Why Profit Is So Important

In most cultures, profit is seen as the outcome of exploitation of some individuals by some other individuals.
Hence, anyone who is seen as striving to make profits is regarded as bad news and the enemy of society and must be stopped in time from inflicting damage.
Profit however, has nothing to do with exploitation – it is about the most efficient use of real funding or real savings.
Profit as such should be seen as an indicator as it were, with respect to whether real savings are employed in the best possible way, as far as promoting people’s life and wellbeing is concerned.
If the employment of real savings results in the expansion of the pool of real savings, this could be seen as indicative that this employment was done in a profitable manner.
Conversely, if there is a decline in the pool of real savings as a result of the particular actions of individuals then this could be seen as indicative of a loss. These actions caused the squandering of real savings.
Obviously, an expansion in the pool of real savings, which is the heart of economic growth and is manifested through profits, should be regarded as the key factor for raising individuals’ living standards.
Rather than being condemned, individuals that are instrumental in the expansion of the pool of real wealth, which is manifested in terms of profits, should be praised.

This post was published at Ludwig von Mises Institute on Dec 27, 2017.

 

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