American Compass Releases Conservative Economic Agenda for 118th Congress
Hayek’s Broken Promise
Comparative Disadvantage

Sept. 13 is the 50th anniversary of a seminal moment in the world of business: the publication of Milton Friedman’s essay in The New York Times Magazine entitled ‘The Social Responsibility of Business Is to Increase Its Profits.’ … You can read the original essay in its entirety here. Below are quotations from Friedman’s landmark essay, along with the experts’ responses.

Oren Cass: Friedman’s logical suppositions build carefully atop one another, but at their base lies a sloppily unsupported claim: that what business owners generally want is to make as much money as possible. If this were true, the rest might well follow. But it is empirically false. Sole proprietors and closely held firms often operate in ways considerate of their workers, communities and customers that are far from profit-maximizing.

What of the dispersed and anonymous shareholders to whom Friedman is so attentive? Their preferences are notoriously difficult to discern. That does not argue for ‘make as much money as possible’ as the default instruction to managers. Why not ‘operate as you believe a responsible member of the community would’? We could at least as easily say that is what owners generally want.

The best defense of Friedman’s profits-über-alles default is that shareholders of a widely held, publicly traded company are not like personally engaged business owners. Distant, diffuse and often hidden behind layers of legal fiction, they are not accountable, or even known, to the communities in which their companies operate. They often do not know, or care to know, how those companies operate.

If that is Friedman’s argument, it is less celebration of the free market’s power than brutal indictment. Logic does not lead from there toward his doctrine of shareholder primacy. Rather, if such ownership is prevalent, the conclusion should be that stronger legal constraints may be necessary to channel the pursuit of profit toward delivering widespread prosperity.

Continue Reading at The New York Times
Oren Cass
Oren Cass is the executive director at American Compass.
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American Compass Releases Conservative Economic Agenda for 118th Congress

Today, American Compass is releasing New Direction: Conservative Principles & Policies for the 118th Congress, an agenda for economic renewal, focused on the interests of worker, their families and communities, and the nation.

Hayek’s Broken Promise

It is a tragedy that Friedrich Hayek’s excesses, invested with the authority of his (deserved) reputation, became the unexamined default for right-of-center economic thinking in America.

The resulting orthodoxy too often combines a Panglossian insistence on defending market outcomes regardless of their quality with a reflexive belief that policy intervention can only be distortive for the worse.

But when it comes to international trade’s effect on the American economy, a knowing assertion that nothing should be done, followed by yet another “analysis” working backward to an argument that nothing needs doing, will no longer do.

Comparative Disadvantage

If comparative advantage is created rather than discovered, refusing to play the game has consequences.