You’ve probably seen the headlines. Data center construction projects face protests and legal challenges from residents worried about noise, water usage, and property values. Social media platforms defend themselves in court against claims they’ve failed to protect teenagers from harmful content. Every major corporate expansion seems to trigger questions about environmental impact, community displacement, and social responsibility.

And amid all this clamor, it’s a question that bears thinking about: What is the social responsibility of a business? 

And of course, there’s a bare legal minimum that needs to be met. Was the property acquired through legal means? Is the marketing free of fraud? Are employees and vendors being paid what they’re contractually owed? These are basic requirements for operating in a lawful society.

But the notion of social responsibility, particularly as it relates to ESG (environmental, social, and governance) initiatives, goes well beyond those legal minimums. It ventures into muddier territory—the realm of feelings, philosophy, and competing claims about what businesses owe to society beyond following the law and fulfilling their contracts.

It should surprise nobody that Milton Friedman wrote about this. In 1970, the New York Times published his essay arguing that the social responsibility of business is, exclusively, to make money. The article remains available in the Times’ archives, and Friedman’s logic is characteristically clear: businesses exist for a singular purpose, and attempting to layer additional social responsibilities onto them fundamentally misunderstands what businesses are and how they function in a free society.

Now, ‘the social responsibility of business is to make money’ sounds cold. Heartless, even. Very much in the Hollywood-villain category of ‘It’s just business.’ But as we’ve discussed throughout this series, particularly in our exploration of greed, there’s more to this than meets the eye.

Think about what a business actually needs to do to make money within capitalism. The system runs on voluntary exchange. You only buy something if you value it more than the money you’re spending. The seller only accepts your money if they value it more than the product. Nobody’s forcing either party into the transaction. Both have to believe they’re getting the better end of the deal, or it doesn’t happen.

This means that to make money in capitalism, you have to solve problems for other people. Your product or service needs to add value to someone else’s life. You need to offer something they want badly enough to part with their money. The only path to profit runs directly through serving others’ interests.

That puts us into a situation where the customer is king, what economists call consumer sovereignty. The economist Ludwig von Mises put it this way: 

“The real bosses [under capitalism] are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or is cheaper, they desert their old purveyors.”

Here in the United States, we enjoy a largely free-market economy. Commercial exchanges—the buying and selling of goods and services—are voluntary. Yes, there are regulations, restrictions, requirements, and limits. No, it isn’t a pure capitalist economy, but it’s reasonably close. And crucially, the goods and services available for purchase are optional.

Walk into any pharmacy and look at the soap aisle. You’ll find at least a dozen brands. Bar soap, gel soap, lotion soap, liquid foaming soap. Soap for hands, soap for faces, soap for bodies. Soap for deep cleaning, soap for sensitive skin, moisturizing soap, exfoliating soap. The list goes on.

Each of us is different. We have different priorities, preferences, and needs. Some of us care deeply about our soap being plant-based and cruelty-free. Some of us are particular about scents or the lack thereof. Some of us prioritize convenience. Others just want it to get the job done at the lowest possible price.

And if you don’t want or don’t like any of these soaps, you don’t have to buy them. You can buy the soap you do want. You can go to a different store that offers options you like more. You can order something online. You can make your own. Nobody is forcing you to hand over money for a product that doesn’t align with your values or meet your needs.

This is consumer sovereignty in action. Every purchase is a vote. Every dollar spent sends a signal about what matters to you. And businesses listen to those signals because their survival depends on it.

When enough consumers care about cruelty-free products, companies that can credibly demonstrate those practices gain market share. When people value environmental sustainability, businesses respond by developing and marketing products that address those concerns. When communities want certain practices or ingredients, companies that provide them attract loyal customers willing to pay for what they value.

None of this requires anyone to force businesses to ‘be more socially responsible.’ The market creates those incentives automatically, as long as consumers have the freedom to choose where they spend their money.

This is what makes capitalism different from other economic systems. Economic freedom gives us the ability to support businesses whose values align with ours. Our spending sends powerful signals to entrepreneurs. In many cases, they’ll change entire business models to suit our preferences—but only if we, the consumers, have the freedom to choose.

When a company like Patagonia builds its entire brand around environmental responsibility, that’s not altruism in its purest form. That’s responding to signals from customers who care about those issues and are willing to pay premium prices for products that reflect their values. When another company focuses on offering the absolute lowest prices with no frills, that’s responding to different customers with different priorities. Both can succeed in capitalism because consumer sovereignty allows diverse values to coexist in the marketplace.

This is the key insight that gets lost in debates about corporate social responsibility. When businesses are free to pursue profit, and consumers are free to choose, the market channels self-interest toward mutual benefit. The soap manufacturer doesn’t formulate cruelty-free products because they care deeply about your values regarding baby bunnies. They do it because enough customers care about those values to make it profitable. But you still get products that align with what you care about.

Forcing businesses to pursue social goals determined by regulators or activists or whoever manages to be loudest removes this dynamic. It replaces the distributed intelligence of millions of consumer choices with the concentrated decision-making of people who don’t face the consequences of being wrong. It turns social responsibility into compliance with someone else’s values rather than responsiveness to actual human needs and preferences.

The difference matters. When social responsibility comes from consumer sovereignty, it reflects what people actually value enough to pay for. When it comes from mandates, it reflects what someone else thinks people should value. One respects individual choice and diversity of preferences. The other imposes uniformity.

Does capitalism solve every social problem automatically? No, of course not. Markets need rules, property rights need protection, and genuine harms need legal remedies. But the solution to concerns about business behavior isn’t to pile on more obligations defined by people who don’t own the businesses and don’t bear the costs of those obligations.

The solution is to preserve and strengthen the mechanism that already aligns business success with social benefit: consumer sovereignty in competitive markets. When people are free to choose and businesses are free to compete, the social responsibility that emerges tends to reflect what people actually value, not what someone else thinks they should value.

Friedman had it right in 1970, and the logic holds today. The social responsibility of business in capitalism is to make money. And businesses make money by creating value for customers, treating employees and suppliers fairly enough that they voluntarily choose to do business with you, and responding to the signals that free people send through their economic choices.

That’s not a rejection of social responsibility. That’s the most effective and honest form of it we’ve ever discovered.Learn more about capitalism here.