Wayne Winegarden

Economics matters; the Corporate Social Responsibility (CSR) movement obscures basic economic principles by redefining the meaning of a private transaction. Should this redefinition be successful, our economic growth and vitality will suffer. Right now, the prognosis is not good because the Corporate Social Responsibility movement is steadily gaining prominence in the business community. According to an article in the 1/22/04 Economist magazine:

One of the biggest corporate fads of the 1990s - less overpowering, no doubt, than dotcom mania, but also longer-lived - was the flowering of "corporate social responsibility" (CSR). The idea that it is not enough for firms to make money for their owners is one that you might expect to be an article of faith among anti-globalists and eco-warriors. Many bosses now share, or say they share, the same conviction.

This movement is also impacting the business leaders of tomorrow. For instance, a 2004 press release from Ithaca College touts the college “is making sweeping changes in its business school in order to produce leaders who care equally about profits, society and the environment. The practice, which is known as sustainability, or sustainable development, has been adopted by many national governments and a number of leading corporations, but is just now beginning to be taught at the nation's leading business schools.”

Economic theory posits that by pursuing one’s self interest, the greater good can be achieved. As Adam Smith famously noted, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.” Free markets work because generally, Smith’s observation provides the optimal social outcome.

CSR proponents argue that this is not the case for modern corporations. They claim that private individuals serve their private interests at the expense of the public interest. The solution, which should come as no surprise, is an elaborate CSR scheme that redefines private interests of corporations to include public concerns. This definition contradicts the very foundations of our free market economy and society, and consequently poses a clear and present danger to the health and vitality of our economy.

Wayne Winegarden

Wayne H. Winegarden Ph.D. is a partner in the firm Arduin, Laffer & Moore Econometrics.

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