Comments on: Milton Friedman Was Right http://blogs.law.harvard.edu/globalfund/2006/11/24/milton-friedman-was-right/ Globalization, Development, \"Corporate Social Responsibility\" Sat, 03 Feb 2007 07:24:34 -0500 http://wordpress.org/?v=2.8.4 hourly 1 By: » Blog Archive » Milton Freedman was right http://blogs.law.harvard.edu/globalfund/2006/11/24/milton-friedman-was-right/comment-page-1/#comment-58 » Blog Archive » Milton Freedman was right Thu, 04 Jan 2007 09:51:20 +0000 http://blogs.law.harvard.edu/globalfund/2006/11/24/milton-friedman-was-right/#comment-58 [...] The article, that also appeared on the Wall Stree Journal, is by Mr. Manne, dean emeritus of the George Mason University School of Law. [...] [...] The article, that also appeared on the Wall Stree Journal, is by Mr. Manne, dean emeritus of the George Mason University School of Law. [...]

]]> By: Andras Erszegi http://blogs.law.harvard.edu/globalfund/2006/11/24/milton-friedman-was-right/comment-page-1/#comment-49 Andras Erszegi Fri, 08 Dec 2006 12:13:48 +0000 http://blogs.law.harvard.edu/globalfund/2006/11/24/milton-friedman-was-right/#comment-49 I believe that Friedman was right, in fact his arguments were beautifully logical and clear, within his model of business and society, which, however, as all models, simplifies complex issues so that they can be dealt with in a rational way. In my opinion, the Friedman model ignores two issues: (1) The roles of business and government are not as separate in the real world as implied in the Friedman model. In fact, the larger a company, and the smaller the country lead by a government, the greater the company's influence on the government's decisions, due to its lobbying power. For instance, Central-Eastern-European governments are competing for large investments by transnational companies, by suiting their countries' legislation to the interests of those transnationals, mainly in the areas of taxation. Mr. Manne is right in saying that even a billion apples do not become meat. But the difference between a small amount and a larger amount of Uranium may determine whether a chain reaction happens. The notion of "critical mass" is quite well known, and widely used in various contexts. (2) The timescale of business decisions aimed at increasing profits is also important. Short term profitability decisions tend to reduce the "sustainability" of resources, while long term decisions tend to enhance sustainability. Because of this, long term deicisions usually serve the interests of the larger community better than short term decisions, because it is a long term business interest to sustain an environment which continues to provide the necessary natural resources, skilled people who can work for business, and reasonably wealthy people who can afford to buy the end-products of the business. However, the Friedman model does not provide much guidance on how business executives should choose between short term and long term options. Kind regards András Érszegi I believe that Friedman was right, in fact his arguments were beautifully logical and clear, within his model of business and society, which, however, as all models, simplifies complex issues so that they can be dealt with in a rational way.
In my opinion, the Friedman model ignores two issues:

(1) The roles of business and government are not as separate in the real world as implied in the Friedman model. In fact, the larger a company, and the smaller the country lead by a government, the greater the company’s influence on the government’s decisions, due to its lobbying power. For instance, Central-Eastern-European governments are competing for large investments by transnational companies, by suiting their countries’ legislation to the interests of those transnationals, mainly in the areas of taxation.
Mr. Manne is right in saying that even a billion apples do not become meat. But the difference between a small amount and a larger amount of Uranium may determine whether a chain reaction happens. The notion of “critical mass” is quite well known, and widely used in various contexts.

(2) The timescale of business decisions aimed at increasing profits is also important. Short term profitability decisions tend to reduce the “sustainability” of resources, while long term decisions tend to enhance sustainability. Because of this, long term deicisions usually serve the interests of the larger community better than short term decisions, because it is a long term business interest to sustain an environment which continues to provide the necessary natural resources, skilled people who can work for business, and reasonably wealthy people who can afford to buy the end-products of the business. However, the Friedman model does not provide much guidance on how business executives should choose between short term and long term options.

Kind regards
András Érszegi

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