Socially Irresponsible Behaviour

Socially Irresponsible Behaviour

Socially irresponsible Behaviour

Why has the profit-maximizing boundary shrunk? It seems likely that in the early stages of capitalistic development the need for profit is greater than at a more advanced stage. Therefore, entrepreneurs will be allowed greater freedom by society to pursue profit than will managers at a later and higher stage of capitalism.

An example is the use of child labour in industry. In the Industrial Revolution, children working long hours in wretched working conditions. Factory owners felt few moral qualms about this practice. Society accepted it as necessary and therefore socially responsible. This no longer is the case. It is socially irresponsible to hire children for dangerous and unhealthy work, and factory owners do not do so. This stricture would exist even if there were no child labour laws because the normative system is so ingrained in employers that few of them would go against the social consensus.

Under some circumstances the profit-maximizing boundary may expand rather than contract, and irresponsible behaviour will be allowed. A case in point is the Russian textile industry where the profit ethic is decisions on an experimental basis to see if the performance of the industry can be improved. The experience in the United States, however, supports the idea of a shrinking profit-maximizing boundary.

This analysis offers a clue as to why managers resist the notion of social responsibility. They think of themselves as hard-driving profit maximizers who have little patience for the broader issues of society and leave these matters to ministers, professors, and social workers. In a way they are right-they are concerned in the conscious part of their minds with

profit making. But in a fundamental sense they are wrong. They fail to take into account the constraints on profit making which have just as much effect on their decisions as the desire to earn profit. They have an essentially static view of their own Behaviour and therefore take a good deal for granted without realizing it. But the cultural constraints change over time. It is not at all uncommon for a man of many years' business experience to suddenly realize the great gulf between the kinds of decisions he makes today compared with thirty or forty years ago. He would not dream of doing today what he did then. But he is still a profit maximizer in his own mind. What has happened in the interim, of course, is that society has changed the rules of the game and he has learned the new rules almost without knowing it. He has become socially responsible in spite of himself!


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Talking Business for Londoners

The stage was set for the decline of mercantilism by the Industrial Revolution in the late eighteenth and early nineteenth centuries.