The thread wasn’t about the facts of the article. It’s specifically about the obligation of for-profit companies with respect to public service vs. profit motive. The article I read (Jan 26 DMN) was pretty heavy on the implication that Greyhound was somehow abrogating a responsibility and obligation to serve low-income riders, and that seemed off to me, especially considering where the bus station actually was.
Had it been something like “Downtown bus station closing; Greyhound to relocate”, I probably wouldn’t have thought twice. But the article itself leaned pretty hard into the idea that by closing the Downtown station, this was somehow shirking their obligation, whatever that was.
Thanks for the link to the article. I read it a bit differently. To me, it seems to say that the bus service and the downtown terminal are needed but does not say anywhere that the company should be forced to maintain it despite losses. In fact the article mentions that the new Atlanta bus terminal was built with federal backing.
They have no obligation whatsoever, but I do think that it is great PR to do so if it is feasible. Here in Chicago, many businesses leave those low income areas because they are also high crime areas. Also, “low income area” means less consumer dollars.
I understand a corporation acting in the best interests of its shareholders. But can you explain what the Friedman viewpoint is on a corporation acting on the best interests of its customers or its employees? I hadn’t heard of those as being part of the Friedman picture.
As an example, lets say a pharmaceutical company invents a new drug. They can price it at ten dollars a dose and make a small profit on each sale. Or they can price it at one hundred dollars a dose and make a large profit on each sale. The shareholders would benefit most from the larger profits of the hundred dollar price. The customers would benefit most from the lower ten dollar price. According to Friedman, how do you balance out these two conflicting interests and arrive at a price?
Less consumer dollars, yes, but honestly, low income people are a large part of Greyhound’s customer base. The solution in such cases is often a public-private partnership. I mentioned the essential air service subsidies upthread. Another is the LifeLine telephone service. Low-income people are offered basic telephone service (originally landline, now cellular) at a low cost, though I don’t know if the cost is subsidized by the government. There is a similar program to offer internet access to low-income people, as that’s now seen as essential.
Right. It’s not in the least unusual for the government to provide, or to subsidize, a service it feels is necessary. The only issue, and it’s a political one, is deciding which services to provide.
That it’s a bus line is an interesting case. Historically, transportation services fell under the purview of the public utilities commission (PUC) or similar organizations in their respective states. They operated said public service over public highways, or even if they didn’t, they required franchise agreements to operate within the towns, cities, and counties where they operated, so they were subject to various regulations. One of those regulations was that they couldn’t just abandon services without approval by the PUC. The reason was that people would move to a particular home, or open a business in a particular location, specifically because of the available transportation. The same goes for other public utility availability like electricity, water, sewer, etc. Cutting that off when that was often the only available option was simply not tenable. One benefit to the regulation is that the state would be reluctant to grant a franchise to a potential competitor, since it would most likely just divide up the existing market, leading to both companies going out of business.
In the case of interurban electric railways for instance, which provided short to medium-haul passenger transportation in the 1890-1930 timeframe, petitions to abandon were still usually granted because the lack of revenue in and of itself was cited as evidence that the public no longer needed their service. Competition from government-funded paved highways, which led to increased private automobile sales, is what pretty well decimated that industry. Competing passenger bus lines did also open up, usually before laws regulating them were put on the books. Nonetheless, some states severely restricted bus competition against existing railroads for the reason I mentioned above. Other states, not so much. In any event, when the petition for abandonment came, they were usually required to offer the system for sale at scrap value to anyone who was willing to take over operations, rather than going straight to the scrappers.
All that is a roundabout way to show that while companies may not be forced to provide unprofitable services, they could be compelled to retain service that’s only minimally profitable. Their corporate charters and franchise agreements are already government instruments, so some strings should be expected. Go back not all that far and corporations would only be granted charters if they could demonstrate some public good above and beyond the paltry taxes levied on profits.
What’s interesting is that some of these questions can arise even within a private company. When I was in Japan I was talking to a man who had worked for a major Japanese company (I forget which) and he told me the following story. The company had a number of engineering divisions and each division would buy technical publications for their own engineers. So they ended up with many copies. Finally, someone realized it would be more efficient to have an in-house library and each engineer who wanted to consult one of the publications would use the library. But the company also had a cost-accounting division and one of their principles was that each division had to make a certain profit. Including the library. So the library had to start charging the users for consulting any book or journal. One result was that the engineering divisions started to discourage their members from consulting the library. This caused the library to raise their fee. It got to be over 1000Y (around $10). As you might imagine, the result was that for any item the engineer needed to consult at all frequently, it was cheaper for each division to buy its own books and journals. I don’t know how it ended, since he left the company for the research institute I was visiting.
In other words, public service is public service and maybe should not be subject to the rules of capitalism.
They aren’t - but my understanding is that the Friedman [doctrine] doctrine is mainly referring to corporate employees when it says the only responsibility of the corporation is to the shareholders. If I owned a company and hire someone to manage it , that manager should run it in the way that I want it run , correct ? The manager shouldn’t donate $10K of the business’s money to charity on their own, because it’s my money they are donating. The same goes for me and my three siblings own a business- the manager shouldn’t donate money unless the ownership wants it done. The more spread out the ownership is, the more likely it is that people will be spending other people’s money in ways they haven’t agreed to but as far as I know, Friedman didn’t have any issues with the idea of corporate executives and stockholders having social responsibilities as individuals. And he certainly would have no problem with me directing the manager of my wholly owned company to donate that $10K to charity.
I’m not sure what Friedman would say. Assuming we are talking about a pharmaceutical company with hundreds or thousands of stockholders my guess is that he would say neither the corporate executives nor the stockholders have any right to spend other people’s money. If it’s a pharma company owned by 2 or 3 people he would say the execs are responsible to run the company the way the owners want it run and he might not have a problem with me saying the owners (not the company) have an obligation to assist low income people to obtain this drug.
But I also want to point out that sometimes things are described as being done out of “social responsibility” when they are not. Often, the maximum profit does not come from setting the highest price because as the price goes up, the number of widgets sold goes down. Or a corporation pays college tuition for its employees - but is doing so because they have found it reduces turnover , attracts better employees and so on , thereby lowering costs - so it’s actually a decision based on profit and it’s just dressed up as social responsibility. Or the donations are made for PR purposes or reputation laundering - which are again, business decisions. I’m not saying that these actions are never taken out of social responsibility - but plenty of times they are not.
From the article I linked to “his customers and his employees can desert him for other producers and employers less scrupulous in exercising their social responsibilities.” It may not have to be the “best” interest of employees and customers, but if a business ignores their interest altogether, they will find their customers and best employees will tend to leave them.
This is a pretty basic economics question. The higher you price it, the fewer customers you’ll have. There is some ideal price where the marginal return on raising the price is zero. The company could even set different price points based on need to maximize revenue.
It doesn’t say the company should be forced, but it definitely implies heavily that the company has some sort of obligation to provide their service. That’s what got me to scratching my head about it.
[quote=“doreen, post:49, topic:997097”]
But I also want to point out that sometimes things are described as being done out of “social responsibility” when they are not. Often, the maximum profit does not come from setting the highest price because as the price goes up, the number of widgets sold goes down. Or a corporation pays college tuition for its employees - but is doing so because they have found it reduces turnover , attracts better employees and so on , thereby lowering costs - so it’s actually a decision based on profit and it’s just dressed up as social responsibility. Or the donations are made for PR purposes or reputation laundering - which are again, business decisions. I’m not saying that these actions are never taken out of social responsibility - but plenty of times they are not. [/quote]
Two birds
One stone
Birdkilling at 50% normal expenditure
Profit!
ETA: couldnt fix the qoute in time. Something was weird
Not really. Marco Polo and others like him at the time were just the latest in a long line of European travelers on the Silk Roads - back as far as Rome. They all used routes and oases & caravanserais largely developed by various Chinese polities and the network of Central/West Asian states along those routes. So, government aid.