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Quotation of the Day…

… is from Milton Friedman’s September 13th, 1970, essay in the New York Times Magazine – an essay titled “The Social Responsibility of Business is to Increase its Profits“:

The discussions of the “social responsibilities of business” are notable for their analytical looseness and lack of rigor.

DBx: Reasonable and well-meaning can and do debate, productively, whether or not Friedman was correct or incorrect to argue that managers of for-profit publicly held corporations should not use corporate funds or assets for purposes other than to seek maximum profits for shareholders (a seeking that, Friedman believed, should be constrained only by “basic rules of the society, both those embodied in law and those embodied in ethical custom.”)

But no reasonable person can deny that the mere incantation “social responsibility of business” does not itself offer an adequately detailed program. Gather 20 people in a room, all of whom agree that businesses should constrain profit-seeking with the carrying-out of “social responsibilities,” and you will likely get 20 different sets of understanding of what, exactly, is meant by “social responsibility.” You will also likely get 20 different opinions on just how much profit-seeking should be supplanted by the carrying-out of “social responsibility.”

This reality holds if businesses are mandated by the state to pursue “social responsibilities” or, what is the same amorphous and indefinable thing, to promote the the well-being of “stakeholders.”

Nothing is easier for politicians such as Elizabeth Warren to demand that corporations be required consciously to take account of the consequences of their business decisions on “stakeholders” (in addition to, and often at the expense of, shareholders). Such demands bring loud applause from people who mistake fine-sounding words for practical plans that will result in fine outcomes. But no matter how thunderous such applause might be, it does not mean that there is any agreement on just what are the details of who are “stakeholders,” what detailed interests of “stakeholders” are relevant, and exactly how and to what extent any one particular “stakeholder” interest should be promoted given that promoting that interest comes at the expense not only of shareholders but also at the expense of other “stakeholders.”