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The Real Milton Friedman Doctrine: If Your Company Makes Profit, Then It Has a Social Responsibility
Fifty years ago, Milton Friedman published an essay in New York Times Magazine titled “The Social Responsibility of Business is to Increase Its Profits” (pdf). The essay argues business managers who spend their companies’ money on social responsibility projects shareholders, employees, and customers don’t want to address are stealing from those stakeholders. Managers must instead use the firm’s money to maximize profit for shareholders. (Left unaddressed: what managers must do about wages for employees and prices for customers). Friedman’s (1970) argument remains influential and widely used both inside and outside academia. The University of Chicago, where Friedman was a faculty member, is celebrating the publication’s anniversary with a series of events.
Though still influential, Friedman’s (1970) argument is self-defeating. Perhaps surprisingly, Friedman (1970) makes a good argument for the exact opposite conclusion of its famous title. Rather than focus on profit, all firms instead have a social responsibility to spend money on the social good. Further, the more profitable a company is, the more responsibility its managers have to spend some of that profit on increasing social good. I elaborate this critique below.
