[simonh]

Surely that’s exactly the same thing Friedmam was saying. According to Friedman managers spending company money on social causes are spending other people’s money, the same phrase Smith used, when they had no business doing so. In saying that the firms responsibility is to its owners, Friedman was addressing precisely the concern that Smith was worried about.

Of course in Smith’s time joint stock companies were a relative novelty. We have a lot more experience of them now and have developed standards, checks and balances to try to maintain discipline in managers in the intervening centuries. Friedman was simply attempting to bolster that effort, but Smith was writing about exactly the same concern.

As it happens while I’m a big fan of both men, on this issue I think Friedman is too much of a purist. Some social spending can just be good business. It promotes the brand, buys political friends and can even reap commercial benefits down the line. Donating or subsidising computers in schools for a company like Apple for example.