Sunday, February 6, 2011

The social responsibility of business is to increase its profits.

Some take this famous quote by Milton Friedman as "infamous." They think, how could anyone be so crass?  Is it ok to make a profit and pollute?

Friedman was not intimidated by these arguments. It is bad for profits to ruin one's reputation. And polluting would do that. His primary argument is that we usually become shareholders in a company so that we'll earn a good rate of return. When we want to give to charity, we do that as a separate action.

Here's a chart (from the Economist) showing how various countries chime in on Friedman's mantra. It was done by asking well-education high wage earners in each country.

I wonder (much more difficult to determine) what their actions would reflect. Often we don't do as we say we do.

If you'd ask Friedman about whether businesses actually benefit society best when when they make a profit, he'd nod to the affirmative, indicating that's the beauty of the free market. Goods and services are created, innovation occurs, jobs are created, and everyone is better off.

Happy 100 birthday, Ronald Reagan (who carried Capitalism and Freedom) in his coat pocket.

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