Milton Friedman on Corporations

Milton Friedman famously argued that corporations have no social responsibility, only a responsibility towards their customers and shareholders to maximise profit. In fact, he even supported legislation to makes them to do this. Funny how legislation is OK when…no, forget it (again).

Friedman’s position is obviously an odd one. If corporations have no social responsibility, then presumably they are, in abstract, permitted to steal, defraud and coerce for their customers and shareholders? My guess is Friedman wouldn’t support this position. This leaves two possibilities:

(1) They shouldn’t do these things because they are constrained by the law. In other words: they should obey the law, just because it’s the law. I can’t imagine Friedman supporting a position like this, either.

(2) They shouldn’t do these things because they have a moral obligation apart from the law. In other words, they have some social responsibility.

Presuming Friedman doesn’t think corporations are allowed to coerce, defraud and steal, and presuming he doesn’t think laws should be obeyed simply because they are laws, the only conclusion can be that corporations have some moral and social obligations. The question then becomes where these lie.

As with much of libertarianism, on close inspection, the dichotomies become blurred, and the debate collapses back to where it’s always been.


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  1. #1 by Left Outside on June 14, 2012 - 1:37 pm

    I’m struggling to imagine a corporate person committing a crime without an actual person committing a crime. That person has a responsibility to not commit the crime.

    Marx made a similar point, not that corporations shouldn’t have social responsibilities, but that they can’t or they’ll go out of business. The profit motive etc.

    • #2 by Unlearningecon on June 14, 2012 - 1:50 pm

      (1) I was thinking something similar when I wrote this. A corporation can’t ‘do’ anything without somebody carrying out the action or ordering it.

      (2) The funny thing is that corporations do, and always have, committed theft, fraud and coercion for profit. From the beginning. Libertarians who speak of profit maximisation at all costs rarely mention this.

  2. #3 by noiselull on June 14, 2012 - 8:33 pm

    Friedman would reject the characterization of the requirement of abiding by basic laws as a “responsibility”. Responsibility- a thing that one is required to do as part of a job, role, or legal obligation (Oxford English Dictionary)

    • #4 by Unlearningecon on June 14, 2012 - 10:40 pm

      I don’t understand. You say obeying the law isn’t a responsibility but then go on to provide a definition that implies exactly that?

      • #5 by noiselull on June 16, 2012 - 8:27 pm

        Obeying CERTAIN laws = NOT doing things like murder, rape, and theft.

      • #6 by Unlearningecon on June 17, 2012 - 11:38 am

        OK, but surely that counts as something of a responsibility?

      • #7 by noiselull on June 30, 2012 - 4:01 am

        (Couldn’t reply below)
        No, that’s why I posted the definition to prove that wrong.

  3. #8 by Min on June 14, 2012 - 9:09 pm

    “If corporations have no social responsibility, then presumably they are, in abstract, permitted to steal, defraud and coerce for their customers and shareholders? My guess is Friedman wouldn’t support this position.”

    Why not? Didn’t Posner, an actual judge, support that position?

    • #9 by Unlearningecon on June 15, 2012 - 9:00 am

      Well, as I said above, corporations appear to, given the history of capitalism.

  4. #10 by Min on June 15, 2012 - 6:06 am

    “The Board and the Management owe the shareholders fiduciary duties. If the Board and Management breach the duties owed to shareholders, then they can be liable to the corporation or the shareholders for an injury or damages.

    “The goal is to maximize the corporation’s profits.”

    The last statement does not follow from the previous ones. Yes, that is the common understanding. But the shareholders may have different goals. There is no particular reason that a corporate person, unlike the humans who own it, has to be a sociopath or a Frankenstein’s monster.

  5. #11 by nfreiling on June 29, 2012 - 6:45 pm

    Could it be that Friedman would have argued that maximizing profits necessarily entails a respect for at least the most basic of property rights? I’m not well-read enough to know.

    • #12 by Unlearningecon on June 29, 2012 - 7:12 pm

      I doubt it – historically corporations have taken large amounts of land and indeed people for themselves. Stealing, after all, is a great way to increase profits!

  6. #13 by noiselull on July 9, 2012 - 3:28 pm

    You can’t actually cite Friedman himself becuase he held a different position. “so long as it stays within the rules of the game”

    • #14 by Unlearningecon on July 9, 2012 - 3:50 pm

      This fits into my characterisation well, because ‘rules of the game’ simply begs the same questions: which rules? If the law, just because it’s the law? And so forth.

      • #15 by noiselull on July 11, 2012 - 1:40 am

        Moral obligation ≢ Social responsibilty

      • #16 by Unlearningecon on July 11, 2012 - 6:18 am

        You’ll have to do better than stating it as an unsupported assertion. As far as I can tell, social responsibility is an obligation to society to do/not to do specific things.