----------------- HES POSTING ----------------- In response to Sam Bostaph: Thanks for your intervention here. Let me repeat the pertinent quote that I found interesting--and that you found to be "clarified" in subsequent paragraphs. It said: "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 dicovered 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." TO WHICH I RESPOND: Note first the wonderful line about the "free enterprise" system (I have commented on this matter previously, but here it is again--it seems to be everywhere). That is, "free enterprise" seems to mean that businesses are free to do what they have always done and if we need for them to change we are going to have to pay them to do so. Note, also, the wonderful put down of "the current crop of reformers"--those who worry about unemployment, discrimination, pollution and other "catchwords" in fashion at the moment. We then come to Friedman's coup de grace--such fellows are "preaching pure and unadulterated socialism." Then there is some curious talk "free societies." Are societies not "free" is they show concern for pollution and unemployment--and take policy measures to rectify those situations? Now if MF were some innocent who did not understand the force of the words he chose to use this would all be excusable. Most of us see it in term papers written by sophomores. But I am of the belief that people who know better, and MF seems to qualify here, use words for calculated purposes. There can be no doubt that here MF wishes to equate those who care about discrimination, pollution, and unemployment with those who are "socialists" and enemies of what he is pleased to call "free societies." I should imagine that in the 1970s, and perhaps even today, those words are selected with a specific purpose in mind. He can then apply all sorts of salve and fancy words later on--but the message is not in doubt. Again, he is free to his views--my gripe is that he is using his prestige as an accomplished economist as a disguise to sway others that caring about pollution or unemployment makes one a socialist or an enemy of a "free society." For one who regularly denounced Soviet nomenklatura for their vapid propaganda, MF is not bad at it either. Unlike the sophomore, but not unlike the nomenklatura, MF knew precisely what he was doing and he chose his words to serve his ends. Let us now turn to his allegedly exculpatory elaboration: "What does it mean to say that the corporate executive has a 'social responsibility' 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 [the owners of the business]. 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 increase would be in the best interests of the corporation. Or that he is to make expenditures 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 objective of improving the environment. Or that, at the expense of corporate profits, he is to hire 'hard-core' unemployed instead of better-qualified available workmen to contribute to the social objective of reducing poverty." TO WHICH I RESPOND: We see here yet another sleight of hand by MF. And just who is to say that acting "socially responsible" is not in the interest of the owners? Of course if you define "interest" narrowly--as he does here--then it seems to suggest "paying more than is absolutely necessary to produce a product at the lowest possible cash cost." On this tack MF is then free to denounce government for regulations that force firms to pay "more" than they would otherwise pay for the waste disposal services of the nearby river. But the fundamental problem is his denial that some companies choose to behave in ways that demonstrate "social responsibility" and still manage to survive. To doubt this is to make a fetish of the stuff we teach sophomores about alert and agile firms always perfectly yet precariously poised on some fictitious production possibilities frontier--moving to and fro at the slightest provocation from market signals. Such stories make for nice lectures, but they cannot possibly be said to describe the world MF seeks to invoke with his rhetoric. Michael Porter even has a hypothesis named after him now for discovering that a number of firms undertake some environmental improvements beyond what is "necessary"--and that a number of them have found that the possible threat of regulations some time in the future have caused them to reassess their processes and procedures and after "re-engineering" things discovered that they are now more "competitive" than hitherto. That is, their production costs are lower, their revenue picture is enhanced--and they have jumped ahead of their competitors in technology adoption. Of course the true believers find it incredulous on the grounds that if it were not efficient before how could it possibly be efficient now? Such is the fate of those who adhere too closely to their deductive truths at the expense of open-minded empirical work one finds in business schools where devotion to certain deductive truths is less severe than in other places we might mention. "In each of these cases, the corporate executive would be spending someone else's money for a general social interest. Insofar as this actions in accord with his 'social responsibility' reduce returns to stockholders, he 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." TO WHICH I RESPOND: Cute and rhythmic, but merely a classic case of Friedman's statics. Notice the lack of feedback, evolutionary adjustment, and learning in this stark reductionist world. It is sheer static nonsense. Do firms behave in "socially responsible" ways? The last decade has seen a number of them appearing to do so--and a wise strategy it seems to be. Or, as MF himself might wish to put it, "we cannot be sure what they are doing or why they are doing it, but they sure seem to be behaving AS IF they cared about what the consuming public thinks of them." For a pure instrumentalist like MF that is the end of the story. Q.E.D. So did MF really believe his "AS IF" trick, or only when it seemed useful to do so? Sorry Sam, MF's elaboration did not help much at all. Dan Bromley ------------ FOOTER TO HES POSTING ------------ For information, send the message "info HES" to [log in to unmask]