It is common to hear profit attacked as exploitation and greed. How many supervillains have appeared in TV shows, books, or movies with the diabolical plot of putting “profits over people”? In reality, profit is a powerful mechanism for human cooperation, and serves to make sure that the earth’s resources are maximized to serve the best interests of humanity. Why? Think of profit as the reward for making good decisions. Profit doesn’t have to be only about money—selling something for $5 that you made for $3. It can also be something immeasurable: volunteering time to a charity can be profitable if doing so benefits a cause you’re passionate about. The benefits of profit are obvious. We want to benefit from our actions, rather than be disappointed by them. Now let’s look at the benefits of profit beyond an individual level. The world is a complicated place, full of billions of individuals with different opinions and interests, and a future that is never predictable. Add to this that there are many resources that have numerous uses. For example, iron can be used to make all sorts of things—from refrigerators to cars to medical devices. Given this web of complexity, decisions on what to make and how to produce it are beyond anyone's comprehension. No single person can imagine a way to fulfill the needs and desires of every single other person. Luckily, no one has to. Instead of one single person trying to figure out how to use all the world’s resources, property rights allow individuals to own these resources. These individuals can then sell these resources on markets, where others can buy them and combine them with other resources to build new products. The individual who risks his money buying resources to build products to sell is called an entrepreneur. In doing so, he also invests in capital goods (such as machines and buildings) as well as laborers, who have a variety of skills. All of these parts of production have costs. The entrepreneur is hoping that he will be able to sell the end product for more money than it costs to make it. That money is the profit that he gets to enjoy. It’s not just the entrepreneur who benefits, though. Consumers benefit, because they get new and different products. Workers benefit, because they make money. A successful entrepreneur is therefore helping other people while making a profit. Just as important, however, is loss. As we mentioned before, many of the components that go into producing a good have a variety of uses. This is true for natural resources, buildings, workers, and machines. If these resources are being used on a product and it isn’t profitable, this means that consumers don’t value that product enough to buy it. By suffering a loss, an entrepreneur may sell his resources to other entrepreneurs who can use them better. The factory is sold to another company. The employees work new jobs. This process plays itself out every day, in various ways, all around the world. Even better, it adapts to all sorts of changes. Maybe people’s taste changes; perhaps people stop liking sweet candies and instead like salty chips. Some candy factories may close, but new chip companies will emerge. When individuals get to choose how to spend their money, they end up influencing where entrepreneurs invest, and what is produced. Unfortunately, governments interfere with this process of profit and loss. For example, politicians add costs to businesses and industries, in the name of taxes or regulation, that make businesses less profitable. This is bad for the entrepreneur, bad for their workers, and bad for the consumers, who don’t get the products they would like. At other times, governments choose to bail out industries that aren’t making a profit. Politicians do so by pointing to jobs they want to protect— failing to recognize the profitable jobs they are destroying. Bailing out unprofitable industries means that scarce resources—including labor—continue to be used for products that people don’t want enough to buy. We have limited resources on Earth, and we should use them as wisely and efficiently as possible. The market economy, where entrepreneurs are driven by profit and loss, is the best way to make sure we do just that. Questions Are there are any businesses that you have a particular loyalty to? Why? What do you think is a better way of picking winners and losers in society: voting in a political election, or consumers "voting with their dollars" by choosing certain businesses and products? Why? Which group of people do you think have done more to improve your daily life: politicians or entrepreneurs? Articles "Why We Need Profits" https://mises.org/wire/why-we-need-profits "Economics: The "Other Side" of Politics" https://mises.org/power-market/economics-other-side-politics Book 'Profit and Loss' by Ludwig von Mises https://mises.org/library/profit-and-loss-0