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ARTIKEL 1

A Friedman doctrine‐- The Social Responsibility of Business Is toIncrease Its ProfitsBy Milton Friedman - Sept. 13, 1970About the ArchiveThis is a digitized version of an article from The Times’s print archive, before thestart of online publication in 1996. To preserve these articles as they originallyappeared, The Times does not alter, edit or update them.Occasionally the digitization process introduces transcription errors or otherproblems; we are continuing to work to improve these archived versions.WHEN I hear businessmen speak eloquently about the “social responsibilities ofbusiness in a free‐enterprise system,” I am reminded of the wonderful line about theFrenchman who discovered at, the age of 70 that he had been speaking prose all hislife. The businessmen believe that they are defending free enterprise when theydeclaim that business is not concerned “merely” with profit but also with promotingdesirable “social” ends; that business has a “social conscience” and takes seriously itsresponsibilities for providing employment, eliminating discrimination, avoidingpollution and whatever else may be the catchwords of the contemporary crop ofreformers. In fact they are—or would be if they or any one else took them seriously—preaching pure and unadulterated socialism. Businessmen who talk this way areunwitting puppets of the intellectual forces that have been undermining the basis of afree society these past decades.The discussions of the “social responsibilities of business” are notable for theiranalytical looseness and lack of rigor. What does it mean to say that “business” hasresponsibilities? Only people can have responsibilities. A corporation is an artificialperson and in this sense may have artificial responsibilities, but “business” as awhole cannot be said to have responsibilities, even in this vague sense. The first steptoward clarity in examining the doctrine of the social responsibility of business is toask precisely what it implies for whom.Presumably, the individuals who are to be responsible are businessmen, whichmeans individual proprietors or corporate executives. Most of the discussion of socialresponsibility is directed at corporations, so in what follows I shall mostly neglect theindividual proprietor and speak of corporate executives.IN a free‐enterprise, private‐property system, a corporate executive is an employe ofthe owners of the business. He has direct responsibility to his employers. Thatresponsibility is to conduct the business in accordance with their desires, whichgenerally will be to make as much money as possible while conforming to the basicrules of the society, both those embodied in law and those embodied in ethicalcustom. Of course, in some cases his employers may have a different objective. A

group of persons might establish a corporation for an eleemosynary purpose—forexample, a hospital or school. The manager of such a corporation will not havemoney profit as his objective but the rendering of certain services. ADVERTIsem*nTSKIP ADVERTIsem*nTIn either case, the key point is that, in his capacity as a corporate executive, themanager is the agent of the individuals who own the corporation or establish theeleemosynary institution, and his primary responsibility is to them.Needless to say, this does not mean that it is easy to judge how well he is performinghis task. But at least the criterion of performance is straightforward, and the personsamong whom a voluntary contractual arrangement exists are clearly defined.Of course, the corporate executive is also a person in his own right. As a person, hemay have many other responsibilities that he recognizes or assumes voluntarily—tohis family, his conscience, his feelings of charity, his church, his clubs, his city, hiscountry. He may feel impelled by these responsibilities to devote part of his incometo causes he regards as worthy, to refuse to work for particular corporations, even toleave his job, for example, to join his country's armed forces. If we wish, we may referto some of these responsibilities as “social responsibilities.” But in these respects heis acting as a principal, not an agent; he is spending his own money or time orenergy, not the money of his employers or the time or energy he has contracted todevote to their purposes. If these are “social responsibilities,” they are the socialresponsibilities of individuals, not of business.What does it mean to say that the corporate executive has a “social responsibility” inhis capacity as businessman? If this statement is not pure rhetoric, it must mean thathe is to act in some way that is not in the interest of his employers. For example, thathe is to refrain from increasing the price of the product in order to contribute to thesocial objective of preventing inflation, even though a price increase would be in thebest interests of the corporation. Or that he is to make expenditures on reducingpollution beyond the amount that is in the best interests of the corporation or that isrequired by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire “hard core”unemployed instead of better qualified available workmen to contribute to the socialobjective of reducing poverty.In each of these cases, the corporate executive would be spending someone else'smoney for a general social interest. Insofar as his actions in accord with his “socialresponsibility” reduce returns to stock holders, he is spending their money. Insofaras his actions raise the price to customers, he is spending the customers’ money.Insofar as his actions lower the wages of some employes, he is spending their money.Editors’ PicksIf You’ve Ever Heard a Voice That Wasn’t There, This Could Be Why‘Here We Are’ Review: The Last Sondheim, Cool and Impossibly Chic

spending the stockholders’ or customers’ or employes’ money. How is he to knowhow to spend it? He is told that he must contribute to fighting inflation. How is he toknow what action of his will contribute to that end? He is presumably an expert inrunning his company—in producing a product or selling it or financing it. Butnothing about his selection makes him an expert on inflation. Will his holding downthe price of his product reduce inflationary pressure? Or, by leaving more spendingpower in the hands of his customers, simply divert it elsewhere? Or, by forcing himto produce less because of the lower price, will it simply contribute to shortages?Even if he could answer these questions, how much cost is he justified in imposing onhis stockholders, customers and employes for this social purpose? What is hisappropriate share and what is the appropriate share of others?And, whether he wants to or not, can he get away with spending his stockholders,customers’ or employes’ money? Will not the stockholders fire him? (Either thepresent ones or those who take over when his actions in the name of socialresponsibility have reduced the corporation's profits and the price of its stock.) Hiscustomers and his employes can desert him for other producers and employers lessscrupulous in exercising their social responsibilities.This facet of “social responsibility” doctrine is brought into sharp relief when thedoctrine is used to justify wage restraint by trade unions. The conflict of interest isnaked and clear when union officals are asked to subordinate the interest of theirmembers to some more general social purpose. If the union officials try to enforcewage restraint, the consequence is likely to be wildcat strikes, rank‐and‐file revoltsand the emergence of strong competitors for their jobs. We thus have the ironicphenomenon that union leaders—at least in the U. —have objected to Governmentinterference with the market far more consistently and courageously than havebusiness leaders.The difficulty of exercising “social responsibility” illustrates, of course, the greatvirtue of private competitive enterprise — it forces people to be responsible for theirown actions and makes it difficult for them to “exploit” other people for either selfishor unselfish purposes. They can do good—but only at their own expense.Many a reader who has followed the argument this far may be tempted toremonstrate that it is all well and good to speak of government's having theresponsibility to impose taxes and determine expenditures for such “social” purposesas controlling pollution or training the hard‐core unemployed, but that the problemsare too urgent to wait on the slow course of political processes, that the exercise ofsocial responsibility by businessmen is a quicker and surer way to solve pressingcurrent problems.Aside from the question of fact—I share Adam Smith's skepticism about the benefitsthat can be expected from “those who affected to trade for the public good”—thisargument must be rejected on grounds of principle. What it amounts to is anassertion that those who favor the taxes and expenditures in question have failed topersuade a majority of their fellow citizens to be of like mind and that they areseeking to attain by undemocratic procedures what they cannot attain by democratic

procedures. In a free society, it is hard for “good” people to do “good,” but that is asmall price to pay for making it hard for “evil” people to do “evil,” especially since oneman's good is anther's evil.I HAVE, for simplicity, concentrated on the special case of the corporate executive,except only for the brief digression on trade unions. But precisely the same argumentapplies to the newer phenomenon of calling upon stockholders to requirecorporations to exercise social responsibility (the recent G. crusade, for example).In most of these cases, what is in effect involved is some stockholders trying to getother stockholders (or customers or employes) to contribute against their will to“social” causes favored by the activists. Insofar as they succeed, they are againimposing taxes and spending the proceeds.The situation of the individual proprietor is somewhat different. If he acts to reducethe returns of his enterprise in order to exercise his “social responsibility,” he isspending his own money, not someone else's. If he wishes to spend his money onsuch purposes, that is his right, and I cannot see that there is any objection to hisdoing so. In the process, he, too, may impose costs on employes and customers.However, because he is far less likely than a large corporation or union to havemonopolistic power, any such side effects will tend to be minor.Of course, in practice the doctrine of social responsibility is frequently a cloak foractions that are justified on other grounds rather than a reason for those actions. To illustrate, it may well be in the long‐run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to at tractdesirable employes, it may reduce the wage bill or lessen losses from pilferage andsabotage or have other worthwhile effects. Or it may be that, given the laws about thedeductibility of corporate charitable contributions, the stockholders can contributemore to charities they favor by having the corporation make the gift than by doing itthem selves, since they can in that way contribute an amount that would otherwisehave been paid as corporate taxes.In each of these—and many similar—cases, there is a strong temptation to rationalizethese actions as an exercise of “social responsibility.” In the present climate ofopinion, with its widespread aversion to “capitalism,” “profits,” the “soullesscorporation” and so on, this is one way for a corporation to generate goodwill as a by‐product of expenditures that are entirely justified in its own self‐interest.It would be inconsistent of me to call on corporate executives to refrain from thishypocritical window dressing because it harms the foundations of a free society. Thatwould be to call on them to exercise “social responsibility”! If our institutions, andthe attitudes of the public make it in their self‐interest to cloak their actions in thisway, cannot summon much indignation to denounce them. At the same time, canexpress admiration for those in dividual proprietors or owners of closely heldcorporations or stock holders of more broadly held corporations who disdain suchtactics as approaching fraud.

The article you've shared is an opinion piece written by economist Milton Friedman in The New YorkTimes on September 13, 1970. In the article, Friedman discusses the concept of the socialresponsibility of business, arguing that the primary responsibility of a business is to increase itsprofits within the framework of the law and ethical custom. He criticizes the idea that businessesshould take on broader social responsibilities, such as addressing issues like pollution,discrimination, or poverty. Here are the key points from the article: - Business and Social Responsibility: Friedman argues that when businessmen speak about the "social responsibilities of business," they are essentially advocating for a form of socialism. He contends that businesses should focus on profit-making, and individual social responsibilities should be separate from business activities. - Responsibilities of Corporate Executives: According to Friedman, corporate executives are employees of the business who have a responsibility to conduct the company in line with the desires of its owners (stockholders) to maximize profits while adhering to legal and ethical rules. - Spending on Social Objectives: The notion of a corporate executive having "social responsibility" implies that they would spend the company's money on social causes, even if it reduces returns to stockholders or raises prices to customers. Friedman argues that this is akin to imposing taxes and making expenditure decisions, which are typically governmental functions. - Political Mechanism vs. Market Mechanism: Friedman highlights the fundamental difference between the market mechanism and the political mechanism. In a free market, cooperation is voluntary, and individuals pursue their interests. In contrast, the political mechanism relies on conformity to serve a broader social interest, often determined by a majority or authority. Friedman sees the doctrine of "social responsibility" as an extension of the political mechanism into every aspect of human activity, which he views as a subversive idea in a free society. - Consequences and Criticism: Friedman suggests that the use of "social responsibility" as a pretext for actions that primarily benefit a company's self-interest can harm the foundations of a free market system. He argues that this kind of short-sighted thinking may lead to greater government intervention and controls, which he considers detrimental to a free market economy.Overall, Milton Friedman's article asserts that businesses should focus on maximizing profits withinthe boundaries of the law and ethical standards, leaving social and political matters to individualsand governments, respectively. The article presents a perspective that emphasizes the importance ofa free market and limited government intervention in economic affairs.ARTIKEL 2