What’s Wrong with Profit?

Many would say it’s simply undeserved.  By any standard – be it need, ability, effort, or accomplishment/contribution.  In this respect, one might be tempted to compare profit to the ridiculously high salaries of sports stars.  And senators.  But salary is not profit.  Even if a salary is ridiculously high, it is still a salary, a payment for services rendered; and as such it is, in theory, deserved.  Or at least earned.

Profit, on the other hand, is, by its very definition, in a separate, completely gratuitous, undeserved category.  It’s the difference between how much X cost you to make or do and how much you were paid for it when you sold it.  Profit is getting more than you give.

It is, therefore, perhaps more like lottery winnings: you put out a dollar and get back a million.  One might argue that at least with a lottery, everyone has an equal chance at that undeserved excess; at least it’s fair.  But everyone has an equal chance with profit too.  Anyone can open a business.  And with a little luck, you can put out a dollar and eventually get back a million.  At least with profit, it’s not just a matter of luck: one needs to do a little more than scratch a ticket.  And don’t forget that Bozo Smith could take his million dollar lottery win and purchase a million tickets in the next lottery, the one with the five million pot.  So much for equal chance.

Perhaps the problem with profit is that it seems like such a selfish thing.  But that’s making an assumption about what the profit will be used for.  What about Carnegie?  (And yet, when was the last time Bozo set up a public interest foundation?)

What if the profit were used not for philanthropy but for research and development?  Or expansion?  What if the company is in the cure-for-cancer line of business?  Is profit okay then?  Do the ends justify, excuse, the means?

Maybe the problem isn’t profit per se, but the amount of profit.  One could argue that ridiculously high profits could not have been acquired without some exploitation, some wrongdoing: if there’s that much profit, that much difference between expense and revenue, then either your wages are too low or your prices are too high.  In a perfectly fair world, there should be no difference between expense and revenue: X should cost exactly what it cost.

And there’s the problem: rather than establishing an absolute standard, a rule of ought, prices and expenses are set by rules of can; further, prices and expenses are determined independent of each other.  The result is a difference, a profit – or a loss.  Ah.  Imagine a world without losses.  Easy. just imagine a world without profits.  Imagine fixed values.

On what basis could we establish fixed values?  Not need, because need fluctuates.  Earthquake victims will pay $25 for a $10 two-by-four, and the otherwise unemployed accept jobs at $2/hour.

Ability and effort would likewise lead to unfixed figures.  If Person A has to work twice as hard as Person B to type a letter, he would get paid twice as much; the price of the letter would thus vary according to who typed it.

Using contribution or accomplishment as a standard might work.  A perfectly typed letter could be worth $5.  And a perfectly-placed brick could also be worth $5.  And a perfectly-repaired ruptured artery could be worth $500.  If you find typing letters difficult and time-consuming, you should go into brick-laying instead.  And if the person next to you is able to lay bricks twice as quickly or with half the effort, why shouldn’t they get paid twice as much or put in half the hours?  Chances are if they find it that unchallenging, they’ll be happier doing surgery anyway.

One last note, though, about loss: even if the prices and expenses are fixed and fair, a loss can be incurred – but only if products already made are not purchased.  Note that this can’t apply to services: you can’t perform a service and then find no one willing to pay you for it.  Well you can.  But that would be really stupid.  Couldn’t we say you were just as stupid to make a hundred thousand cars before you had a hundred thousand orders?

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One Response to “What’s Wrong with Profit?”

  1. tai carmen Says:

    Good thoughts, all.


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