Duncan Austin: Milton Friedman’s hazardous feedback loop

via Gerald Midgely

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Duncan Austin: Milton Friedman’s hazardous feedback loop

 Duncan Austin: Milton Friedman’s hazardous feedback loop

The economist’s statement – 50 years old this week – propels the runaway corporatism that continues to destabilise our society and environment.

Friedman's feedback loop
Friedman’s feedback loop

In a famous article written 50 years ago this week, Milton Friedman argued ‘the social responsibility of business is to increase its profits’. The statement remains a lightning rod for the debate on ‘corporate purpose’ – whether public corporations should be managed just for the benefit of shareholders or for a broader set of stakeholders, including employees, suppliers and the community. 

We continue to go back and forth. In 2019, to much fanfare, 181 CEOs of the US Business Roundtable publicly committed to manage corporations for stakeholders – reversing their 1997 statement that upheld shareholder primacy! Not so fast, countered Harvard Law Professors Lucian Bebchuk and Roberto Tallarita, who argued that stakeholderism can backfire in insulating corporate leaders from external accountability and compromising economic performance… to the detriment of broader stakeholders! 

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Duncan Austin: Milton Friedman’s hazardous feedback loop