The Friedman Doctrine Revisited

Abstract

In a brief digression in his best-selling book Capitalism and Freedom, first published in 1962, the late great Milton Friedman famously asserted: “There is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud.” The Chicago School economist then expanded on this simple idea in a short essay published in 1970, an essay whose provocative title said it all: “The Social Responsibility of Business Is to Increase Its Profits.” As it happens, both Friedman’s 1962 digression as well as his lengthier 3000-word essay invoke the name of the great Adam Smith, but Friedman’s invocation of the Scottish philosopher/political economist begs the question, Is the Nobel laureate’s simple profit-maximization model of business ethics the logical conclusion of Smith’s metaphorical “invisible hand,” or is it a dangerous betrayal of Smith’s true moral ideals? This paper will revisit Friedman’s 1970 essay with this fundamental question in mind.

Keywords: Milton Friedman, Adam Smith, Invisible Hand

JEL Classification: B10, B20, B30