The Origins of the Profit Constraint; What’s up with Recycling?

The Origins of the Profit Constraint

By Kellen Betts in Manifold

Fifty years ago, Milton Friedman published his landmark work The Social Responsibility Of Business Is to Increase Its Profits in The New York Times Magazine. A reaction against the surging support for social justice in 1970, the essay would go on to influence the course of economics and corporate governance for the next half century.

Friedman’s argument is rather simple. In a business, decisions are made by managers employed by the owners of the business. Managers thus have a contract to run the business consistent with the objectives of its owners. In some cases, a business may be established by its owners for social, environmental, or other charitable purposes. For non-charitable businesses, according to Friedman, the owners want the business to make as much money as possible. The power of Friedman’s argument is it gives managers a simple model for decisions: maximize profit.

This optimization model lies at the heart of the modern corporation. It is the pacemaker of shareholder capitalism. New insights from the science of complexity, however, are showing this pacemaker has a flaw.

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Upcoming Event from CSCMP-PS

What’s up with Recycling? The Circular Economy and Supply Chain Management

Tuesday, November 17
4:00 PM - 5:15 PM, Virtual Event

You hear it thrown around as a buzz word, so what exactly does “circular economy” mean? How does it interface with supply chain management? Two leaders in the area of recycling, resource recovery and zero waste will provide status reports and answer questions about this crucial aspect of the economy and the environment. Join CSCMP Puget Sound as we explore these questions with Heather Trim, Executive Director Zero Waste Washington and Derek Ruckman, Vice President Pacific Northwest Recology.

Free for CSCMP Members or $10 for nonmembers. Register here.


By the Numbers

1494

The year Luca Pacioli—the famous mathematician from Sansepolcro and companion of Leon Battista Alberti and Leonardo de Vinci—published his treatise on mathematics with a chapter that became the definitive guide to the Venetian double-entry bookkeeping method.


About Us

Kellen Betts is Editor of Supply Chain Weekly. He also writes the newsletter Manifold, exploring the intersection of supply chain, sustainability, and technology. Contact him at kellen@supplychainweekly.com. Follow him on LinkedIn and @KellenBetts.