The Social Responsibility of Business is to Increase its Profits

The Social Responsibility of Business is to Increase its Profits (full article) by Milton Friedman.  Also at

[But contrast the historical origin of keizai or “economy” in Japanese – Keizai comes from keisei zaimin, or “administering society and deliverance of people” in 18th century Osaka. Also Sen shows Friedman’s view is not that of Adam Smith].

The New York Times Magazine, September 13, 1970. Copyright @ 1970 by The New York Times Company.

When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free en­terprise when they declaim that business is not concerned “merely” with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing em­ployment, eliminating discrimination, avoid­ing pollution and whatever else may be the catchwords of the contemporary crop of re­formers. In fact they are–or would be if they or anyone else took them seriously–preach­ing pure and unadulterated socialism. Busi­nessmen who talk this way are unwitting pup­pets of the intellectual forces that have been undermining the basis of a free society these past decades.

The discussions of the “social responsibili­ties of business” are notable for their analytical looseness and lack of rigor. What does it mean to say that “business” has responsibilities? Only people can have responsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.

Presumably, the individuals who are to be responsible are businessmen, which means in­dividual proprietors or corporate executives. Most of the discussion of social responsibility is directed at corporations, so in what follows I shall mostly neglect the individual proprietors and speak of corporate executives.

In a free-enterprise, private-property sys­tem, a corporate executive is an employee of the owners of the business. He has direct re­sponsibility to his employers. That responsi­bility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while con­forming to the basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose–for exam­ple, a hospital or a school. The manager of such a corporation will not have money profit as his objective but the rendering of certain services.

In either case, the key point is that, in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.

Basic statements about capitalism

This won’t be very systematic but Iwill be keeping notes on this blog on the basic ideas and statements about capitalism.  I have started reading Economics and the Crisis of Ecology by Narindar Singh (3rd edition 1989 OUP). For him the real villain of the piece are the petrochemical and associated industries.  The initial argument of the book is that no proposed solution to the forthcoming environmental crisis has a hope in hell of working if it tries to do so within (and thus preserve) the capitalist status quo. He goes through a range of strategies including zero growth, the marketising of externalities, population control, and technological fixes, including nuclear power, and demostrates how none of these can possibly work leaving capitalism in place as the fundamental and defining characteristic of capitalism is its need for continuous growth.

According to Marx, the capitalist “shares with the miser the passion for wealth as wealth. But that which in the miser is mere idiosyncrasy, is, in the capitalist, the effect of the social mechanism, of which he is but one of the wheels”.  Capital Vol I Allen &Unwin 1957 p 603.

Look up Schumpeter’s ideas on capitalism as creative destruction.

Treadmill of production: “In 1980, Schnaiberg developed a conflict theory on human-environment interaction. The theory is that capitalism is driven by higher profitability and thereby must continue to grow and attract investments to survive in a competitive market. This identifies the imperative for continued economic growth levels that, once achieved, accelerate the need for future growth. This growth in production requires a corresponding growth in consumption. The process contains a chief paradox; economic growth is socially desired but environmental degradation is a common consequence that in turn disrupts long-run economic expansion”. Taken from

Reading Amartya Sen (1)

Sen seems to be popping up everywhere these days. He was mentioned by a couple of speakers at the recent Roundhouse Critical Theory conference and his latest book The Idea of Justice will be the discussion topic at the BSA Theory study group at the forthcoming BSA conference in April. So I had a quick look at his 1987 book On Ethics and Economics.  This is a detailed critique of the narrow impoverishment of modern economics focused as it is on producing logistic and predictive models of markets based upon the notion of a purely self interested rational actor. “… there is nevertheless something quite extraordinary in the fact that economics has in fact evolved in this way, characterizing human motivation in such spectacularly narrow terms”.  Sen claims in its origins modern economics had both a practical ‘engineering’  aspect and  one concerned with human behaviour in the round and ethical considerations of what a good life should be. Both these aspects are fully present in Adam Smith for instance, but modern economics has expunged the ethical, normative aspects to produce a distorted orthodox “Smithian” view. To the extent Smith was at all sociological, this has been erased.

While looking for information about Sen on the web I coincidently found a blog entitled Adam Smith’s Lost Legacy (by-line “In 2009, we again saw why Adam Smith’s invisible hand often appeared invisible: it is not there.” Professor Joseph Stiglitz, 31 December 2009. The blog post I found was Amartya Sen’s Two Brilliant Essays on the Relevance of Adam Smith Today. I shall be looking at these soon. Thanks to Gavin Kennedy for bringing my attention to these, albeit via the beneficence of Google.

How to put ‘society’ into climate change

On the 8th February 2010 the British Sociological Association hosted the first of a series of Presidential Event at the British Library Conference Centre – How to put ‘Society’ into Climate Change. A number of leading sociologists specialising in environmental issues gave presentations on their understanding of how sociology can make a contribution to policy debates on environmental issues. Videos of all the presentationsand discussions are available on line and audio only files for listening or downloading can be accessed from the BSA’s Postgraduate Forum blog PG Focus. The presentations give some important insights into the current controversies in climate science (so-called Climategate) and the rather impoverished understanding of the social and behavioural aspects of climate change that informs (or misinforms) much climate change policy.

Several of the speakers referred to the uncertainty of the climate sciences and our unrealistic expectations and demands for certainty and exactitude in climate change predictions. John Urry refers to the complexity and multi-disciplinarity of climate change science and, importantly, its relative newness. Couple this with the enormous public scrutiny it is subjected to it is hardly surprising that it will be found wanting. Brian Wynne claims that the big question asked in the 1980s – is a reliable predictive science of climate change possible – has never been explicitly and conclusively answered. Back in those days the limit of long term weather forecasting was 15 days. Today even this seems overly optimistic with the UK Met Office stating only forecasts up to 5 days can be considered reasonably reliable. Over the last 20 years or so a vast amount of money and resources have been poured into climate change science and massive advances have been made in the technologies and data collection techniques. The big question therefore seems to have been answered by default rather explicitly and scientifically.

This is not to say that human-made climate change is a myth. In fact the evidence for this is an entirely separate matter to the accuracy of climate change predictions, according to Wynne. In any case the uncertainty of prediction seems more likely to underestimate the temperature increases than overestimate them. Apparently 16 feedback processes relevant to climate change were identified by climate scientists but left out of the original IPCC report on climate change. 13 of these are likely to be positive feedback loops, i.e. would lead to more rapid and higher global temperature rise. One of these, for example, concerns the way that methane is being released from thawing tundra (any soil and rock that is frozen 12 months in the year). The question arises, why were these left out of the report? The answer seems to be that the scientists produced the report in line with with what they perceived the policy makers could realistically cope with. In this respect Wynne claims that the science is ‘co-producing’ itself with an assumed world of policy and its policy needs and capacities.

Another aspect of climate change science that Wynne is critical of is the way that the science is allowed to set the agenda for climate change policy. As well as giving us information about climate change the science also seems to set the meaning of the policy debates. For example, the science shows the relation between a ton of carbon dioxide emissions and a specific rise in the global temperature. A ton of CO2 saved anywhere is equally effective in those terms. But this makes no distinction between a ton of emissions created by thousands of subsistence farmers growing barely enough to feed their families and a ton of CO2 coming from waste disposed of in a landfill site in an affluent Western society.

In similar vein Wynne also takes issue with the narrow scientistic approach to risk assessment and how this dictates and limits the meaning of the policy debates. As an example he cites the risk assessment of genetically modified crops. The scientists have done the laboratory tests and risk assessments in terms of crop trials and so on and claim there is no risk to human beings and no justification for resisting the introduction and further development of GM crops. But a legitimate public issue may be the concern that half a dozen of so corporations could come to control the global food chain. This is a risk of another sort not addresses by the scientific definition and evaluation of risk.

So one major contribution to climate change policy debates can be made by the sociological understanding of science, the scientific community and the knowledge production process and how this is itself thoroughly social and not something outside of social, economic and political processes. As Wynne puts it, ‘society’ is already in the science. Sociology’s job is to identify and problematise the implicit assumptions about society that are embedded in the science, often by default and omission. This “highly normative sociological practice” is a primary responsibility of sociology with respect to climate change science.

All the presenters identified gaps and inadequacies in current policy debates about climate change and identifed ways that sociology could fill the gaps and contribute. One clear area is the problem of human behaviour since there is now general agreement that the move to more sustainable societies will require significant changes in individuals’ behaviours. The individualistic and rational action theories that underpin much policy debate are inadequate. One common variant of this is the so-called ‘deficit’ model of behaviour. The idea is that individuals behave in ways that are detrimental to the environment because they lack the environmental knowledge and awareness that, if they had it, would lead them to act differently. Little if any evidence has been produced to support this theory. We require a much more sociological and structural understanding of why the majority of individuals behave the way they do whether they have the environmental knowledge or not. This needs to recognise the habitual nature of behaviours that are embedded in social practices and are not the result of conscious and ‘rational’ calculation. Sociology has a great deal to offer in exposing and understanding these processes that are both structural and cultural.

A final theme I will pick out from the presentations is that of the necessity of a normative sociology. Mention has already been made above to Wynne’s claim that what is needed is a ‘highly normative sociology” of climate change science. It is difficult, when looking at the possible futures outlined by Urry that are implied by the decline in fossil fuels, water and food shortages, population growth and increase environmental migration, and so on, not to get involved in normative considerations of what sort of sustainable society we should be working towards. For instance, one possibility is that corporatist authoritarian and militaristic surveillance societies will come to dominate with a loss of democratic forms of government, civil rights and even perhaps a redefinition of human rights. It would be difficult for a social science that identifies the process that could lead to this scenario to remain indifferent to the fate of future generations and humankind.

Tim Jackson acknowledges the discomfort many sociologists would feel at taking an overtly normative stance. His cultural and structural analysis of the roots of the behaviours that lead to environmental degradation and the current unsustainability of societies points ultimately to the influence of growth based capitalist economies. He claims social structures based on capitalism and growth have lead to rapacious exploitation and degradation of both environmental resources and forms of cultural capital. He goes on to ask, what if we have evolved and developed a set of social institutions and social structures that produce exactly the opposite of what is needed for a sustainable society and ways of living? We need a re-engagement of a critical sociology with these social structures and the nature of capitalism and growth in order to make sense of sustainability. To do this we will have to engage with the moral dimension. This puts us in danger of crossing the line between being scientists and being polemicists. Jackson warns that if this happens we may find ourselves as being ‘no further use to policy’. But we may just find we are of some use to humanity.