Letters

From the January 2006 issue

(Page 2 of 3)

David J. Balan
Washington, D.C.

Thank you for publishing the comments of Friedman and Rodgers, who are two of my heroes. But John Mackey has only my profound contempt. He talks about "responsibility," but his Whole Foods stores devote approximately one quarter of their floor space to an incredible collection of worthless pills and nostrums, located so that the customers must walk through them to reach the checkout area. The customers who shop there belong to that same class of Americans who are incapable of accepting the overwhelming evidence for evolution. They are a tribute to the profound failure of our educational system.

Robert Gilchrist Huenemann
La Honda, CA

Milton Friedman is correct that much of corporate philanthropy might just be good business rather than actual philanthropy. But what about corporate philanthropy that does not increase the cash flows of the firm? Is there any moral justification for it in a free society?

The responsibility of the corporation is not to maximize the wealth of the investors. The responsibility of the corporation is rather in line with the goal of economics--to maximize the utility of investors. Investors come in many types. Some want to maximize profits and others want to get a good return and a warm feeling from contributing to charitable causes--defined however investors define "charitable."

What is interesting is that, if and only if all the investors are on board with the company's social initiatives, the stock price will be unharmed by these social initiatives, even though these investments might decrease profit. In our forthcoming article in Academy of Management Review, we argue that the potential exists for a firm to maximize its stock price, but not maximize the profits of the firm, by engaging in socially conscious behavior.

In our model, investors who value socially conscious business practices congregate their investment dollars in firms that implement the practices their investors believe in. These socially conscious investors must value their socially conscious stock as highly as wealth-maximizing investors value their wealth-maximizing stock, or else wealth-maximizing investors will lead a hostile takeover of the socially conscious firm, changing its management to a wealth-maximizing management.

All parties act in their own rational self-interest, but the two different kinds of investors have different interests. In fact, this scenario is no different from the case in which both firms are run to maximize profits, and the socially conscious investors get together on their own to fund some worthy cause, except for the tax benefits, as Friedman mentioned, and the costs of the investors getting together to agree upon where to donate their money. Whole Foods seems to follow this model, as the initial investors bought in to the vision articulated by John Mackey (no relation).

If Mackey's vision of corporate philanthropy takes hold, it will not be because it makes more money than wealth-maximizing firms, but because investors demand it of the managers they pay.

Jay Barney, Alison Mackey, Tyson Mackey
The Ohio State University
Columbus, OH

In Defense of Happy Pills

Maia Szalavitz took heroin to stop depressing herself, and she now takes Zoloft for the same reason. She argues that the rewards of self-examination --and psychotherapy is not the only way to know oneself--are no different from the happiness she feels after ingesting Zoloft, and she seems bothered by statements in my book, Addiction Is a Choice: "I oppose the use of heroin for the same reason I oppose the use of Prozac. I think relying on these is an existential cop-out--a way of avoiding coping with life."

Yet Szalavitz never actually responds to what she considers worth quoting. She has chosen to take issue with me for criticizing the use of heroin and cocaine, and for pointing out the similarity with using Zoloft.

I believe there is a difference between spending 14 years training in the martial arts, receiving a black belt on the merits of effort and skill, and simply buying a black belt without working for it. Either way, the belts are black. Szalavitz seems to think the two are the same.

Certainly, she has a right to abstain from self-examination, just as people should be free to use drugs without penalty and without prescription. She doesn't seem to want to know how or why she is depressing herself; she refers to this as indulging oneself in meaningless pain and suffering. But understanding how a person makes herself depressed is key to changing the way she feels. Taking a drug that makes her feel good about herself is different from reaping the fruits of self examination.