Final answer:
Corporate social responsibility (CSR) aligns with neoclassical economic theory by suggesting that businesses operate effectively in a free market and are responsible for maximizing shareholder value, which theoretically leads to broader social benefits. CSR extends this theory by asserting that companies also have responsibilities to society beyond profit maximization, indicating that within a free market, firms can contribute to social welfare.
Step-by-step explanation:
The economic model of corporate social responsibility (CSR) is often aligned with broader free market or neoclassical economic theory.
This theory suggests that businesses should operate in a free market without intervention, where the forces of supply and demand dictate the production of goods and the services and labor markets.
According to this view, the main responsibility of a corporation is to maximize shareholder value, which indirectly leads to positive outcomes for society through efficient allocation of resources, economic growth, and innovation.
However, CSR suggests that companies also have responsibilities to other stakeholders, such as employees, customers, suppliers, communities, and the environment. This perspective implies that companies should aim to make a profit while also considering the impact of their operations on society at large. The connection here is that, even within a free market system, firms can and perhaps should take on the role of improving social welfare through their business practices, even if these responsibilities are not explicitly outlined by the forces of supply and demand within neoclassical theory. CSR can thus be seen as an extension of neoclassical economics, where social welfare is also a consideration beyond pure economic growth.