Milton Friedman

Definition

Milton Friedman was an American economist who was a prominent advocate of free-market capitalism and a critic of government intervention in the economy. His views on the role of business in society had a significant impact on the field of business ethics, particularly in the areas of ethics and profitability, the evolution of business ethics over time, and the ability of businesses to make a positive difference in the world.

5 Must Know Facts For Your Next Test

1. Friedman argued that the sole responsibility of a business is to maximize profits for its shareholders, as long as it operates within the rules of the game and without deception or fraud.
2. Friedman believed that the pursuit of profit was not only ethical, but also the best way for businesses to contribute to the overall well-being of society.
3. Friedman's views challenged the emerging concept of corporate social responsibility (CSR), which he saw as a misuse of corporate resources and a violation of the principles of free-market capitalism.
4. Friedman's ideas have had a lasting impact on the field of business ethics, shaping debates around the role of business in society and the balance between profitability and social responsibility.
5. Friedman's emphasis on shareholder primacy has been criticized by proponents of stakeholder theory, who argue that businesses have a responsibility to consider the interests of a wider range of stakeholders.

Review Questions

• Explain how Milton Friedman's views on the role of business in society relate to the concept of ethics and profitability.
  • According to Milton Friedman, the primary responsibility of a business is to maximize profits for its shareholders, as long as it operates within the rules of the game and without deception or fraud. Friedman believed that the pursuit of profit was not only ethical, but also the best way for businesses to contribute to the overall well-being of society. He argued that by focusing on profitability, businesses would be able to allocate resources more efficiently and create more value for society as a whole. Friedman's views challenged the emerging concept of corporate social responsibility (CSR), which he saw as a misuse of corporate resources and a violation of the principles of free-market capitalism.
• Analyze how Milton Friedman's ideas have influenced the evolution of business ethics over time.
  • Friedman's views on the role of business in society have had a lasting impact on the field of business ethics. His emphasis on shareholder primacy and the pursuit of profit as the primary responsibility of a business has shaped debates around the balance between profitability and social responsibility. Friedman's ideas have been challenged by proponents of stakeholder theory, who argue that businesses have a responsibility to consider the interests of a wider range of stakeholders, including employees, customers, and the community. This ongoing debate has led to a more nuanced understanding of the role of business in society and the ethical obligations of corporations, as businesses have grappled with the need to balance financial performance with social and environmental concerns.
• Evaluate the extent to which Milton Friedman's views on the role of business in society have influenced the ability of businesses to make a positive difference in the world.
  • Friedman's emphasis on shareholder primacy and the pursuit of profit as the primary responsibility of a business has been criticized by those who argue that businesses have a greater responsibility to contribute to the overall well-being of society. Critics of Friedman's views argue that by focusing solely on profitability, businesses may neglect important social and environmental concerns, and miss opportunities to make a positive difference in the world. However, Friedman's defenders argue that by operating efficiently and profitably, businesses can generate wealth and resources that can be used to fund charitable initiatives and social programs, ultimately contributing to the greater good. The ongoing debate around Friedman's ideas has shaped the ways in which businesses approach their role in society, with some companies adopting a more balanced approach that considers both financial and social/environmental factors, while others continue to prioritize shareholder interests above all else.

Related terms

Shareholder Theory: The view that the primary responsibility of a business is to maximize profits for its shareholders, as advocated by Friedman.

Stakeholder Theory: The view that a business has responsibilities to a wider range of stakeholders, including employees, customers, and the community, not just shareholders.

Corporate Social Responsibility (CSR): The idea that businesses have a responsibility to consider the social and environmental impacts of their operations, which Friedman was critical of.