• 3017amen
    2.2k
    So your faith extends to the market.Banno

    To say it correctly, my faith, in this context, is in the free market and free enterprise.

    As Friedman stated, businesses should act responsibly with open and free competition without deception and fraud. Fast forwarding from Friedman ( in the 21st century), the new emphasis on the environment coming from what we have learned through modern science and recent statistical trends, should not be excluded from the need to act in a responsible manner.

    Accordingly, it can, once again, be argued that it is the Gov'ts wheelhouse to provide for the necessary public safety measures, environmental laws, etc. (rules of the game) to act as a watch dog to help prevent greedy individuals from certain violations and/or unintended accidents/consequences from breaching such laws and/or otherwise help with remediation ( from industrial accidents, oil spills, etc.) ... .

    Kind of like Homeland Security. After 9/11, I don't think many have argued against having a watch dog, all for the need to increase security measures nation wide.

    And so, economics is far reaching, and this is just a small example of all the players involved in economic policy (s), discipline that effects many things and engages many players. It's almost common sense.

    And so, back to the OP, I have yet to hear arguments as to why ALL businessmen make great economists? Perhaps just another troll...
  • Banno
    8.9k
    If you didn't notice it, the specific question was about what a private corporation/company can do about inflation.ssu

    Well, no. That was one example.
    If Friedman were to be consistent he would have to argue that the corporation's agency is equally a legal fiction, resting on the agency of the stockholders. It is only by ignoring this that he is able to pretend that the only interest of the corporation is profit.Banno

    and

    Which amounts to: we don't know what to do, so we should do nothing. Friedman goes on for the remainder of the article to repeat this in various ways. It's indeed a dumb idea.Banno
  • ssu
    3k
    Seems like you are referring to two different articles or?

    But in any case, some questions for you, Banno:

    1) What is the incentive for the owners of a corporation to form a corporation?

    2) Do you genuinely think that the incentives in forming a corporation are the ONLY incentives for the owners in their life?

    3) What do you mean by the "interest of the corporation"? A corporation is only a legal entity, not a physical entity with it's own interests.

    4) Do you have problems in understanding what Steve Denning is saying in his article?
  • Banno
    8.9k
    Seems like you are referring to two different articles or?ssu

    Well, yes:

    The Origin Of 'The World's Dumbest Idea': Milton Friedman

    The Social Responsibility of Business is to Increase its Profits

    The first is a critique of the second. Not sure how that was misunderstood.
  • Banno
    8.9k
    1) What is the incentive for the owners of a corporation to form a corporation?ssu

    Why would one think that there was one common incentive for all of them? They are many and various.

    2) Do you genuinely think that the incentives in forming a corporation are the ONLY incentives for the owners in their life?ssu
    No; indeed, that is the point that the counterargument in the article cited above makes. A corporation is free to take on whatever incentives the owners choose; including those that do not lead directly to profit.

    3) What do you mean by the "interest of the corporation"? A corporation is only a legal entity, not a physical entity with it's own interests.ssu

    I simply followed the wording from the articles. I would be more comfortable using "values", since the point of this discussion is to view an economic argument from and ethical perspective. And yes, a corporation is a legal fiction - a technical term used without a derogatory import.

    4) Do you have problems in understanding what Steve Denning is saying in his article?ssu

    Not that I am aware of. Enlighten me.
  • ssu
    3k
    Why would one think that there was one common incentive for all of them? They are many and various.Banno
    And those incentives to choose to form a company, a corporation, are things like the limited liability of a corporation, the tax incentives, the ease to coordinate and operate the business. Let's the remember that the other option is simply to buy services without using the contract called a corporation.

    No; indeed, that is the point that the counterargument in the article cited above makes. A corporation is free to take on whatever incentives the owners choose; including those that do not lead directly to profit.Banno
    Yet isn't then the issue really about the people, the owners and managers of the corporation, and how they act in the society and what is their role in the society?

    It's they who act, not the corporation, which is just an empty shell, a legal contract, without them. Corporations should clearly follow laws and pay taxes, but that doesn't change them from existing to make a profit. This is very crucial here, because it's the people's actions as a part of a society. Far better to argue about the role in society of the ruling class, the owning class, than pinpoint corporations. Because when we don't refer to the people themselves, but only to a corporations, we are arguing that the corporation should duly exist because of other reasons than making profit. So what do we mean by that?

    Are corporations non-profit organizations? There is that option too, you know, to form a non-profit. Or the owners can set up a foundation, a charitable trust. Or simply have an association, again a legal entity that can buy and sell, which has limits to how much profits it can do.

    The fact is attacking Friedman here is basically is a lousy argument if not even a straw man, because the function that corporations are to make profits still exists. What is Steve Denning actually saying? Here's a quote from the article:

    It’s not merely the application of new technology or a set of fixes or adjustments to hierarchical bureaucracy. It involves basic change in the way people think, talk and act in the workplace. It involves deep changes in attitudes, values, habits and beliefs.

    The new management paradigm is capable of achieving both continuous innovation and transformation, along with disciplined execution, while also delighting those for whom the work is done and inspiring those doing the work. Organizations implementing it are moving the production frontier of what is possible.

    A lot of mushy good sounding biz-words, but is what Denning is saying really refuting that corporations are to make profit? You see, the simple fact of taking into account stakeholders, taking into account environment etc. doesn't simply refute the basics. It's a different question. But seems like depicting the line that economists like Friedman as he said that corporations exist to make profits have nothing else in their mind is the way this issue handled.
  • Banno
    8.9k
    ...but that doesn't change them from existing to make a profit.ssu

    You haven't actually explained why a corporation must make a profit.

    Again, why shouldn't a corporation be free to take on whatever values the owners choose; including those that do not lead to profit?

    And of course the answer is that they are not limited only to making profits.
  • ssu
    3k
    You haven't actually explained why a corporation must make a profit.Banno

    Isn't it obvious? A business enterprise has to make a profit or at least to cover the costs in order to exist in the long term. A business that covers only it's running costs can make no investments, which can create problems later.

    And apart from non-profits, which I mentioned, there are many companies where the intention is not to make a profit, but only to have limited liability of the owners. Housing co-operatives are a case example, as they at least here aren't co-operative but stock companies.

    The simple fact is that if you want to have limited liability and not prefer to make a profit, there are then options that I already mentioned open for you: non-profit organizations, an association, foundation even a co-operative. Corporation, or basically a company, isn't the only way.
  • Isaac
    2.8k
    A business enterprise has to make a profit or at least to cover the costs in order to exist in the long term. A business that covers only it's running costs can make no investments, which can create problems later.ssu

    you want to have limited liability and not prefer to make a profit, there are then options that I already mentioned open for you: non-profit organizations, an association, foundation even a co-operative. Corporation, or basically a company, isn't the only way.ssu

    This doesn't seem to make sense. In the first part you say that a business which doesn't make profits is in trouble. In the second you say there are other business models available if you want to avoid profit. How come there are other non-profit forms of business if making a profit is essential?
  • Philosophim
    79
    If you're going to say a field is invalid, you're going to need more than an opinion.

    Lets look at it this way. Economists are hired by businesses and organizations. Someone is paying them money, and that someone runs that organization or business.

    If you believe that business owners are superior in their judgement then economists themselves, then why are they hiring economists? They hire them, because economists add value to their business/organization.

    Now if you can show why they've all been bamboozled, feel free. But I just don't see how your point makes any sense if you take it to its end result.
  • ssu
    3k
    This doesn't seem to make sense. In the first part you say that a business which doesn't make profits is in trouble. In the second you say there are other business models available if you want to avoid profit.Isaac
    Hint: the other forms are not businesses. They doin't have a business model. Associations don't have business models, they have some agenda or some idea, issue or thing that they promote. It's not called a business. You know, the difference like .com and .org?

    Yet they are "legal persons" as corporations and companies and can buy or sell things and own stuff, just like companies.
  • Isaac
    2.8k
    the other forms are not businesses.ssu

    What defines a businesses then?
  • ssu
    3k
    Business = commercial activity.

    What is commercial activity, then you ask? Well, something done to make or done intended to make a profit.
  • Isaac
    2.8k
    Business = commercial activity.

    What is commercial activity, then you ask? Well, something done to make or done intended to make a profit.
    ssu

    Right. So what were you talking about when you said...

    A business enterprise has to make a profit or at least to cover the costs in order to exist in the long term. A business that covers only it's running costs can make no investments, which can create problems later.ssu

    That's now like listing reasons why a bachelor needs to remain unmarried.
  • ssu
    3k
    Well, to have the ability to make investments is very reasonable.

    Let's say that most companies intend to make a profit. Those wanting to not make a profit are typically called non-profit organizations. Yes, this is easy.
  • Isaac
    2.8k


    But the issue is whether some category of legal entity needs to make a profit. There can only be two possibilities

    1) Making a profit is part of the requirements for being that legal entity.
    2) Some contingent list such that failing to make profit causes their demise.

    I don't know my law well enough to know about (1), but you seemed to start out listing reasons as if it were (2) and then revert to a definitional justification. Are you saying that corporations will legally cease to be corporations if they stop making a profit?
  • ssu
    3k
    They will legally cease to exist when they file for bankruptcy. So you might say that is something close to your 2). I assume that surely nowhere is it mandatory for a company to make a profit.
  • Isaac
    2.8k
    They will legally cease to exist when they file for bankruptcy. So you might say that is something close to your 2).ssu

    But that leads us back to the fact that not-for-profit companies exist and are not bankrupt. So if a company is not required to make a profit by it's legal definition, and it's not required to make a profit merely to exist (not-for-profit companies exist), then the question remains unanswered. Why must companies name a profit?
  • ssu
    3k
    But that leads us back to the fact that not-for-profit companies exist and are not bankrupt.Isaac
    There's no inconsistency. And they are called not-for-profit organizations. As I said before, there's a differnce between .com and .org, just to give one example. Commercial activity usually intends to make profits.
  • Isaac
    2.8k
    Commercial activity usually intends to make profits.ssu

    The question wasn't about what they usually intend. It was about what it was necessary for them to aim for.
  • Banno
    8.9k
    A business enterprise has to make a profit or at least to cover the costs in order to exist in the long term.ssu
    So what?

    Why ought a group of individuals not incorporate (moving back from your slide to business enterprise...) in order to spend their money collectively on wrapping trees in toilet paper, if that is what they wish to do?

    It is inconsistent to say that individuals are autonomous and yet that their incorporated entities, legal fictions that are "an empty shell", must only ever have the one goal, to make profit.

    Hence,
    If Friedman were to be consistent he would have to argue that the corporation's agency is equally a legal fiction, resting on the agency of the stockholders. It is only by ignoring this that he is able to pretend that the only interest of the corporation is profit.Banno
  • Banno
    8.9k
    The simple fact is that if you want to have limited liability and not prefer to make a profit, there are then options that I already mentioned open for you: non-profit organizations, an association, foundation even a co-operative. Corporation, or basically a company, isn't the only way.ssu

    You want to move from the"is" of the limited liability of an incorporated body to the "ought" of profit making. But the argument just will not hold.

    Plainly, an incorporated body can take on whatever obligations its owners desire.

    Plainly, there are not for profit incorporated bodies.
  • Janus
    9.2k
    Most corporations or companies are "for profit". As @ssu noted earlier if they fail to at least cover costs, then they cannot survive, and if they merely cover costs, they cannot grow.

    There are "not for profit" incorporated organizations, and they also must "make ends meet" or fail. Generally such organizations profit from donations or government subsidies, but ideally any funds in excess to running costs are plowed back into the organization to help make it more effective in the carrying out of its given work.

    A corporation that is not "not for profit" would generally aim to make a profit, if only to give something back to investors, who otherwise would be better off putting their money in the bank or in government bonds; so it would seem that the aim to make a profit is necessarily one, if not the main aim of any such corporation.
  • Isaac
    2.8k
    A corporation that is not "not for profit" would generally aim to make a profit, if only to give something back to investors, who otherwise would be better off putting their money in the bank or in government bonds; so it would seem that the aim to make a profit is necessarily one, if not the main aim of any such corporation.Janus

    Non-profit making companies are not allowed to make a profit to give something back to their investors. That's the whole point. Otherwise they'd be a profit making company.
  • Banno
    8.9k
    Yes, yes, indeed, all that.

    The Friedman article argues that the sole aim of a corporation is to make a profit; that they ought have no other goal.

    That is the bone of contention here.
  • Janus
    9.2k
    Non-profit making companies are not allowed to make a profit to give something back to their investors. That's the whole point. Otherwise they'd be a profit making company.Isaac

    That's right, but I was referring to not not-for-profit companies.
  • Isaac
    2.8k
    That's right, but I was referring to not not-for-profit companies.Janus

    Sorry, didn't notice the double negative. Seems like an odd point to make in the light of the discussion (like you'd have to explain to anyone here what profit-making companies make a profit for)
  • Janus
    9.2k
    It seemed there were assumptions being made that any "for profit" corporation's only concern would naturally be profit-making, and that "not for profit" organizations normally had no such concern at all. Correction seemed in order. Perhaps it was, or perhaps I didn't read carefully enough.
  • ssu
    3k
    The Friedman article argues that the sole aim of a corporation is to make a profit; that they ought have no other goal.

    That is the bone of contention here.
    Banno
    More likely Friedman is arguing that companies should not be obliged by the government to have other goals, like being actors that have to deal with inflation (especially when inflation doesn't happen because of them, but is a monetary phenomenon). Yet if their actions have externalities (like they produce pollution), naturally they have to oblige with the laws.
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