Question

1. Friedman distinguishes between the two concepts that (a) businesses really do act in ways to maximize profit and (b) businesses have a moral responsibility (or, as he puts it, a social responsibility) to act to maximize profit. How does he defend the latter position? (See both the Friedman and Sandbu readings)
2. From the Sandbu article, Sandbu quotes Adam Smith as saying that we get our dinner from the self-interest of the butcher, baker and brewer. What does he mean by this? How does this observation lead to Adam Smith's concept of the "invisible hand?"

NB: Can I get an email to send both article?

Answer 1

1.

Friedman in his position wants to convey the message that is intended in the context of ethical decision in terms of the best interests of the employers, to understand simply I have put forth the points that Friedman is implying with his statement "businesses have a moral responsibility  to act to maximize profit"

• Friedman argues that in order to work in the best interest of the shareholders the companies need to focus completely on maximizing the profits.
• If companies start spending or making expenditures in the social sector or in a socially responsible way, that would reduce returns to the shareholder wealth which should be the primary concern for any business since it should focus on maximizing the investment made by shareholders in the form of shareholder wealth.
• If the business exercises its decision in putting the resources in the form of CSR(corporate social responsibility) programs, it could be an exploitation of the shareholder wealth, though done for a socially good and moral purpose it would be unethical on a part because would constitute exploitation of the shareholder's wealth.

2.

Through the statement Adam Smith is emphasizing on the following points:

• The needs of the society as a whole are met when the individual needs are met i.e the pursual of individual self-interest needs i.e The butcher, baker & brewer are in a way pursuing their own individual self-interest to make money in the form of exchanging their services so that they can purchase their preferred goods and services.
• The statement highlights the concept of the free market economy which forms a guiding principle of the world economy which functions very smoothly without the presence of a single controlling entity as if it is guided by an invisible hand: This invisible hand that Adam Smith refers to is the invisible guiding force to move the world economy which is governed by the principle of Individual Self Interest and Freedom of production.