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Who Does Business Represent?

On whose behalf do business associations speak? It’s an increasingly urgent question, because while firms have radically changed how they think about themselves, business associations have yet to catch up, and the resulting lag is making capitalism less legitimate in many countries.

CAMBRIDGE – On whose behalf do business associations speak? Well, business. But who is “business”?

It’s an increasingly urgent question, because while firms have radically changed how they think about themselves, business associations have yet to catch up. And the resulting lag is making capitalism less legitimate in many countries.

The traditional view of the firm – shared by both Karl Marx and Milton Friedman – is that it is an organization owned by capitalists (shareholders), on whose behalf it is run. It hires workers and buys other inputs to maximize returns for those who put up the money. According to Friedman, the social responsibility of the firm is to increase profits. Any goal that does not directly benefit shareholders is just another distortionary tax.

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