Is the Friedman doctrine right?
The Friedman doctrine was right and wrong about the responsibility of business. For democratic capitalism to live up to its name, voters, not corporate interest, must set the rules of the game. Fifty years ago to the day, Milton Friedman set forth the famous "Friedman doctrine".
Milton Friedman was an American economist and Nobel Laureate. Regarded as the founder of monetarism, his work and theories influenced economic policies in the United States and abroad. Friedman is remembered as a leader of the Chicago school of monetary economics and an advocate for free-market capitalism.
A 2011 survey of economists commissioned by the EJW ranked Friedman as the second-most popular economist of the 20th century, following only John Maynard Keynes. Upon his death, The Economist described him as "the most influential economist of the second half of the 20th century ... possibly of all of it".
The ideas of the Nobel laureate, who died 15 years ago this week, remain influential not only in economics but also in education and public policy. As relevant today as he was the day he won the Nobel in 1976.
The Social Responsibility of Business Is to Increase Its Profits was blunt in its conclusions. Friedman made the case that businesses shouldn't need to go against their best (financial) interests to improve society because they aren't people with real beliefs or morals.
As an advisor to President Ronald Reagan as well as British Prime Minister Margaret Thatcher in the 1980s, Friedman advocated for minimal government intervention, believing that free market (laissez-faire) capitalism was the best and only way to maximize human liberty.
American economist Milton Friedman developed the doctrine as a theory of business ethics that states that “an entity's greatest responsibility lies in the satisfaction of the shareholders.” Therefore, the business should always endeavor to maximize its revenues to increase returns for the shareholders.
Friedman's ideas were profoundly influential. Among other things, he argued that free trade, lower taxes on income and capital, and a reduction in the burden of regulation would increase economic growth and improve social well-being.
Milton Friedman famously said, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”1 We are currently engaged in a test of this proposition.
Friedman is not a socialist, he is a free market advocate who is thinking pragmatically and not just on first principles.
Was Milton Friedman a capitalist?
Milton Friedman was a U.S. economist and Nobel laureate known as the most influential advocate of free-market capitalism and monetarism in the 20th century.
Economic Quarterly
Friedman was one of the great intellectuals of the 20th century because of his major influence on how a broad public understood the Depression, the Fed's stop-go monetary policy of the 1970s, flexible exchange rates, and the ability of market forces to advance individual welfare.
The biggest problem with Friedman's theory is that corporations can—and, according to his theory, should—use their influence in Congress to block laws that stop corporations from causing such harms. Nor was Friedman correct that business executives are the employees of the shareholders.
- Advantage: Profitability and Value. ...
- Advantage: Better Customer Relations. ...
- Disadvantage: CSR Costs Money to Implement. ...
- Disadvantage: Conflicts with the Profit Motive.
Friedman argued that returning value to shareholders was the primary responsibility of business and suggested that “Greed is Good.” Shareholders, of course, could invest their money in whatever causes they desired, but Friedman believed companies should focus their own efforts on creating value for shareholders.
In Friedman's eyes, respect for ethical custom takes precedence over profits. This puts a sharper point on Friedman: Yes, foregoing a dollar of profit when doing so will not compromise the law or ethical custom is, as he put it, theft against the shareholder.
