Hooray for profits!

So, what’s wrong with profits?

 

I propose that much of the uncivil discourse currently taking place in our country distills down to fundamental misunderstandings of, combined with mean streaks of envy toward, profits.

 

I just love the incongruity of the Left hammering profit-making corporations while bewailing the fact that public pensions are going broke and unable to meet their payout obligations. What do they think drives the ability of public pension systems to pay out benefits? It is stockholder returns and bond payments gained from market profitability. Where does the Left believe that government obtains its revenues? It takes them from the earnings (profits) created by private individuals and corporations? Where does the Left believe universities earn their ability to pay out exorbitant salaries to unqualified, rent-seeking academics and administrators? Profits!

 

Profits are good. Let’s look at individual profits (earned income): what do people do with their profits? They can buy things (creating jobs), save (creating investment capital for loans) or invest (creating investment capital for the economy, thereby creating more jobs). Their money does not just “sit there” in a pile of gold coins, as many believe.

 

What about corporations? They take their profits and reinvest them into new products (research and development), new business opportunities (creating more jobs), employee benefits (good for employees) or, they return some of those profits to shareholders (creating individual earned income …see above) and pension plans. What’s wrong with that?

 

Too many people do not understand what “profit” is.

Profit is the value of a product over and above the cost of its inputs. If a company makes a profit, it means that it has created added value. If a company does not make a profit, it has not created value. So, it has wasted its resources. If an individual is not creating profits (earnings), they are not creating value.

 

What is value? It is whatever that great international trading bazaar, the market, says it is. If an oil company sells its oil at $10 per gallon, they aren’t ripping anyone off, they are just offering it to somebody out there for whom the oil is worth that price. Ditto for cancer-preventing drugs.

 

Here’s a basic rule: nobody is owed any part of somebody else’s or some other company’s productivity. A person or company should be free to sell their products and labor in a free market to the highest bidder. Anything else is making a claim on that person or company’s productivity. If I dictate what I will pay to somebody that I have compelled to make a product or provide a service, that person is no longer free.

 

If a drug or oil company makes lots of profit on a new drug or a new drilling ground, then it created a lot of value! Hooray! I say, great job! Ditto for oil companies…I hope they earn lots and lots of profit! I also hope that my retirement funds happened to have stock in that company, as that would be my only claim on their profit. But, even if did not directly share in their profit, I know that their profit is good for my society and my neighbors, some of whom may work for said company.

 

Profit is good! Anybody disagree?