Pitchfork Economics with Nick Hanauer
Jun 30, 2026 · 48 min · 10 segments
This week, we’re continuing our archive miniseries, Myths That Built Trickle-Down Economics, with the myth that corporations exist to maximize shareholder value. For decades, Americans were sold the…
Nick HanauerHost
Lenore PalladinoGuest
William LazonickGuestDavid GoldsteinHost
So shareholder value maximization is the notion that the only purpose of the corporation is to enrich, uh, shareholders.
Um, and the idea, uh, has a long legacy, uh, d- that you can connect from neoclassical economics and some of the underlying assumptions, home economicus and equilibrium theory, to the neoliberal economist Milton Friedman, uh, who wrote a very famous, um, editorial in 1970 where he claimed, and I quote, "There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits." And-
The norm had been for a long time that because corporations were granted limited liability by the society, they had a responsibility broadly back to that society.
And, you know, that corporations owed, uh, responsibility, of course, to shareholders, but after their customers, after their workers, and after their communities, that shareholders, in fact, deserved a fair return, but not more.
But Friedman's assertion and then a bunch of efforts, economists Jensen and Meckling argued that, you know, basically there was only one responsibility, which is to get executives focused on increasing shareholder wealth, and if you did, everything else would follow.
it is this magical neoliberal principle that if you just do that, uh, the, the markets will be very efficient, and more prosperity would be generated for all, and so on and so forth.
And that idea was adopted in a very widespread way, both because no one offered really a compelling counter theory, but you know, being honest, if you are an executive or a shareholder, the idea that you are serving the public interest by narrowly serving your own self-interest is extremely appealing.
[laughs] Who wouldn't want to believe that? That the richer I get, the better it will be for you.
And, uh, so not surprisingly, that view was adopted quickly across the business community, and is in fact now being taught in business schools, that, you know, they're churning out people from the Harvard Business School who believe that their only social responsibility is to themselves.
So shareholder value maximization is the notion that the only purpose of the corporation is to enrich, uh, shareholders.
Um, and the idea, uh, has a long legacy, uh, d- that you can connect from neoclassical economics and some of the underlying assumptions, home economicus and equilibrium theory, to the neoliberal economist Milton Friedman, uh, who wrote a very famous, um, editorial in 1970 where he claimed, and I quote, "There is one and only one social responsibility of business, to use its resources and engage in activities designed to increase its profits." And-
The norm had been for a long time that because corporations were granted limited liability by the society, they had a responsibility broadly back to that society.
And, you know, that corporations owed, uh, responsibility, of course, to shareholders, but after their customers, after their workers, and after their communities, that shareholders, in fact, deserved a fair return, but not more.
But Friedman's assertion and then a bunch of efforts, economists Jensen and Meckling argued that, you know, basically there was only one responsibility, which is to get executives focused on increasing shareholder wealth, and if you did, everything else would follow.
it is this magical neoliberal principle that if you just do that, uh, the, the markets will be very efficient, and more prosperity would be generated for all, and so on and so forth.
And that idea was adopted in a very widespread way, both because no one offered really a compelling counter theory, but you know, being honest, if you are an executive or a shareholder, the idea that you are serving the public interest by narrowly serving your own self-interest is extremely appealing.
[laughs] Who wouldn't want to believe that? That the richer I get, the better it will be for you.
And, uh, so not surprisingly, that view was adopted quickly across the business community, and is in fact now being taught in business schools, that, you know, they're churning out people from the Harvard Business School who believe that their only social responsibility is to themselves.
The rest of this transcript — segmented and speaker-labeled, so you land on the exact moment something was said
Search every transcript — by keyword, by phrase, or by meaning, across every show Radar indexes
Trends — what is surging across podcasts, measured against its own baseline
Alerts — when a name you follow appears in a newly indexed episode
No account is needed to search Radar.