READ: Should Corporations Be Do-Gooders?

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"It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better."

by Adam Ozimek - The Atlantic

Green products, companies paying workers to volunteer, corporate donations to charitable causes, fair trade coffee: you can't turn on the TV or walk down a grocery aisle without seeing examples of what economists call "corporate social responsibility." But what should we make of supposedly profit maximizing enterprises who seem to contribute to the public good? Far too often, those defending or advocating for corporate social responsibility are interested in diminishing the status of capitalism, profit seeking, self-interest, and/or neoclassical economics. But I think one can embrace corporate social responsibility without this baggage.

In his classic essay "The Social Responsibility of Corporations", Milton Friedman took the opposite position and argued that sole responsibility of corporations is to strictly profit maximize, and that their contribution to society arises out of that. And to be sure, the biggest benefit to society that businesses generate does arise from their pursuit of profits. Paul Krugman, famously writing in praise of sweatshops, agreed that the profit motive has done tremendous good for the third world:

"It is the indirect and unintended result of the actions of soulless multinationals and rapacious local entrepreneurs, whose only concern was to take advantage of the profit opportunities offered by cheap labor. It is not an edifying spectacle; but no matter how base the motives of those involved, the result has been to move hundreds of millions of people from abject poverty to something still awful but nonetheless significantly better."

Yet one can both recognize the value of non-profit maximizing corporate social responsibility and accept that profit maximizing is the greatest good businesses provide. Markets, self-interest, profit maximizing behavior... these things are great. But a little bit of explicit corporate contribution to the public good can also be of value on the margin.

Corporate social responsibility does not need to be held in opposition to capitalism, self interest, or neoclassical economics. After all, the more effective corporations are at providing public goods, the stronger the case for voluntary exchange that is the cornerstone of capitalism. And self-interest and neoclassical economics are not the enemies of altruism that some imagine. Neoclassical economics is completely consistent with rationally self-interested actors who value altruism pursuing it and being willing to pay for it. READ MORE