's "The Social Responsibility of Business is to Increase its Profits"

Introduction

• Speaker: Dr. Gregory Sadler, philosophy professor and founder of Reason I.O.
• Purpose: Discusses shorter videos focused on core philosophical concepts.
• Key Topic: Milton Friedman's views on social responsibility of businesses.

Key Ideas from Friedman's Essay

• Main Thesis: Business's primary responsibility is to increase profits.

Clarifying Responsibilities

• Vague Terms: "Social responsibility" is often analytically loose.
• Who Can Have Responsibilities?
  • Corporate Executive/Manager: Central to the discussion.
  • Stockholders: Can advocate for corporate social responsibility.
  • Individual Proprietor: Can use their own resources for social aims without issue.
  • Unions: Typically reject social responsibility when it conflicts with members' interests.

Corporate Executive's Role

• Responsibilities: Direct responsibility to employers (owners).
  • Align business conduct with owners’ desires, typically profit maximization.
  • Operate within legal and ethical norms.
• Personal Responsibilities: Executives can personally engage in charity using their personal income.
• Limitation: Should not use company resources for personal social aims.

Corporation as an Entity

• Artificial Person: Can only have artificial responsibilities.
• Sector Responsibility: No responsibility for business as a whole sector, only specific corporations or individuals.

To Whom are Responsibilities Directed?

• Primary Stakeholders:
  • Stockholders/Owners: Main focus for corporate executives.
  • Customers: Should benefit from efficient business practices (lower prices).
  • Employees: Efficient business should allow for better wages.

Examples of Social Responsibility Impact

• Examples from the 1970s:
  • Inflation Control: Avoid raising prices to prevent inflation.
  • Pollution Reduction: Expenditures beyond legal requirements.
  • Hiring Practices: Employing the hardcore unemployed despite inefficiencies.

Problems with Social Responsibility in Business

• Misallocation of Resources: Spending someone else's money (employers, customers, employees).
  • Reduces stockholder returns, raises prices, or lowers wages.
  • Seen as a "tax" by Friedman.
• Ethical Implications: Viewed as abandoning true business responsibility.