hi this is dr gregory sadler i'm a professor of philosophy and the president and founder of an educational consulting company called reason i o where we put philosophy into practice i've studied and taught philosophy for over 20 years and i find that many people run into difficulties reading classic philosophical texts sometimes it's the way things are said or how the text is structured but the concepts themselves are not always that complicated and that's where i come in to help students and lifelong learners i've been producing longer lecture videos and posting them to youtube many viewers say they find them useful what you're currently watching is part of a new series of shorter videos each of them focused on one core concept from an important philosophical text i hope you find it useful as well one of the key ideas in milton friedman's essay the social responsibility of business is to increase its profits is right there in the title its responsibilities so he's going to clarify for us who in fact can have responsibilities in part because as he says this this word social responsibility seems to be a rather vague term he says the discussions of the social responsibilities of business are notable for their analytic looseness and lack of rigor so he's saying to us that we need to clarify who actually can have responsibilities and what sort of responsibilities they have and then who those responsibilities are are owed to you could say or directed towards and if we do that then we can see how we ought to view any sort of advocation or enactment of social responsibilities in terms of business so who in fact can have responsibilities friedman is going to consider a number of different cases the the one that's paradigm for this essay is the corporate executive or as he's going to call him a little bit later the manager so we'll come back to that one in just a moment because it's so absolutely central but a little bit later in the piece he actually talks about two other groups that might have some sort of stake actually they have more of a stake in some sense than the corporate executive because they own either part or the entirety of the company so he he talks about the case of stockholders and he says that the same argument that he's making applies to the newer phenomenon of calling upon stockholders to require corporations to exercise social responsibility there he's talking about stockholder advocacy of you know divesting from certain things or directing the products in a certain way or insisting that a certain wage be paid to employees or benefits we could go on and on about examples but it's been a phenomenon where some of the stockholders would attempt to try to steer a corporation in a particular direction and they may in fact buy stock precisely so that they can do that he also talks about the individual proprietor and here friedman says there really isn't any problem he says the situation of the individual proprietor is somewhat different if he acts to reduce the returns of his enterprise in order to exercise his social responsibility he is spending his own money not someone else's so that that's really the key for friedman friedman thinks that there's no problem spending your own money if it truly is your own money on all sorts of socially beneficial aims and we're going to talk about what what's his examples of those are in just a moment if you want to create a charity to do something and you're using your individual proprietor business to do so not a problem he also briefly discusses unions and he says that social responsibility is something that the unions themselves reject when it's being used to justify wage restraint he says that when union officials are asked to subordinate the interest of their members to some more general purpose they generally say no we're not going to do that so that's another example that would apply here but let's come back now to the corporate executive so the corporate executive is somebody who's in a different sort of position than the individual proprietor it's not their company and they have to take the assets and the goodwill and all the other resources that the company has it's cash flow whatever you want to call that and decide how to allocate those things how to run the business and so friedman says that when he says that that a person can have responsibilities but their responsibility is to the owners of the business he says he has direct responsibility to his employers and what is that responsibility the responsibility is to conduct the business in accordance with their desires what are their desires friedman goes on and says these generally will be to make as much money as possible while conforming to their basic rules of the society those embodied in law those embodied in ethical custom he does hold out the possibility that there could be some other purposes that the owners have he talks about this is coming from the greek term eleos meaning pity or compassion and allow allow mercenary purpose right and he gives examples of those as hospitals or schools so if i establish a school and i hire somebody to be the the dean of that school and manage it that would be an example where i'm the one who's directing the purpose and the dean still has to run it like a business in order to maintain that institution in general for most corporations or most institutions the goal is going to be to make money the goal is going to be to do what the owners wanted to do so the corporate executive has a responsibility to run things in such a way as to try to maximize profits now he also points out that the corporate executive him or herself can be as he says a person in their own right and he says as a person he may have many other responsibilities that he or she assumes or recognizes voluntarily to family conscience feelings of charity clubs churches city country and so that person can take part of their income if they want the salary that the company is paying them their bonuses whatever and devoted to those aims but they don't have the right according to freedmen to divert company resources to serving those aims they can't pick their favorite charity to be the recipient of the company's largesse that would actually be violating the obligation to the stockholders or the owners what about corporations themselves friedman says that a corporation is an artificial person so it can have at most artificial responsibilities when it comes to talking about business with sort of a capital b as something that you know runs throughout society says there is no responsibility on the part of business as such only corporations or individuals can have responsibilities an entire sector of the economy cannot so who are these responsibilities directed towards then and notice that friedman does not just talk about these stockholders owners or as he's going to say the employers a little bit later when he's when he's describing the bad effects as he takes it of diverting any sort of resources or making decisions on the basis of social responsibility he will tell us that it's not only employers who are being given you know short shrift but also customers why customers because if you are not making the business as lean as possible as profitable as possible then you're going to have to raise prices for the customers also employees if you're going to use the business or structure the business or direct it in such a way that it's being less efficient that means that you can't pay the employees as much according to friedman and it gives several examples of this and the examples are quite interesting notice this of course is a piece from 1970 so these are examples that fit particularly well with those times the first one is he says uh dealing with inflation he may re uh you know we might refrain from increasing the price of a product in order to contribute to the social objective of preventing inflation even though a price increase would be in the best interest of the corporation big problem in the 1970s big worry so there was a lot of pressure not to raise your prices another example would be pollution he says here we go one might make expenditures on reducing pollution beyond the amount that is in the best interest of the corporation or what is required by law in order to contribute to the social objective of improving the environment the third one that he gives has to do with unemployment and here he talks about the hardcore unemployed these are the people who have been chronically unemployed usually because they lack job skills or knowledge or because there are certain behavioral problems that need to be dealt with and you know some businesses might hire those people anyway even though they're not good employees precisely because it's a social responsibility of the business or that's the way the manager views it now what is the problem with this friedman says that when you do this you are affecting all these other people in each of these cases he says the corporate executive would be spending someone else's money who are the someone else's employers customers employees he says in so far as his actions in accord with his social responsibility reduced returns to stockholders he's spending their money in as his actions raise the price to customers he's spending customers money insofar as his actions lower the wages of some employees he is spending their money and that is what in friedman's view is wrong with following social responsibility if you are indeed a corporate executive making decisions so he says that the executive is exercising a distinct social responsibility rather than doing what they're supposed to be serving as an agent of the stockholders or customers or employees why because he spends the money in a different way than they would have spent it and he says this amounts in in effect to a tax on on each of these groups or individuals and friedman views that as an abdication of the genuine responsibility that someone has so in ethical terms it's something wrong you