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SOCIALLY RESPONSIBLE INVESTMENT: IS IT PROFITABLE?∗
PHOEBUS J. DHRYMES Columbia University July 1997; revised June 1998
1
What is Socially Responsible?
Before we can answer the question we posed in the title, we need to define just what is “socially” responsible. Evidently, the meaning varies with time and place, since social responsibility is defined by a group’s cultural and ethical values. For example in the middle ages lending with interest was not considered ethical, let alone “socially responsible”. To this day, lending with interest is reprehensible according to Moslem tradition, and in Saudi Arabia at least it is not officially condoned. This does not mean that banking does not exist in that country, only that certain subterfuges are practiced which allow normal banking practices without the payment of “interest”. In the nineteenth century the manufacture of tobacco products in the US spawned several vast fortunes, and was certainly a very respectable enterprise. But this is not so today. One can go on and produce example after example in which the social mores change, and with them what is socially “good” and what is socially “bad” changes as well.
2
Law of One Price
The judgments made regarding social acceptability referred to above, are, and were, made in reference to the individuals that actually carried out
An earlier version of this paper was presented at the conference Making a Profit while Making a Difference, held in New York City, July 22, 1997.
∗
1
these trades. As societies evolved and economies became more complex, it became possible for one to own an enterprise in whole or in part without actually taking part in the production of the goods, or services, provided by the enterprise in question. This is the stage of finance capitalism that Marx noted in the latter half of the nineteenth century. Finance capital, as distinct from physical capital, is fungible. Today I may be involved in the production of refrigerators, and
PHOEBUS J. DHRYMES Columbia University July 1997; revised June 1998
1
What is Socially Responsible?
Before we can answer the question we posed in the title, we need to define just what is “socially” responsible. Evidently, the meaning varies with time and place, since social responsibility is defined by a group’s cultural and ethical values. For example in the middle ages lending with interest was not considered ethical, let alone “socially responsible”. To this day, lending with interest is reprehensible according to Moslem tradition, and in Saudi Arabia at least it is not officially condoned. This does not mean that banking does not exist in that country, only that certain subterfuges are practiced which allow normal banking practices without the payment of “interest”. In the nineteenth century the manufacture of tobacco products in the US spawned several vast fortunes, and was certainly a very respectable enterprise. But this is not so today. One can go on and produce example after example in which the social mores change, and with them what is socially “good” and what is socially “bad” changes as well.
2
Law of One Price
The judgments made regarding social acceptability referred to above, are, and were, made in reference to the individuals that actually carried out
An earlier version of this paper was presented at the conference Making a Profit while Making a Difference, held in New York City, July 22, 1997.
∗
1
these trades. As societies evolved and economies became more complex, it became possible for one to own an enterprise in whole or in part without actually taking part in the production of the goods, or services, provided by the enterprise in question. This is the stage of finance capitalism that Marx noted in the latter half of the nineteenth century. Finance capital, as distinct from physical capital, is fungible. Today I may be involved in the production of refrigerators, and