Thinker

Milton Friedman

In 1970, he wrote that a corporation's only responsibility is to increase its profits.

Economist, 1912-2006

Milton Friedman was born on July 31, 1912, in Brooklyn, New York, to Jewish immigrants from Carpathian Ruthenia in the Kingdom of Hungary.1 His parents ran a dry goods store. The family moved to Rahway, New Jersey, where Friedman grew up, later describing financial crisis as a constant companion of his childhood.2

He won a scholarship to Rutgers University, graduating in 1932 with concentrations in mathematics and economics. He earned his master's degree from the University of Chicago in 1933 and his doctorate from Columbia University in 1946.3

In September 1970, Friedman published an essay in the New York Times Magazine titled "The Social Responsibility of Business Is to Increase Its Profits." The argument was concise. Corporate executives are employees of the owners of the business. Their responsibility is to conduct the business in accordance with the owners' desires, which generally means making as much money as possible.4 Any executive who spends corporate money on social causes is, in Friedman's framing, imposing a tax on shareholders.

The essay became one of the most cited texts in the history of business ethics. It provided the intellectual framework for what later became known as shareholder primacy, the doctrine that a corporation exists to maximize returns to its owners above all other considerations.

1976

The year Friedman received the Nobel Memorial Prize in Economic Sciences.

Friedman's influence extended well beyond academic economics. His 1962 book Capitalism and Freedom advocated school vouchers, a volunteer army, and a negative income tax. His ideas shaped the economic policies of President Ronald Reagan and British Prime Minister Margaret Thatcher.5 A group of Chilean economists trained at the University of Chicago, later known as the "Chicago Boys," implemented his prescriptions in Chile under Augusto Pinochet, a connection that generated lasting controversy.6

His 1980 PBS television series Free to Choose, co-created with his wife Rose, reached millions of viewers. The accompanying book became a bestseller.7 The Economist described him upon his death in 2006 as "the most influential economist of the second half of the 20th century, possibly of all of it."8

Timeline

1962

Publication of Capitalism and Freedom, advocating free-market policies including school vouchers and a volunteer army.

1970

Friedman publishes his New York Times Magazine essay arguing that a corporation's sole responsibility is to maximize profits.

1976

Friedman receives the Nobel Memorial Prize in Economic Sciences.

1980

The PBS series Free to Choose reaches a national audience.

Endnotes

1 "Milton Friedman," Encyclopaedia Britannica.

2 Milton Friedman, Nobel Prize autobiography, Nobel Foundation.

3 Library of Congress, "Introduction: Milton Friedman: A Resource Guide."

4 Milton Friedman, "The Social Responsibility of Business Is to Increase Its Profits," New York Times Magazine, September 13, 1970.

5 Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962).

6 "Milton Friedman," Encyclopaedia Britannica.

7 Milton Friedman and Rose Friedman, Free to Choose: A Personal Statement (New York: Harcourt Brace Jovanovich, 1980).

8 "Milton Friedman, a Giant Among Economists," The Economist, November 23, 2006.