Saturday, 8 October 2011

Remedial Notes

Earlier today, I was at the library of Tainan Technology University. The name is misleading - it would be more accurate to call it a glorified arts and crafts school for eighteen to twenty year old girls, because that is basically what it is. My girlfriend, although she didn't study there (she did a science degree in Kaohsiung), likes their library building for various reasons to do with convenience and aesthetics. I was there to help her prepare for a higher-level English exam, and as she was going through a mock paper and wanted to concentrate, I went wandering around for a while during which time I came across a prominently displayed textbook on "Corporate Responsibility" on the ground floor. I took it back upstairs with me to relieve the boredom of waiting.

Naturally, I went straight to the name index at the back and looked up "Friedman, M" for which there were only five or six page numbers listed. So I went to the first couple of references in Chapter 1 and came across this:

Upon reading that it should be immediately clear why students who go to University to get a degree in business, leave University not only without a clear understanding of the moral case for free markets, but as more or less committed to a democratically calibrated fascism.

Consider the premises tacitly at work there in rendering the term "social responsibility" as consequences that are "good for everyone". It is simply assumed that "social" must encompass "everyone" (where to draw the limits for that "everyone"?), and then further assumed that a given set of consequences can in some measure be beneficial to "everyone" (despite the fact that people's preferences generally display considerable variety at any given point in time).

The first problem - how to define "everyone" - cannot be easily dismissed. Obviously, a company cannot possibly consider the consequences of its actions for everybody in the whole world as such a proposition is as crass as it is unrealistic. Yet nor is that problem simplified to any significant degree by the limiting factor of the nation-state, as after all, populous nation-states typically comprise millions of people. Working that limiting factor further down in scale to something like State or county level might be more realistic, but then there is the problem of consequences for people outside that jurisdiction.

What is required to solve that problem are principles limiting what kind of responsibility a company has relative to different categories of people (e.g. shareholders vs third-parties with a tort claim).

The second problem - ensuring that "everyone" benefits from the consequences of a decision - is essentially insoluble. This is because the decisions that companies make typically ripple their way through market prices to some degree, and these ripples can have far-reaching effects across both local and world markets. Not only do decisions fail to benefit "everyone" to the same degree, but of course, they also impose costs on "everyone" - but again not to the same degree, nor even do they impose the same kind of cost or the same cost at any given point at time. The market system is essentially chaotic in that respect, i.e. the particular effects of a given company decision cannot be predicted a-priori.

Since that problem is insoluble, there are only two possibilities: either no attempt is made by the company's managers to "benefit everyone", or they make a misguided and doomed attempt to do so. In that case, what will inevitably happen is that they end up benefiting certain people (especially, for instance, people able to dispense advantages to them through the exercise of political power), while dumping costs on others. In this way, a company can easily become a minor tool of political power.

Rather than attempting to solve that problem, a free market approach to social responsibility requires principles describing and limiting the specific kinds of responsibility a company owes to specific kinds of people. Those principles are derived from the negative, liberal rights framework of private property and freedom of speech and association, with those rights themselves having their ethical basis in the sovereignty of the individual.

NB: This post isn't finished yet...


  1. I was there to help her prepare for a higher-level English exam, and as she was going through a mock paper and wanted to concentrate, I went wandering around

    If I understand this correctly, you were there to help her and in order to do that you had to act as if you weren't there.

  2. Yes, but only until she completed the mock paper, which didn't include answers - so marking the thing was my job, along with what you might call post-hoc analysis and advice. Take my word for it, if I'd tried to interfere I'd have been in trouble.


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