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Running head: The Goal of the Firm

The Goal of the Firm Blanca Iris Davila-Pabon BA/540 Managerial Economics Dr. Thomas Schaefer February 7, 2013

The Goal of the Firm 2 Abstract This paper is written with the purpose of discussing the Milton Friedman Goal of the Firm and whether or not it applies to understanding the purpose of a business in society. It will also discuss whether or not the government or the society has a role to play in expanding the Friedman Discussion.

The Goal of the Firm 3 Milton Friedman Goal of the Firm According to Makower (2006), Milton Friedman argued that a businesses only goal is to generate shareholder profit. Why would Friedman make such a statement? Isnt the company supposed to be socially responsible as well? Companies should not only have their sole purpose the welfare of their stakeholders. It is an important goal; however, it is not the only one. Other goals should be the wellbeing of the employees because a companys purpose is to jobs so that people would have ways to generate money to live. A companys other purpose is to generate revenue to give to the society through taxes. This way each company contributes to the good of the society because the society represented by the government needs to have funds allocated for public services like infrastructure, transportation, and other important services. Friedmans goal of the firm may be considered selfish because even though the profit of the stakeholders is important, that is not the only thing for which a society needs to exist. In following the purposes and goals mentioned above a company needs to conduct its activity in both legal and ethical manners. Legal boundaries are established by the legislative branch of the government while through ethical conduits a company proves its social and corporate responsibility. Skousen (2010) thinks that the scope of the government should be limited because its most important function is to preserve law and order and to protect the freedom of people both from enemies inside and outside the company. However, the business needs to be socially and environmentally responsible because

The Goal of the Firm 4 durability and sustainability is an important purpose in the preservation of our homes, of our planet and of future generations. A business needs not to pollute or it needs to conduct business activities that are polluting at minimum. Through its activities the business must not be invasive in human life or threatening to the longevity of life. There is also the issue whether or not the government or the society has a role to play in expanding Friedmans perspective. This is an interesting discussion because the government partially supports Friedmans opinion about business roles. On the other hand the society does not probably come to be supportive for Friedmans theory which put selfish purposes on the name of every business. In conclusion it must be said the only purpose of a business is not to fill the pocket of their stakeholders. A personal opinion is that Friedmans statement has a lot of ego inside it and business should go beyond satisfying this sole selfish purpose.

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References Makower, J. (2006). Milton Friedman and the Social Responsibility of Business. Retrieved from http://www.worldchanging.com/archives/005373.html Skousen, M. (2010). Economic Logic (3rd Ed.). Capital Press.

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