Corporate social responsibility efforts are another kettle of fish however. Here we have private firms picking up the banner of charity and "giving back" to the community (under the assumption that they've earned their profits illegitimately, perhaps?). Freshwater economists point to firms' fiduciary duty and cry "foul": the responsibility of a firm begins and ends with maximizing share value. Profits are a signal that the firm is producing consumer surplus, that is, delivering value to the customer. This is what the firm specializes in: it is what they do best, and we are all made better off through specialization and trade. If shareholders are interested in charity, it is more efficient to convert dividends into donations to those organizations that specialize in the business of charity.
Is not corporate charity euvoluntary? Investors aren't coerced into buying stock of Home Depot (well-known for building community playgrounds and refurbishing forgotten municipal parks) or Whole Foods (never one to shy away from posting the money they've raised for a hodge-podge of community projects). There's no hint of coercion anywhere, not from the customers, not from the business owners, and not from investors. Customers can just as easily frequent the classic, miserly firms. Owners are constrained by standard competitive forces and the limits of their imagination. And investors? There are plenty of stocks on the NYSE and plenty of no-load index funds available. What's to object to?
It seems there's a bit of a pickle here (just a lil' gherkin though, not a big ol' kosher dill) for Free-Market Euvoluntaryists. Freedom of association is an important virtue, but efficiency is also good; efficiency is an ingredient in material abundance and is necessary for the amelioration of poverty. We want to see resources finding their way to their highest value use and when voluntary transactions conducted within good institutions, well-defined property rights and the rule of law don't get us there, it can be a little flustering. For those of you taking (or teaching) upper-division econ courses, here is how I might approach the topic with my students.
Questions for discussion:
- Do modern Western states actually have free markets in charity or has the state effectively crowded out smaller community organizations?
- For the charitable assistance that the state does provide, is it sufficiently welfare-enhancing? Are there gaps in the provision of assistance?
- If the state has crowded out private charity, and it does do a relatively poor job of making communities better off, is there a role for other organizations to fill the void?
- Specifically, is there an appropriate role for corporate charity: do corporations conduct de facto social responsibility experiments or are they feel-good vanity projects with no feedback and little or no accountability? Where is the substitute for profit and loss signals? How do corporations stack up against organizations that rely strictly on voluntary contributions?
- If state-run transfer programs were discontinued, would you expect specialized private charities to bounce back or is it likely that corporate entities would continue or expand their charitable activities?
I'm not sure I have good answers to all of these questions. Predicting general equilibrium conditions is tricky and we don't have much empirical evidence of how private charities operate in a modern setting absent any current or past state intervention. Institutions are persistent and if corporate social responsibility is already a trope, it may well be here to stay.