Milton Friedman

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In this essay I evaluate Milton Friedman’s essay: “The Social Responsibility of Business Is to Increase Its Profits” in 1970, on the Social Responsibility of a business and his theory, which is called the “Efficiency Perspective”. In every article and book that I have read about social responsibility, Friedman’s “Efficiency Perspective is placed centrally. During my research I found that Friedman is often criticized for being too classical. Friedman believes that manager’s foremost objective or even moral obligation to the firm should be to maximize profits always. There is however one condition that makes his perspective more complicated, not only for me, but also for several well-known authors. According to Friedman, the managers’ obligations should be carried out: “…while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom”. This leads to one of the main questions of my essay: To what extent does Friedman’s “Efficiency Perspective” give foundation for responsible and moral international management behavior? And need we any concern if it fails to do so? To fully answer the questions, I first need to explain the two different parts of the first question: responsible international management behavior and moral international management behavior. In businesses nowadays they combine these two parts, respectively responsible and moral become social responsibility in international management. The second question anticipates the other theories and models we need to consider when Friedman’s efficiency perspective does not give foundation for social responsibility in international management.

However before I go in further detail, I first explain more about the concept social responsibility. After this I explain Friedman’s full theory, and how it related to these different models of social responsibility, and finally I will draw a conclusion. As any professional looking to have a position in the corporate level will soon recognize that recent years have seen an explosion in popularity of the idea of ‘corporate social responsibility’ (CSR). On top of spending twenty-five hours a day at their desks, prospective recruits are well-advised to feign enthusiasm about the prospect of spending their weekends planting trees in the local park to offset carbon emissions. Indeed, if this is going to make you even half as happy as the employees on the websites look, who can object? Milton Friedman published famous essay explained the idea that a business had any responsibility other than to maximize its profits within legally and ethically acceptable margins, arguing that ‘a corporate executive is an employee of the owners of the business. He has direct re¬sponsibility to his employers. That responsi¬bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con¬forming to the basic rules of the society.’ Anyone daring to dissent is, de rigueur, labeled a ‘socialist’. The argument has a certain appeal. If we can dismiss the concept of CSR as – in fact – irresponsible, we can save many overworked executives a lot of time on their days off, and increase the profits of shareholders. Yet, it must be said that Friedman simply begs the question. Of course, who doesn’t desire to make an unlimited return on his capital? But is this a good desire? The hidden assumptions here are that business is an activity to be exercised purely in the pursuit of unlimited private gain, that it has no social function, and that there is no limit beyond which returns on capital become unjust – practical definitions of greed, individualism, and usury. Some of those in the CSR movement seem to have swallowed Friedman’s critique, and by implication his vision of what constitutes a good business. It is not unusual to see CSR justified less by ethical imperatives than by the argument that it is ‘good for business’, for which read ‘increases...
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