Montreal, August 13, 2006 No 188

 

THE RATIONAL ARGUMENTATOR

 

Gennady Stolyarov II is a science fiction novelist and philosophical essayist, and is Editor-in-Chief of The Rational Argumentator. He lives in Chicago.

 
 

PROFIT IS MORAL

 

by Gennady Stolyarov II

 

          All too often today we hear condemnations of the profit motive as destructive and uncaring. But is it really? Or is the profit motive one of the noblest forces that can impel a man to act?

 

          To understand whether the profit motive is desirable, we must first grasp the goals of a life properly lived. These goals are twofold; on the first level, survival is the goal of sustaining one's biological existence and preventing one's downward slide toward poverty, ruination, and death. On the second level, flourishing is the extension of one's control over the external reality the ability to harness ever more elements in the service of one's life.

          In the process of living, every man provided that he acts and uses his reason at all will gain certain benefits from the external reality. He will also incur certain expenses in order to act in the ways he chooses. If he breaks even if his gains are equal to his expenses then he has accomplished the goal of survival; he is no worse off than he was when he started. But neither is he better off. In order to accomplish the goal of flourishing, his gains must be greater than his expenses. In other words, he needs to make a profit.

          It is vitally important to understand that making profits is the only way to flourish. One cannot consistently extend one's control over the external reality if one keeps losing one's assets or if one merely breaks even. Profits can come in many different forms; they can be intellectual profits or gains of knowledge, technical profits or gains of skill, material profits or gains of property, physiological profits or gains in health and fitness, social profits or gains in valuable relationships, or monetary profits or gains of money. The value each individual assigns to these different kinds of profits is highly contextual; it depends on the ways in which that individual wants to flourish.

          Virtually nobody will condemn every single kind of profit, even though many people will deny that certain types of profit are, in fact, profits. Oddly enough, the type of profit that draws the greatest condemnation is monetary profit. This condemnation is wholly unwarranted.
 

A universally accepted medium of exchange

          Monetary profit is a kind of profit that can be most easily harnessed to the pursuit of the greatest variety of ends. While it might be true to an extent that "money cannot buy everything," it certainly can go a long way to help one fulfill any of one's objectives. Money is a universally accepted medium of exchange; it can be traded for a wide range of goods or services far more conveniently than any other commodity in most situations. Money can buy books or pay for courses that will give a person knowledge and skills. Money can buy training equipment to increase one's health and fitness. Money can buy leisure goods used to rejuvenate one's energies and improve one's standard of living. Money can even buy gifts to friends to sustain positive social relationships. Furthermore, money can be invested into valuable assets to generate additional money. If flourishing is one's goal, money should at least play an important role in attaining it.

          Profit is moral because flourishing and improving one's life are moral; profit by definition cannot be destructive to one's own life. Yet some claim that profit is destructive to the lives of others. This, too, cannot be.
 

"Under laissez-faire capitalism, every man has sovereignty to decide the value he will assign to each type of profit, the ways in which he will pursue this profit, and the types of exchanges he will make with other consenting individuals in order to flourish."


          A man can only make a profit in two ways. He can pursue an action which benefits himself but is irrelevant to other people. That is, he can embark on a solitary self-improvement program or in a direct transformation of inanimate objects without the participation of other people. Or he can pursue an action in cooperation with other people in order to achieve a mutually beneficial objective. He can embark in a voluntary trade with another individual or collaborate on a project or participate in a mutually valued friendship. In the first case, no other person is harmed, and many indirect benefits will flow to other people as a result of the individual's self-improvement and improvement of inanimate entities. In the second case, other people are directly benefited; they earn a profit in return for helping the individual make a profit.

          Furthermore, pure entrepreneurial profit on the free market is gained by observing and eliminating arbitrage opportunities caused by widespread errors of perception. If errors in people's knowledge at present cause resources to be misallocated away from their optimal uses, the entrepreneur can try to find a better allocation by distributing these resources in a different way than had been done before. If the entrepreneur makes a profit in doing so, then he has put the resources to a better use than previously; people are willing to pay him more for the new allocation of resources than they were willing to pay for the prior allocation. By pursuing and eliminating arbitrage opportunities, entrepreneurs benefit everybody in correcting market errors and aligning supply with demand to optimally satisfy human needs. The market's profit-and-loss test is the best way to determine what should be produced and how it should be distributed.
 

Sovereignty to decide

          In order to pursue profit, man needs to be free to do so. He needs to depend on his own rational judgment in deciding what is profitable to him and in determining how to pursue it. If somebody else restricts him from following his best judgment or imposes an unprofitable course of action upon him, then the individual cannot act in his best interests or flourish maximally. The only political, social, and economic system which allows individuals to flourish freely is laissez-faire capitalism, which tolerates no coercive restraints on voluntary, non-coercive, individual profit-seeking activities. Under laissez-faire capitalism, every man has sovereignty to decide the value he will assign to each type of profit, the ways in which he will pursue this profit, and the types of exchanges he will make with other consenting individuals in order to flourish.

          If compulsory economic regulations prevent the individual from seeking his own flourishing in his own way, this will also damage other people; the market errors that entrepreneurial activity might have corrected will remain and continue to result in misallocated resources. Numerous mutually beneficial value-trades will be obstructed. Most tragically, individuals will be stunted in their self-improvement and flourishing by restrictions on certain activities especially money-making. They will instead suffer great losses through the diversion of resources to sustain an inefficient and harmful regulatory regime.

          If human flourishing is moral if the improvement of individual lives is moral than so is the pursuit of profit. If the pursuit of profit is moral, then men should be free to pursue it. This reasoning leads us to favor maximal economic liberty under laissez-faire capitalism.
 

 

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