EconExtra is a series of posts that go beyond the textbook, relating current events and recent developments in economics to content standards, and providing resource suggestions to help you incorporate the current events into your lessons.

The Issue

Milton Friedman, the father of “free-market” or libertarian economics, published his groundbreaking essay, “The Social Responsibility of Business” in September 1970. His basic argument was that corporate executives’ singular focus should be to maximize profit. (Having attended a “Chicago School” business school in the 1980’s, my education included “maximizing shareholder value” as well as “agency theory.”) Social and environmental concerns were to be left to politics. Executives were the agents of the owners, and their personal views on social issues should not influence the decisions they make on behalf of those owners. Those who objected to Friedman’s essay argued that corporations should in fact share in the social mission.

The world was a very different place fifty years ago. Despite the subsequent changes to business, society, and politics, this essay still sparks worthwhile debate among economists and business leaders as to its meaning and implications for today. The topic of corporate governance and mission may stretch beyond any single CEE content standard, but it touches on elements of standards one through seven. Given the rise in popularity of “socially responsible” investing, students may very well be interested in joining this discussion.

Resources

The essay itself is a readable 3000 words. This Forbes article summarizes Friedman’s essay and the position of opponents to it when it was published. It goes further to summarize the New York Times DealBook deep dive commemorating the 50^th anniversary of the essay’s publication. The Forbes article ends with a discussion of socially responsible investing.

The DealBook article (link above) is a longer read. This is Aaron Sorkin’s description of the DealBook article:

At DealBook, we wanted to mark the occasion by stirring a series of discussions and debates. So, in conjunction with The Times Magazine, we assembled 22 experts — including C.E.O.s, Nobel laureate economists and top think-tank leaders — and asked them to respond to Friedman’s essay. Some cited specific passages, and some took on (and took issue with) Friedman’s entire argument.

(Another Dealbook Essay that might be worth reading for historical context is Kurt Anderson’s essay.)

Suggested Activities 

Introduce the topic by having students read the Forbes article. Then have the students read the essay itself. (Depending on the level and independence of your students, you may have to guide this reading a bit.)

At this point you could go one of two ways. If you want to have students consider the essay as a whole, you could set up a class-wide debate, or simply have students decide if they agree or disagree with Friedman and support their position with a few arguments.

The New York Times DealBook article can be used to set up an alternative activity.  Many of the contributors to the article commented on specific paragraphs or segments of the essay. You could assign one of these portions or pull others from the essay itself and assign each to a small group of students to debate/discuss within the group. (Here is a PDF of the essay where I highlighted several paragraphs that could be used for this.) The NYT article itself could be used as an example and resource for your students in forming their arguments. A representative of each group could then present the arguments on each segment to the class.

In either case, the lesson could be concluded with a discussion of the rise in popularity of socially responsible investing, how that may be changing the perceived “mission” of corporate executives and directors, and what Friedman might think of that were he still alive.

About the Author