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In an earlier draft, I included a discussion of why Friedman's position is far more reasonable than it might seem. For example, corporation that maximises long-term profit has powerful incentives to innovate, to produce quality products, to be an attractive place to work, and so on. In the orthodox framework, however, these are (or rather, should be) subsidiary goals -- not independent, but serving the primary goal of maximising share value.

That said, a focus on maximising share value per se is, in the world of real human beings, likely to lead to short-term thinking that produces inferior long-term results. Treating the subsidiary goals as primary may, in fact, better serve the primary goal than would directly pursuing it. (The psychopath model breaks down in part because corporations often pursue a more enlightened form of self-interest than the model would indicate.)

What I suggest would fully legitimise, in hard-core Friedmanesque terms, more corporate behaviour of the sort that you praise. It would recognise that these "subsidiary goals" have value external to the corporation that should, in some measure, be considered part of shareholder value.

Words and ideas I offer here may be used freely and without attribution.

by technopolitical on Fri Dec 22nd, 2006 at 07:09:30 PM EST
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