Economic Efficiency and the Quality of Life

ABSTRACT. A classical moral defense of profit seeking as the social responsibility of business in a competitive market is examined. That defense rests on claims about the directness of relationships between (a) profit seeking activity and standards of living and (b) standards of living and the quality of life. Responses to the classical argument tend to raise doubts about the direcmess of the first relationship. This essay challenges the directness of the second relationship, argues that the classical argument is invalid, and claims that an alternative description of the social responsibility of business is entailed by the classical premisses.

Profits, we are told by the classical and neoclassical strains in economic thought, are the best measure of a firm's contribution to the welfare of others. If our contributions to the social good are relevant to what we merit or deserve, then profits clearly seem to be deserved. The classical sto W is sometimes told in a more dramatic form: the mechanisms of the free market work to yield a high quality of life for a community when, and only when, the participants in the market are driven by a motive of profit maximization. If the participants suffer a motivational lapse and direct their market activities to ends other than profits, the machine falters, and the community lapses into hard times; thus, if the participants in the free market bear a responsibility for the well-being of bystanders, then that responsibility can only be met by engaging in the pursuit of profits. These kinds of stories about the relationships between economic activity and ethics, ending with claims about the moral status of profit seeking, have been widely challenged outside the classical I tradi-

Rockney Jacobsen teachesphilosophy at Wilfrid Laurier University in Waterloo, Ontario, Canada.

Journal of Business Ethics 10: 201-209, 1991. © 1991 KluwerAcademic Publishers. Printed in the Netherlands.

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tions in economic thought. The dispute tends to focus on the truth or falsity of claims about the capability of a free market, fueled by the energies of profit seekers, to deliver the promised goods efficiendy to the community. It thus becomes a series of skirmishes over how direct the relationship is, at various points, between increasing profits and increasing contributions to the social well-being. If the relationship turns out to be direct, the classical liberal or contemporary libertarian is thought to win the day; if the relationship is discovered to be indirect or, better yet, inverse, then the case is thought to be lost. I will not enter into the fray along this front, for two reasons. First, the claims about the delivery capabilities of a free market of competing profit seekers is often acknowledged to be an empirical claim which, according to its proponents, has not yet been subjected to an adequate or fair test in the market place.2 Thus, if the consequences of profit seeking in any particular case can be shown to be morally odious, the defender of profit seeking is more likely to call for revisions in the economic system than concede that the odious consequences derive from a motive to acquire profits. Secondly, I suspect that the moral upshot of disputes about the status of profit seeking depend less on the soundness of classical economics than is generally assumed. My strategy in what follows will be to grant as much as possible to the claims of classical economics, but question the moral consequences which are thought to follow. Since his writings are the most articulate contemporary expression of the classical cause, I will use the libertarian views of Milton Friedman 3 as my chief stalking horse. Although most of my attention will be directed towards an argument which operates only as "deep background" to Friedman's own presentation of his case, we will see in the final section

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how the ruin of this classical argument takes the wind out of the contemporary libertarian addenda.

II I noted in opening that the classical argument can take more or less dramatic forms, resulting in a stronger or weaker conclusion; in its weaker form, the argument concludes that profit seeking is always morally justifiable (morally permissible); in its stronger form, the argument concludes that profit seeking is morally obligatory. Both conclusions agree in suggesting that there is certainly nothing wrong with pursuing profits - that it is not morally forbidden. I will state and examine an argument for both the weaker and stronger conclusions; the argument will be found lacking, but in noting how it fails we shall see an alternative statement of the social responsibilities of business emerge. The central classical argument for these conclusions, which I will refer to as the economic efficiency argument, is of distinguished pedigree, making an early appearance in the writings of Adam Smith. In a deservedly famous passage, Smith, writing of merchants who intend only their own interest and gain, says that in a free competitive market such a merchant is led by an invisiblehand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.4 This passage, which Friedman quotes 5 with obvious approval, does not actually state an argument, but the spirit of one shines clearly through. The justification of the pursuit of private interest and gain in the market place is derived from the fact that such a pursuit promotes the public interest or good; furthermore, designs on the part of merchants to promote the public good directly will be less efficient in doing so than is the pursuit of gain and may even damage the public interest. If pursuing individual profits effectively promotes the public welfare, then it is morally justified; if pursuing individual profits is the only effective means of promoting

social ends, then it is morally obligatory; and if pursuing desirable social ends directly is destructive of those ends, it is morally forbidden. The first premiss employed in such reasoning may be stated as follows: (1) A free competitive market, in which the participants act always so as to maximize their individual profits, is the most (or, the only) efficient mechanism for the production and distribution of safe, high quality, affordable goods and services for consumers. This claim about the delivery capabilities of a free market is offered both in defense of a certain design for the market place - it must be free and competitive - and in defense of a profit motivation on the part of its participants. My strategy will be to suppose that both parts of the claim are true, and see what follows. I will, therefore, suppose that a free competitive market is the most (or, the only) efficient mechanism for the delivery of the goods, and, the efficiency of the mechanism depends upon the self-interested pursuit of profits on the part of persons doing business in the market place. The additional premisses needed to support the desired conclusion are less contentious and less frequently criticized. I suggest the following premisses as a plausible route to the weaker and stronger conclusions of the classical argument: (2) The production and distribution of safe, high quality, affordable goods and services for consumption increases the standard of living throughout the community by alleviating scarcity and its attendant moral evils hunger, disease, crime, etc. (3) Alleviation of, and security against, scarcity and its attendant evils is an essential part of promoting and maintaining a high quality of life for persons, human well-being, human flourishing, the good life, etc., and these are morally good things. Before completing the argument, we should pause here to deflect a misunderstanding which might otherwise affect the outcome of the argument. The joint claim of the first three premisses might easily be obscured by talk about "the quality of life", "human well-being", etc. The claim being made is not that the maximal contribution which persons in

Economic EJficiency and the Quality of Life business can make to our quality of life is made by the self-interested pursuit of their own profits. Rather, the somewhat weaker claim is being made that the maximal contribution such persons can make to our quality of life in their capacity aspersons in business is made by their self-interested pursuit of profits. Milton Friedman does not deny6 that I can make, and even should make other contributions to the quality of your life in other capacities - e.g., as your friend, as your spouse, as your priest, etc. But, in doing business with you, I can make the fullest contribution to your welfare which it is possible for me to make in that capacity or role, by pursuing my own profits in a free and competitive market. Contributions which I might make by serving you well in other capacities may be far greater than any I can make by doing business with you. But in making such contributions to your well-being I can only be viewed as meeting the responsibilities which accrue to me in the roles of friend, spouse, or priest; I am not thereby meeting the responsibilities of business. The question we should have before us is not "what can I do to contribute to the quality of your life?" but, rather, "what can I do, qua businessman, to meet the responsibilities which I have in that capacity?" With this qualification in mind, the argument can be completed as follows: (4) Participants in a free competitive market can (or, can only) promote and secure a high quality of life throughout a community by acting always so as to increase their profits. (5) Those who can contribute to the promotion of moral goods, or the alleviation of moral evils, are morally justified in doing so (or, have a moral responsibility to do so). (6) Participants in a free competitive market are morally justified in (or, have a moral responsibility for) acting always so as to increase their profits. We are in a position to see that, even granting the truth of the premisses of this argument, there are difficulties in supposing that it supports any moral advice or moral prescriptions which can be used to guide participants in the market place as they do business. In the following sections, I wilt point to three weaknesses in argument, in order of increasing degree of seriousness, and enroute arrive at an alternative statement of the responsibilities of business.

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Only in the concluding section will I address directly Friedman's libertarian addenda to the argument. We shall see that when the economic efficiency argument is answered, and its import better understood, then those addenda lose their force.

Ill It should first be noticed that to concede the argument in its entirety is not yet to concede that persons in business are justified in, or obligated to pursue profits. The moral justification which the economic efficiency argument provides for either permitting or requiring the pursuit of profits does not depend upon the implausible assumption that there is something intrinsically good about making profits; rather, the pursuit of profits is argued to have intrinsically desirable consequences for the quality of life in our communities. The entire weight of the argument is borne by those consequences. Thus, if there should arise any need for a trade-off between prorooting the ends of profit seekers and promoting social ends, then only those trade-offs which favor the promotion of socially desirable ends will receive the moral backing of the efficiency argument. But our present economy is agreed by all sides to be one in which such trade-offs are required7 Trade restrictions, corporate taxes, and a whole net of government constraints on business make ours a market in which there is not a direct relationship between increasing profits and increasing the quality of our lives. Consequently, even if the argument is sound, the conclusion which it yields is not that participants in any actual market are morally justified in pursuing, let alone morally obliged to pursue their individual profits at every point in their market activities. It may well be true that this only points to flaws in our economic systems as they stand, and the defender of the argument will, perhaps, justly respond that the point only requires us to urge deregulation of the present market. Nonetheless, the conclusion we are forced to by the economic realities is that the efficiency argument cannot be used to support saying that persons in business ought always to act in such a way as to increase their profits. Furthermore, the nature of the support which the argument does try to throw behind profit seeking reveals that at all points where our less than free and

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competitive market requires a trade-off between the public good and profits, morality will demand that we sacrifice profits for the public good. If an increase in the quality of our lives can work to ground the morality of profit seeking in a free economy, then surely it will work to ground the charge that profit seeking is immoral at any point that it decreases the quality of life.

IV It might be thought that the case made in the previous section only establishes that, in our fallible world, the moral advice to people in business to pursue their profits is defeasible on special occasions and, so, allows occasional exceptions. We should therefore see what happens in a less imperfect world. Let us suppose that not only are the premisses of the argument true, but that we also have an ideal libertarian market, of perfect freedom and perfect competition. In this happy world, a firm's profits are thought to be a perfect measure of the contributions which the firm makes to our standard of living. Consumers will be assured that those contributions, in the form of goods and services, which business is capable of making to our well-being are being made to the fullest, and business can be assured of the greatest profits commensurate with that contribution. In such a world, the entrepeneur who lived according to the maxim "act always so as to increase your profits" would at the same time always act so as to increase the standard of living throughout the community. Nonetheless, I shall argue that even in such a world, there are limits on the extent to which the pursuit of profits receives moral justification via the economic efficiency argument. Recall that the moral justification which the pursuit of profits receives from the economic efficiency argument derives solely from the contribution which that pursuit makes to the quality of our lives; it does not derive from the intrinsic value of the activity of seeking profits, but, nor does it derive from the contribution which pursuing profits makes to the standard of living in the community. It is only in so far as seeking profits promotes the quality of life that we defend profit seeking; but, even in an ideal economy, how far is that? The third premiss of the argument states, quite plausibly, that the

"delivery of the goods" is an essential part of prorooting human well-being. The larger, more complex, and more interdependent human communities become, the more likely it is to be true that that part of a life of desirable quality will be provided by market mechanisms. Our standard of living, as it is measured by production and consumption, may be granted to be an essential component in our quality of life without thereby granting very much of moral interest. Perhaps there are rare individuals (though this is doubtful) who measure the quality of their lives by their standard of living alone, where that standard is viewed in terms of the goods and services made available for them to use as they will. But in general, however much we differ in what we take a high quality of life to contain, our view of it is much more capacious than our view of our standard of living. Most of us view it as containing certain ingredients which it is no part of the capabilities of a market, however perfect, to deliver - such "intangiables" as love, friendship, virtues, enjoyable activities, and so on. So long as there is a difference between what makes up a high standard of living and what makes up a high quality of life, there will be limits to the extent to which the economic efficiency argument can justify the pursuit of profits. The reason is this: the moral value which we place on any increase in our standard of living derives from the contribution which that increase makes to our quality of life; but so long as our standard of living is only one of the components of our quality of life, then the moral value of an increasing standard of living will obey a principle of "diminishing moral utility". Equivalent consecutive increases in the standard of living will not yield equivalent consecutive increases in the quality of life; as our standard of living increases up to a certain point, the contribution which such increases make to the quality of our lives will diminish towards zero. Let us see why. Suppose, contrary to what has been suggested, that increases of equivalent size in a person's standard of living always resulted in increases of equivalent size in that person's quality of life. Now consider the case of a person who lacks love, friendships, the promise of salvation, or whatever in your view goes into a high quality of life beyond a high standard of living. Suppose that this person has the same high standard of living as others in the community, but

Economic Efficiency and tke Quality 0fL~ that they, unlike him, also have the intangibles to which he has been denied access. We would surely think that those who have an abundance of these "intangible goods" are better off than the one who lacks them. But, now, suppose that the man who lacks the intangibles acquires the means to increase his wealth, and so, his standard of living, without limit. By hypothesis, as he does so, he will at some point acquire a higher, more desirable quality of life than the others, despite the fact that, unlike them, he will never be blessed with the intangibles. Thus, it would appear, love, friendship, and the like, are no essential part of the quality of life we enjoy. Any quality of life which can be achieved by having those things can also be reached, and even surpassed, merely by acquiring a high enough standard of living. But this consequence runs entirely against the grain of our view of a desirable quality of life as containing such intangibles, however much we may differ as to what they are. The consequence is avoided by denying that increases in our standard of living are always accompanied by commensurate increases in our quality of life, and conceding that there are limits on the extent to which greater access to goods and services can make for a better life. No doubt an increase in our standard of living which lifts us from hunger and disease to satiation and health will be assigned a high moral value; but the move from economic sufficiency to affluence need not be thought to have as great a value to us, and the further move from affluence to opulence will have even less value. At some point, further affluence will always become superfluous in the pursuit of a better life. We can see now why the fact of diminishing moral utility limits the range of the efficiency argument in justifying the pursuit of profits. In a community in which a level of affluence is reached which is sufficient for doing its part in contributing to a desirable quality of life, further increases in our standard of living cease to make any additional contribution, and, so, further profit seeking cannot be given moral justification by citing consequences for the quality of our lives. The very best that the economic efficiency argument can do to defend the pursuit of profit, even in an ideal economy, is justify the pursuit of profit up to the point where the community has reached some level of economic sufficiency or affluence; beyond that point, profit

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seeking lacks the backing of the argument. Furthermore, before that point is reached, but as it is more and more closely approached, the strength of the support which the efficiency argument gives to profit seeking diminishes. I have not made the claim that our society has already reached the point of zero moral returns from profit seeking; but it seems arguable that we are approaching it, and the claim is always worth seriously entertaining. The market place, fueled as it is by the profit motive, stands to benefit from obscuring our sense of how close we might be, and when we may have had enough of what it can provide.

V I have argued thus far that even if the economic efficiency argument is sound, it does not yield moral advice or prescriptions for persons who do business in our present economies; also, it has been argued that the considerations raised in the efficiency argument do not support unlimited pursuit even in an ideally free and competitive market. Both arguments against the classical cause have assumed that the argument for the cause contains only true premisses; the first counterargument assumes the soundness of the efficiency argument and the second counterargument challenges only the range of application of the conclusion. In this section, the soundness of the argument will be challenged. It may be replied to the considerations raised in the preceding sections that they show only that profit seeking is not always morally justified or obligatory. Nonetheless, in so far as our present markets approximate a flee and competitive ideal, and in so far as our standard of living has not (or, has not clearly) reached a point of zero moral returns on profit seeking, some (or even much) profit seeking is still justified by the efficiency argument. Furthermore, nothing I have said addressed directly the stronger form of the argument which leads to the conclusion that profit seeking is morally obligatory. If maintaining and securing our standard of living depends upon profit seeking, and if directing the attention of persons in business to desirable social ends and, thereby, away from profit seeking would

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undermine the efficiency of the market to such an extent that we would run the serious risk of lapsing into scarcity and its attendant evils, then participants in the world of business are morally obliged to pursue their individual profits. But it is, we shall now see, a mistake to suppose that these considerations, even if all true, would support thinking that business has a social responsibility to pursue profits. Seeing why they fail will lead us to an alternative statement of the responsibilities of business. Let us assume, once again, that the first premiss of the efficiency argument is true, and that when and only when market participants (in an ideally flee and competitive market) pursue their individual profits, can we be assured of security against the evils of scarcity. We noted earlier that the economic efficiency argument gives whatever justification it does to market activities only by reference to the contributions which such activity makes to the quality of our lives. That fact would not be changed simply because the economy was so arranged that we had a perfectly direct relationship between increasing profits and increasing (or maintaining) the quality of our lives. But it is only supposing that a perfectly direct relationship between these two factors does make a difference to the source of our rights and obligations which could lead us to suppose that there is a moral responsibility on the part of business to increase its profits. An analogy should make clear why this is so. Consider a boiler tender who is responsible for keeping the pressure in a boiler within a specified range; he proceeds by opening and closing valves and adjusting the temperature while watching a pressure gauge. As long as the gauge is functioning properly and is properly calibrated, all he need attend to is the position of the needle on the gauge. If he should come to describe his own responsibility as being that of keeping the needle within a certain range, his description of his responsibilities is perfectly harmless, but it is a harmless mis-description of his responsibilities. That it is a misdescription, and not merely an alternative reformulation of his duty, is shown by the fact that if the gauge were faulty, he would be clearly duty bound to try as best he could to keep the pressure within its proper range, despite the fact that, then, the needle would no longer stay within the range which ought to, but does not,

indicate that pressure. In such a situation, to let the pressure go where it will, in order to ensure that the needle stays where it ought, would be the height of negligence. To take his "harmless" misstatement of his responsibilities seriously would be an invitation to catastrophe. In a world of perfect pressure gauges, our boiler tender would not be forced to choose between describing his duty as a duty to keep the needle in a certain position or describing it as a duty to keep the pressure in a certain range; in practice, they will come down to the same thing. Likewise, if we grant that the first premiss of the economic efficiency argument is true, and if we supposed that we lived and worked in a perfectly free and competitive market where profits were a perfect gauge of a firm's contributions to our quality of life, then it would be a harmless misstatement of the responsibilities of business to say that their sole social responsibility was to increase their profits. Nonetheless, what the efficiency argument supports as a proper description of the social responsibilities of business is not increasing profit, but, rather, producing and distributing safe, high quality, affordable goods and services for consumers. In the case of the boiler tender, it was only because maintaining the pressure and positioning the needle on the gauge came down to the same thing (given an ideal gauge) and because maintaining the pressure was his real responsibility, that we were at all tempted to accept the misstatement of his responsibility as keeping the needle in position. Likewise, it is only because delivering the goods and making profits are thought to come down to the same thing (in an ideal market), and because the delivery of the goods is the social responsibility of business, that we are at all tempted to accept the misstatement of the responsibility of business as increasing profits. If we think that delivery of the goods, to whatever extent is sufficient for maintaining a desirable quality of life, is a desirable social end, then what this argument shows is that business does, after all, have a moral responsibility to promote desirable social ends. According to my conclusion, it is no part of the social responsibility of business to increase its profits though, assuming the truth of the first premiss of the economic efficiency argument, and taking into account the considerations raised in previous sections, pursuing profits may sometimes be morally permissible. In the following and concluding section

Economic Efficiency and the Quality of Life I will raise and address two objections to my conclusion.

VI The doctrine that firms have a social responsibility, combined with the claim that they have no responsibility to make profits, is argued (by the contemporary libertarian descendants of Adam Smith) to have dangerous consequences.8 The libertarian addenda to the classical efficiency argument proceed by indicating the dangerous social and political consequences of the doctrine of social responsibility. Since I have argued for a version of that doctrine and rejected in total the strong libertarian conclusion that business has a social responsibility to increase its profits, it will be necessary to speak directly to the so-called "dangerous" consequences. It might first be objected that by following a moral prescription to meet their social obligations, and not attending to profits, corporate executives will be distracted from that course of action on which the efficient operation of the market depends. Businesses attending to their social responsibilities, and not to their profits, are like the boiler tender who attends to the pressure in the tank, and not to the needle on the pressure gauge. Even if their responsibility is to promote certain social ends, they cannot accurately gauge how well they are doing that except by attending to their profits. Even if profits are not a perfect measure, in our less than perfectly free and competitive market, of a firm's contributions to our quality of life, they are nonetheless the best measure we have. The problem here is epistemic, not moral. Just as the boiler tender has no way to gauge the pressure other than by watching the pressure gauge, so the person in business has no way to gauge contributions to our quality of life, except by attending to profits. To allow boiler tenders and firms to exercise their own best judgement without recourse to such aids as gauges and profits is to invite catastrophe. But this objection is misguided. The heart of the defense of the free competitive market, and the pursuit of profits, was the assumption that business best promotes the public good by seeking profits precisely because it will discover that the best way to make profits is to provide safer, cheaper, lower cost goods and services for consumers.

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Thus, the self-regulatory nature of the market which is meant to lead (albeit unintentionally) to desirable social ends requires that persons in business will be able to judge what counts as a safer, higher quality, or lower priced commodity. But that is all that I have argued they have a social responsibility to do. If they can do those things well enough for the purposes of the defenders of the first premiss of the economic efficiency argument, then they can do it well enough for the purposes of meeting their social responsibilities qua business. A second objection which might be leveled against my conclusions derives from the contractual agreements which are made by individuals in doing business. Thus, a corporate executive, for example, is described by Milton Friedman as an employee of the owners of the business. He has a direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible...9 Now this point, by itself, does nothing at all to support the claim, which Friedman is defending, that corporate executives have a social responsibility to increase profits. As is well-known, no one has a responsibility to keep any contracts or agreements if it should turn out that what has been promised, agreed, or contracted to, is itself immoral. But, even if we add the additional premiss that making profits is not immoral, such responsibilities as Friedman mentions would not count as moral or social responsibilities. Even though society has a strong interest in seeing that just agreements and contracts are kept, and so we have a general obligation to keep our agreements, it does not follow that the contents of our agreements have a similar status. Thus, although I may owe a general duty to society to keep my promises, and though I have promised to lend you my car for the weekend, it does not follow that I owe a duty to society to lend you my car for the weekend. Though it turns out, that, on this occasion, the only way I can meet my obligation to society to keep my promise is by lending you my car, my doing that (lending the car to you) is not a duty owed to society. My doing that is no part of what society has an interest in, though my keeping my promises is. Friedman's worry, thus far, simply mistakes the notion of a social responsibility. But he goes further:

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What does it mean to say that the corporate executivehas a "social responsibility"in his capacity as a businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers.1° and: The executive is exercizing a distinct "social responsibility", rather than serving as an agent of the stockholders or the customers or the employees,only if he spends the money in a different way than they would have spent it.l~ Friedman is here creating a false dilemma. He represents as incompatible alternatives the options of meeting social responsibilities and abiding by agreements with employers and stockholders. But if the social responsibility which a person has in his capacity as a businessman is simply the production and distribution of safe, quality, affordable goods and services, then, according to the doctrines of the free market, by meeting those responsibilities, he will be keeping his agreements to make profits for his employers. They are not incompatible alternatives; rather, the one is supposed to be the most efficient means to the other. If that turns out not to be true, then the moral defense of the free market collapses. Finally, an objection to the view that business has a social responsibility to promote desirable social ends, and no responsibility to increase profits, comes from those who, like Friedman, are concerned to protect the liberties of persons in a free society. The promotion of social ends is the business of those we elect to represent our interests. By inviting corporate executives to promote social ends, we are in effect inviting private citizens to exercize their sometimes considerable influence to shape policy according to their personal visions of what makes for a better quality of life. When there is no consensus as to what makes for a better quality of life, we do not want powerful corporate executives, whom we cannot remove by the ballot, forming public policy according to their private visions. This argument against the doctrine that businesses have a social responsibility mistakenly supposes that the social responsibilities of businessmen go beyond doing what they can to ensure the production and distribution of safe, high quality, affordable goods and services. But nothing in the efficiency argument supports that supposition. What it supports saying is

only that business has a moral responsibility for the delivery of the goods. O f course, not all the responsibilities which persons in business have accrue to them in their capacity as businessmen. Meeting the responsibilities of that role does not involve activities which could threaten the liberties of free persons or which could undermine the roles of elected representatives. On the other hand, by doing what they can to meet those responsibilities which they take themselves to have outside of their roles in business, businessmen may well undertake to do things which have dangerous consequences. But so may we all. Any individual with sufficient power or wealth is capable of doing things which either promote or destroy the quality of life of others, and we should no doubt maintain close controls on the extent to which any person is capable of so influencing others. Friedman's fear that businesses, when aiming to promote some vision of a better life for the community, will undermine our liberty to pursue our own and varied visions, is not a fear of the consequences which might ensue if businesses meet their social responsibilities. The responsibilities which come with doing business - i.e., effectively delivering the goods - are too narrow to pose that threat. The responsibilities which individuals may take themselves to have as citizens, as members of a political party, as members of a church group, and so on, do pose the threat which Friedman sees, but even there the threat is contained by limiung the powers of individuals to impose their views on others, not by denying that there are such responsibilities. The error which I have just been attributing to Friedman dates back to Plato. In his argument with Thrasymachus in the first book of the Republic, Socrates argues that the doctor who charges a fee is acting in two different capacities. In charging a fee, he is acting qua businessman. So, on the account which emerges, it becomes the function of the person (who happens also to be a doctor) to make money in so far as he is doing business. But my suggestion has been that this dichotomy - the doctor/businessman dichotomy - is a false dichotomy. Even though it is not the doctor's function to make money but, as Plato rightly says, to promote the health of his patients, it may still be true that the function of the businessman is to promote health, if the businessman is a doctor, and his line of business is practicing medicine. In a world in which medical

Economic Efficienff and the Quality of Life services are acquired in the market place, to practice medicine is to do one's business, and so one's function in that line of business, is to promote health. Likewise, if one is engaged in the business of manufacturing automobiles, one's social "function" is to produce a safe, quality product at a reasonable price. W e thus find that granting the assumption that a free competitive market is the most (or, the only) effective mechanism for promoting a better quality of life does not have the consequence that persons in business have a responsibility to increase their profits; it does not have the consequence that it is always (or, even in general) morally permissible to seek profits; nor does that initial assumption conflict with the doctrine that business has a social responsibility to promote certain desirable social ends. Whether or not that initial assumption should be granted is yet another problem.

Notes

1 I will be using the expression "classical" more broadly than usual, referring to systems of thought which share certain assumptions about the self-regulatory nature of the market. It thus encompasses the theories of Smith and Ricardo, the neoclassical or "marginalist" theories of Marshall and his followers, as well as contemporary libertarian figures like Hayek and Friedman. 2 See, for example, Narveson Jan: ~Justice and The Business Society', in Ethical Theo~ and Business, 2nd., Tom L Beauchamp and Norman E. Bowie, (eds.), Prentice-Hall, Enc., Englewood Cliffs, New Jersey. Especially pp. 620-1. 3 'The Social Responsibility of Business Is to Increase Its

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Profits', New York Times Magazine (Sept. 13, 1970); reprinted in 1983, Ethical Issues in Business, 2nd., Donaldson and Werhane, (eds.), Prentice-Hall, Inc., New Jersey. Page numbers cited below are from this reprint. Also see Friedman,: 1962, Capitalism and Freedom, The University of Chicago Press, especially Chapter VIII. 4 The Wealth of Nations, Bk. IV, Chapter ii. 5 Friedman, op. tit. p. 133. (' On the contrary, he insists on it. Discussion of his conclusion often proceeds by ignoring this important qualification. His New York Times Magazine essay emphasizes the need for the qualification in several explicit passages, though his earlier defense of what I am calling "the stronger conclusion" does not make the qualification explicit (see Capitalism and Freedom, op. cir.pp. 133-6). 7 All sides agree that the pursuit of profits in the present market has morally undesirable consequences in particular cases; what they disagree about is the diagnosis and the cure. Libertarians trace the cause to inadequate freedom or competition, and so call for revisions in the present system to increase these; their opponents trace the cause to excessive zeal in the pursuit of profit, and so call for closer regulation of market activity. But all agree that things are not as they should be in the market place. 8 See Levitt Theodore: 1958, 'The Dangers of Social Responsibility', HarvardBusinessReview (Sept.--Oct.). 9 op. cit., 'The Social Responsibility of Business Is To Increase Its Profits', p. 239. 10 Ibid, p. 240. i1 Ibid, p. 240.

Department of Philosophy, Witfrid Laurier University, Waterloo, Ontario, Canada