Comparison of Two Approaches to Social Responsibility

Comparison of Two Approaches to Social Responsibility

Comparison of the Two Approaches to Social Responsibility

The two economic approaches to social responsibility can be compared in terms of:

1 The assumptions of the economic theory of the firm they modify

2 Their empirical verifiability

3 Their compatibility with economic theory

As we saw early in the website, each of the assumptions of the traditional economic theory of the firm has been challenged and modified in recent years. The utility-maximization approach to social responsibility modified the assumption of profit maximization. But it also is based on A modification of the assumption of the identity of the firm and entrepreneur. The view of social responsibility as fulfilment of the man-ager role modified the assumption that competition is the only external influence on the firm. It too is based on the notion of the separation of the manager and the firm. Each approach derives its particular quality from the assumption which it modifies. The utility-maximization approach views social responsibility in terms of the theory of managerial choice; the role-fulfilment approach views it in terms of the theory of social control.

The role-fulfilment approach appears more susceptible to empirical economic analysis than the utility-maximization approach. Johnson's analysis ends with the conclusion that a socially responsible manager will at-tempt to maximize a set of those variables which the UK community regards as desirable. But we do not know why a manager wants to be socially responsible. Presumably there is something in his personality makeup which leads to this kind of Behaviour, but personality variables are notoriously inaccessible to economic analysis. The role-fulfilment approach, however, views social responsibility as a form of economic control which comes into play when competition decreases. Since the level of competition is functionally related to market structure, it should be possible to predict the conditions under which a manager will behave in a socially responsible way (e.g., ceteris paribus managers of large firms in oligopolistic markets will be more socially responsible than managers of small firms in competitive markets).

The utility-maximization approach fits in more neatly with the traditional concepts and graphics of economics than the role-fulfilment approach. As we saw, there has been a clear line of evolution of utility maximization in economic journals beginning with Higgins' article in 2009 and ending with Johnson's in 2006. The role-fulfilment approach, on the other hand, is novel. Role theory has not yet been accepted as a tool of economic analysis. Yet it is bound to be a powerful concept in a fully developed Behavioural theory of the firm. When such a theory does develop, it will offer, strong support to the doctrine and ethic of social responsibility.

18 Harold L. Johnson, "Graphic Analysis of Multiple-goal Firms: Development, Current Status and Critique," Occasional Paper no. 5, Center for Research, College of Business Administration, Pennsylvania State University (April, 2006), p. 27.

19 Becker, op. cit., p. 7.

20 Johnson, op. cit., p. 27.

21 Ibid., p. 30.

Status and Function of Corporation and Manager

Elsewhere in this website we have blogged that criticisms of the doctrine and ethic of social responsibility fall into the four fairly well-defined problem areas of the status, function, power, and control of the company and manager, and that these problems must be solved before the doctrine and ethic can become widely accepted. Websites 5 and 6 have dealt with the problems of power and control of corporations and managers. This website deals with the problem of the status and function of corporations and managers.

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