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Adam Smith vs. Milton Friedman on Business with Heart

Milton Friedman famously stated “There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

Adam Smith, considered the father of modern economics, wrote 200 years earlier that “What improves the circumstances of the greater part can never be regarded as an inconvenience to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable.”

So here we have two icons of capitalism, with different opinions on the role of business in society. Friedman states that business has only one responsibility – making money. Smith is more open to business playing a positive role in society.

Smith’s quote from the book “Wealth of Nations” was published in 1776 -- the year that the United States was founded. I like to think of this as a signal that U.S. business should return to its roots, and consider its impact on society in addition to its focus on profits.

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