Milton Friedman on the morality of corporations seeking profits

Who is responsible for death of a neighbor who died as a result of his electricity being turned off due to no payment? Is it the electric company or someone else? Milton Friedman explains in this excerpt video clip from a 15-part lecture series delivered from 1977 to 1978 entitled "Milton Friedman Speaks." The lectures were originally intended to serve as the core content of what later became the Free to Choose television programs and subsequently the best selling book of the same title. Source: Sidewinder77 YouTube channel.

(see video at the bottom of transcript)

Transcript:

Student: I think you’ve done an excellent job tonight of defending capitalism. Capitalism has treated you well. In general it’s treated the people in this audience well, and as you say, people respond to things based on their self-interest. So I think they’ve responded well to you. What I’d like to get to now is the question of the relationship between morality and economic policy which you talked about before in terms of the quotes from Thoreau. You said the worst sort of person is the person who’s going to try to be charitable and who is going to try and be—

Friedman: No, that isn’t what Thoreau said.

Student: Well you said that it was unwise for a person to be charitable or to be sincere.

Friedman: No, no.

Student: What did you say then?

Friedman: Let me repeat Thoreau’s words. Thoreau’s words were, “If I knew for certain that a man was coming to my house with the conscious design of doing me good, I should run for my life.” Now that’s not the same thing as being charitable.

Student: Ok, fine I’ll accept that distinction. Take what Thoreau just said and you’ve echoed and apply it to American business. I think, what you’re basically saying is—

Friedman: Apply it to whom?

Student: American business, a corporation.

Friedman: A businessman?

Student: You are the head of a corporation.

Friedman: Oh, you’re applying it to me as the head of a corporation.

Student: Can I ask you the question please?

Friedman: Sure.

Student: Now it seems to me that the implication is that that corporation should not try to do anyone else good, because then the people would run away. What they should do is pursue their own self-interest, and that means profit. And what I’d like to talk about is the implications of that in terms of three concrete examples. I believe that a couple of years ago when there was a major flood in Pennsylvania you came out as opposed to aid for those disaster victims based on the rational that they had bought the land at lower prices because the risk was known and they shouldn’t be given any aid. I’d like people to consider the implications of that.

Friedman: That isn’t what I came out against. I came out against the government providing flood insurance at low cost in advance. I did not come out against private individuals giving charity to people who were hurt.

Student: But what about disaster aid by the government?

(Audience: what should the government do about the nuclear power plant?)

Friedman: Well it’s the same thing. The nuclear power plant ought to be made to pay full insurance themselves and that ought to be incorporated into their charges. I’m not in favor of government subsidization of nuclear power plant insurance. Look—don’t attribute to me your conventional views about what “a conservative” believes, because I’m not a conservative. I’m a believer in freedom!

Student: Well then I’d like to talk about that using an example. Freedom. In Ohio an old man failed to pay his electric bill. You may be familiar with the case. And the electric company turned off the electricity and he died. The reason they turned it off is because it wouldn’t have been profitable for them to keep it on because he didn’t pay his bill. Do you believe that was right?

Friedman: I don’t know the details of that case at all. But I can well believe—

(interruption from the audience)

Friedman: But I’ll be glad to— No no, excuse me. In many of these cases you hear stories which when you find the details are very different from those that have been presented. But let’s suppose it were true. Which is what I was going to go onto say. You know why do you want to stop me? Why do you assume I’m always going to give the wrong answer?

(laughter)

Friedman: Let’s assume the facts were true. The result is a tragedy. Who is responsible? Is it really the responsibility—should I blame the people—let’s suppose for a moment. Let’s suppose the electric company were to follow the practice of never turning off anybody’s electricity. Let’s just for a moment take that other extreme. Then this wouldn’t have happened. Who would pay the cost?

Student: Are those the only alternatives?

Friedman: Well—for a moment—we can come to other alternatives, but I just want to show you the logic of it. Because I want to show you—

Student: You’re reducing it to absurdity.

Friedman: No no, it’s not an absurdity, because what I want to show you that what you have to ask about, are the costs imposed on different individuals. The electric company is meaningless. The electric company is a non-human institution. The electric company—what you must talk about are either the stockholders of the electric company, the employees of the electric company, or the customers of the electric company. Those are the people involved. As you go to the other extreme and adopt the policy that the electric company will never turn anything off, then you’ve effectively instituted a system under which the only people who pay for electricity will be those who pay for it voluntarily. Now the number of people who will do that—

Student: Mr. Friedman, are these the only 2 alternatives?

Friedman: No, but I’m just showing you—you’ve gone to one extreme, I’m going to the other extreme and show you that where the responsibility really lies for they kind of thing you’re describing. The responsibility really lies not on the electric company for turning it off, but on those of this man's neighbors, and friends, and associates who are not charitable enough to enable him as an individual to meet the electric bill. You’re blaming the wrong person for what happened.

Translated by: Jadranko Brkic