The Social Responsibility of Business
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The paper explains that according to Milton Friedman, the social and ethical responsibility of business is to make a profit, since businesses exist to earn returns for their owners. This author disagrees with this sentiment and argues that there are situations where business has greater social responsibilities than simply earning a profit. The author goes on to illustrate how Friedman's argument rests on a number of false premises and he oversimplifies many key points in order to make his argument fit.
From the Paper:"Friedman's underlying premise that investors are strictly rational is false. While there are strictly rational investors in the world, not all investors are. Indeed, asset bubbles and market crashes imply a distinct lack of rationality among investors. More importantly Friedman errs in his understanding of the link between investing and rationality when he assumes perfectly rational investors. Investors today have innumerable options for their capital, and they choose between investments that deliver a full set of outcomes. It is reasonable to expect that investors take into account the full set of outcomes when making their investment decisions. For example, there exists ethical mutual funds that do not invest in certain industries; these funds are evidence that at least investors do choose to invest their capital based on total outcomes rather than strictly financial outcomes.
"Indeed, the microeconomic concept of utility is related directly to understanding the total value of a purchase by consumers. The utility of any single purchase is related to the worth ascribed to the total outcomes associated with that purchase. Most purchases have entirely non-financial outcomes. Friedman assumes that an investment decision, however, has entirely financial outcomes. Yet, it is a false premise that financial and non-financial outcomes are mutually exclusive. Even Friedman accepts that there are non-financial outcomes when he argues that the pursuit of profit should stay within the laws and prevailing ethics of society."
Sample of Sources Used:
- Friedman, M. (1970). The social responsibility of business is to increase its profits. New York Times Magazine. Retrieved November 28, 2010 from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html
- Stieb, J. (2009). Assessing Freeman's stakeholder theory. Journal of Business Ethics. Vol. 87 (3) 401-414.
Cite this Argumentative Essay:
The Social Responsibility of Business (2013, May 01) Retrieved July 30, 2021, from https://www.academon.com/argumentative-essay/the-social-responsibility-of-business-153020/
"The Social Responsibility of Business" 01 May 2013. Web. 30 July. 2021. <https://www.academon.com/argumentative-essay/the-social-responsibility-of-business-153020/>