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Some claims and arguments have been uttered so frequently that most people accept them at face value as though they were self-evident truths even though they are really self-evident fictions. Consider these, for example:
"The directors of a firm are ultimately responsible to one group--the shareholders."
According to Milton Friedman, The business of business is business (1970), originally Calvin Coolidge (1925). Friedman says that a business is only responsible to its shareholders, and its prime concern is to make as much profit for them as possible though, he does recognize the need to play by the rules.
But the claim is false on its face. For instance, companies are clearly restricted from injuring the nation, its society, and its people in many ways. These restrictions clearly imply responsibility to others that is much broader than a mere responsibility to shareholders. The clearest of these restrictions are those that require that companies refrain from doing business with enemies and transferring militarily useful technology to foreign nations. These restrictions imply that companies have a responsibility to not endanger the nation's security. And as Gibbon demonstrated in his Decline and Fall of the Roman Empire, the fall of great nations is the result of internal breakdown rather than external aggression, and business practices that restrict the benefits of commercial activity to stockholders alone can and often do demolish the internal social cohesion that holds a nation together. That has already happened in the United States of America. An astute observer, whose name I neglected to record, has written that Americans do not live together; they merely live side by side. Any business practice that does not attempt to enhance its nation's well-being as a whole is just as much an enemy as a foreign aggressor.
"Pharmaceutical companies must charge high prices for their products in order to finance medical research."
But consider the consequences to a pharmaceutical company if it closed its research operations. When its current patents ran out, it would become a mere manufacturer of generic drugs. While there is nothing wrong with that, generic drug producers are not considered high-powered companies. Their market valuations are a fraction of those of the major pharmaceutical firms and their officers don't get paid nearly as much. So the claim is nonsense. These firms will never give up research, and furthermore, much medical research is done in universities and other places. Pharmaceutical firms don't deserve the reputations they have for cutting-edge research. Medical research would not come to an end if pharmaceutical firms stopped doing it, but some of these firms might very well collapse if they were forced to lower prices.
"Corporations must pay their executives enormous amounts in order to attract the best people."
First, no one has a sure-fire method of identifying who the best people are, and the fact that many companies that have paid enormous amounts to executives have been driven into the ground by them proves that high compensation is no guarantee that the executive was one of the best to be had. In fact, corporate executives may have little to do with the success of their companies; yet they have everything to do with their companies' failures. Companies, if I may paraphrase President Reagan, rot from the top down. What have the highly compensated CEOs of our big (middling?) three auto makers, our failing major airlines, the nation's major banks and mortgage companies done to earn their pay? American Airlines CEO Gerald Arpey has recently said that the high compensation bonuses awarded to American Airlines' executives was necessary to keep its executive force at American. But why should anyone want to keep such yahoos? A year ago Arpey was being extolled as a great turnaround expert; today his company is nearing collapse.
"Consistency in viewpoint is a political virtue."
Anyone who is not smart enough to continue to learn and to change his/her mind when the facts warrant is too dumb to be doing anything but cleaning sewers and collecting garbage.
"Media editors and commentators have opinions worth our attention."
Two centuries ago, journalists were among the most well-educated people in their communities. Not so anymore. An education in journalist today provides little expertise in anything. That their views differ widely among themselves proves that they know no more about the matters they expound upon that most of their readers and considerable less than some of them. The ancient saw, de gustibus non disputandum est is also true about knowledge. When two "experts" can argue about something, at least one doesn't know what he/she is talking about. (This comment also applies to financial advisors, economists, clerics, market analysts, and product evaluators.) (5/31/2008)