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The Social Responsibility of Business Is
to Increase Its Profits 1
Milton Friedman
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 dis-
crimination, 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. Business-
men 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 ar-
tificial 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 em-
ployee 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
1 Published in: The New York Times Magazine, September 13, 1970. Copyright @ 1970
by The New York Times Company. Reprinted by permission of The New York Times
Syndicate, Paris, France.
174  Milton Friedman
ethical custom. Of course, in some cases his employers may have a different ob-
jective. 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.
Needless to say, this does not mean that it is easy to judge how well he is per-
forming his task. But at least the criterion of performance is straightforward, and
the persons among whom a voluntary contractual arrangement exists are clearly
Of course, the corporate executive is also a person in his own right. As a per-
son, he may have many other responsibilities that he recognizes or assumes volun-
tarily – to his family, his conscience, his feelings of charity, his church, his clubs,
his city, his country. He may feel impelled by these responsibilities to devote part
of his income to causes he regards as worthy, to refuse to work for particular cor-
porations, even to leave his job, for example, to join his country’s armed forces. If
we wish, we may refer to some of these responsibilities as “social responsibili-
ties”. But in these respects he is acting as a principal, not an agent; he is spending
his own money or time or energy, not the money of his employers or the time or
energy he has contracted to devote to their purposes. If these are “social responsi-
bilities”, they are the social responsibilities of individuals, not of business.
What does it mean to say that the corporate executive has a “social responsibil-
ity” in his capacity as businessman? If this statement is not pure rhetoric, it must
mean that he is to act in some way that is not in the interest of his employers. For
example, that he is to refrain from increasing the price of the product in order to
contribute to the social objective of preventing inflation, even though a price in-
crease would be in the best interests of the corporation. Or that he is to make ex-
penditures on reducing pollution beyond the amount that is in the best interests of
the corporation or that is required by law in order to contribute to the social objec-
tive of improving the environment. Or that, at the expense of corporate profits, he
is to hire “hardcore” unemployed instead of better qualified available workmen to
contribute to the social objective of reducing poverty.
In each of these cases, the corporate executive would be spending someone
else’s money for a general social interest. Insofar as his actions in accord with his
“social responsibility” reduce returns to stockholders, he is spending their money.
Insofar as his actions raise the price to customers, he is spending the customers’
money. Insofar as his actions lower the wages of some employees, he is spending
their money.
The stockholders or the customers or the employees could separately spend
their own money on the particular action if they wished to do so. The executive is
exercising a distinct “social responsibility”, rather than serving as an agent of the
stockholders or the customers or the employees, only if he spends the money in a
different way than they would have spent it.
The Social Responsibility of Business Is to Increase Its Profits  175
But if he does this, he is in effect imposing taxes, on the one hand, and deciding
how the tax proceeds shall be spent, on the other.
This process raises political questions on two levels: principle and conse-
quences. On the level of political principle, the imposition of taxes and the expen-
diture of tax proceeds are governmental functions. We have established elaborate
constitutional, parliamentary and judicial provisions to control these functions, to
assure that taxes are imposed so far as possible in accordance with the preferences
and desires of the public – after all, “taxation without representation” was one of
the battle cries of the American Revolution. We have a system of checks and bal-
ances to separate the legislative function of imposing taxes and enacting expendi-
tures from the executive function of collecting taxes and administering expendi-
ture programs and from the judicial function of mediating disputes and
interpreting the law.
Here the businessman – self-selected or appointed directly or indirectly by
stockholders – is tobe simultaneously legislator, executive and, jurist. He is to de-
cide whom to tax by how much and for what purpose, and he is to spend the pro-
ceeds – all this guided only by general exhortations from on high to restrain infla-
tion, improve the environment, fight poverty and so on and on.
The whole justification for permitting the corporate executive to be selected by
the stockholders is that the executive is an agent serving the interests of his princi-
pal. This justification disappears when the corporate executive imposes taxes and
spends the proceeds for “social” purposes. He becomes in effect a public em-
ployee, a civil servant, even though he remains in name an employee of a private
enterprise. On grounds of political principle, it is intolerable that such civil ser-
vants – insofar as their actions in the name of social responsibility are real and not
just window-dressing –should be selected as they are now. If they are to be civil
servants, then they must be elected through a political process. If they are to im-
pose taxes and make expenditures to foster “social” objectives, then political ma-
chinery must be set up to make the assessment of taxes and to determine through a
political process the objectives to be served.
This is the basic reason why the doctrine of “social responsibility” involves the
acceptance of the socialist view that political mechanisms, not market mecha-
nisms, are the appropriate way to determine the allocation of scarce resources to
alternative uses.
On the grounds of consequences, can the corporate executive in fact discharge
his alleged “social responsibilities”? On the other hand, suppose he could get
away with spending the stockholders’ or customers’ or employees’ money. How is
he to know how to spend it? He is told that he must contribute to fighting infla-
tion. How is he to know what action of his will contribute to that end? He is pre-
sumably an expert in running his company – in producing a product or selling it or
financing it. But nothing about his selection makes him an expert on inflation.
Will his holding down the price of his product reduce inflationary pressure? Or, by
leaving more spending power in the hands of his customers, simply divert it else-
where? Or, by forcing him to produce less because of the lower price, will it sim-
176  Milton Friedman
ply contribute to shortages? Even if he could answer these questions, how much
cost is he justified in imposing on his stockholders, customers and employees for
this social purpose? What is his appropriate share and what is the appropriate
share of others?
And, whether he wants to or not, can he get away with spending his stockhold-
ers’, customers’ or employees’ money? Will not the stockholders fire him? (Either
the present ones or those who take over when his actions in the name of social re-
sponsibility have reduced the corporation’s profits and the price of its stock). His
customers and his employees can desert him for other producers and employers
less scrupulous in exercising their social responsibilities.
This facet of “social responsibility” doctrine is brought into sharp relief when
the doctrine is used to justify wage restraint by trade unions. The conflict of inter-
est is naked and clear when union officials are asked to subordinate the interest of
their members to some more general purpose. If the union officials try to enforce
wage restraint, the consequence is likely to be wildcat strikes, rank-and-file revolts
and the emergence of strong competitors for their jobs. We thus have the ironic
phenomenon that union leaders – at least in the U.S.–have objected to Government
interference with the market far more consistently and courageously than have
business leaders.
The difficulty of exercising “social responsibility” illustrates, of course, the
great virtue of private competitive enterprise – it forces people to be responsible
for their own actions and makes it difficult for them to “exploit” other people for
either selfish or unselfish purposes. They can do good – but only at their own ex-
Many a reader who has followed the argument this far may be tempted to re-
monstrate that it is all well and good to speak of Government’s having the respon-
sibility to impose taxes and determine expenditures for such “social” purposes as
controlling pollution or training the hard-core unemployed, but that the problems
are too urgent to wait on the slow course of political processes, that the exercise of
social responsibility by businessmen is a quicker and surer way to solve pressing
current problems.
Aside from the question of fact – I share Adam Smith’s skepticism about the
benefits that can be expected from “those who affected to trade for the public
good” – this argument must be rejected on grounds of principle. What it amounts
to is an assertion that those who favor the taxes and expenditures in question have
failed to persuade a majority of their fellow citizens to be of like mind and that
they are seeking to attain by undemocratic procedures what they cannot attain by
democratic procedures. In a free society, it is hard for “evil” people to do “evil”,
especially since one man’s good is another’s evil.
I have, for simplicity, concentrated on the special case of the corporate execu-
tive, except only for the brief digression on trade unions. But precisely the same
argument applies to the newer phenomenon of calling upon stockholders to re-
quire corporations to exercise social responsibility (the recent G.M crusade for ex-
ample). In most of these cases, what is in effect involved is some stockholders try-
The Social Responsibility of Business Is to Increase Its Profits  177
ing to get other stockholders (or customers or employees) to contribute against
their will to “social” causes favored by the activists. Insofar as they succeed, they
are again imposing taxes and spending the proceeds.
The situation of the individual proprietor is somewhat different. If he acts to re-
duce the returns of his enterprise in order to exercise his “social responsibility”, he
is spending his own money, not someone else’s. If he wishes to spend his money
on such purposes, that is his right, and I cannot see that there is any objection to
his doing so. In the process, he, too, may impose costs on employees and custom-
ers. However, because he is far less likely than a large corporation or union to
have monopolistic power, any such side effects will tend to be minor.
Of course, in practice the doctrine of social responsibility is frequently a cloak
for actions that are justified on other grounds rather than a reason for those ac-
To illustrate, it may well be in the long run interest of a corporation that is a
major employer in a small community to devote resources to providing amenities
to that community or to improving its government. That may make it easier to at-
tract desirable employees, it may reduce the wage bill or lessen losses from pilfer-
age and sabotage or have other worthwhile effects. Or it may be that, given the
laws about the deductibility of corporate charitable contributions, the stockholders
can contribute more to charities they favor by having the corporation make the gift
than by doing it themselves, since they can in that way contribute an amount that
would otherwise have been paid as corporate taxes.
In each of these – and many similar – cases, there is a strong temptation to ra-
tionalize these actions as an exercise of “social responsibility”. In the present cli-
mate of opinion, with its wide spread aversion to “capitalism”, “profits”, the
“soulless corporation” and so on, this is one way for a corporation to generate
goodwill as a by-product of expenditures that are entirely justified in its own self-
It would be inconsistent of me to call on corporate executives to refrain from
this hypocritical window-dressing because it harms the foundations of a free soci-
ety. That would be to call on them to exercise a “social responsibility”! If our in-
stitutions, and the attitudes of the public make it in their self-interest to cloak their
actions in this way, I cannot summon much indignation to denounce them. At the
same time, I can express admiration for those individual proprietors or owners of
closely held corporations or stockholders of more broadly held corporations who
disdain such tactics as approaching fraud.
Whether blameworthy or not, the use of the cloak of social responsibility, and
the nonsense spoken in its name by influential and prestigious businessmen, does
clearly harm the foundations of a free society. I have been impressed time and
again by the schizophrenic character of many businessmen. They are capable of
being extremely farsighted and clearheaded in matters that are internal to their
businesses. They are incredibly shortsighted and muddleheaded in matters that are
outside their businesses but affect the possible survival of business in general.
This shortsightedness is strikingly exemplified in the calls from many business-
178  Milton Friedman
men for wage and price guidelines or controls or income policies. There is nothing
that could do more in a brief period to destroy a market system and replace it by a
centrally controlled system than effective governmental control of prices and
The shortsightedness is also exemplified in speeches by businessmen on social
responsibility. This may gain them kudos in the short run. But it helps to
strengthen the already too prevalent view that the pursuit of profits is wicked and
immoral and must be curbed and controlled by external forces. Once this view is
adopted, the external forces that curb the market will not be the social con-
sciences, however highly developed, of the pontificating executives; it will be the
iron fist of Government bureaucrats. Here, as with price and wage controls, busi-
nessmen seem to me to reveal a suicidal impulse.
The political principle that underlies the market mechanism is unanimity. In an
ideal free market resting on private property, no individual can coerce any other,
all cooperation is voluntary, all parties to such cooperation benefit or they need
not participate. There are no values, no “social” responsibilities in any sense other
than the shared values and responsibilities of individuals. Society is a collection of
individuals and of the various groups they voluntarily form.
The political principle that underlies the political mechanism is conformity. The
individual must serve a more general social interest – whether that be determined
by a church or a dictator or a majority. The individual may have a vote and say in
what is to be done, but if he is overruled, he must conform. It is appropriate for
some to require others to contribute to a general social purpose whether they wish
to or not.
Unfortunately, unanimity is not always feasible. There are some respects in
which conformity appears unavoidable, so I do not see how one can avoid the use
of the political mechanism altogether.
But the doctrine of “social responsibility” taken seriously would extend the
scope of the political mechanism to every human activity. It does not differ in phi-
losophy from the most explicitly collectivist doctrine. It differs only by professing
to believe that collectivist ends can be attained without collectivist means. That is
why, in my book Capitalism and Freedom, I have called it a “fundamentally sub-
versive doctrine” in a free society, and have said that in such a society, “there is
one and only one social responsibility of business – to use it 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”.