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Individual and Corporate Social Responsibility

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  • Economics
  • Psychology


coase 5d.dvi INDIVIDUAL AND CORPORATE SOCIAL RESPONSIBILITY1 Roland Bénabou2 and Jean Tirole3 November 11, 2009 1This paper formed the basis for the Coase lecture, delivered by Jean Tirole at the London School of Economics on February 19, 2009. We are grateful to Francesco Caselli and Augustin Landier for valuable comments. Bénabou gratefully acknowledges support from the Canadian Institute for Advanced research. 2Princeton University. [email protected] 3Toulouse School of Economics. [email protected] Abstract Society’s demands for individual and corporate social responsibility as an alternative response to market and distributive failures are becoming increasingly prominent. We first draw on recent developments in the “psychology and economics” of prosocial behavior to shed light on this trend, which reflects a complex interplay of genuine altruism, social or self image concerns, and material incentives. We then link individual concerns to corporate social responsibility, contrasting three possible understandings of the term: the adoption of a more long-term perspective by firms, the delegated exercise of prosocial behavior on behalf of stakeholders, and insider-initiated corporate philanthropy. For both individuals and firms we discuss the benefits, costs and limits of socially responsible behavior as a means to further societal goals. Keywords: corporate social responsibility, socially responsible investment, image concerns, share- holder value JEL numbers: D64, D78, H41, L31. 1 Introduction Economists’ view of how society should be organized has traditionally rested on two pillars. The invisible hand of the market described in Adam Smith harnesses consumers’ and corporations’ pursuit of self-interest to the pursuit of efficiency. The state corrects market failures whenever externalities stand in the way of efficiency and redistributes income and wealth, as the income and wealth distribution generated by markets has no reason to fit s

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