If you’re walking around and talking about how you “hate profits,” you might as well say that you “hate oxygen” too. The truth is that you really don’t hate profits because you can’t hate profits.
Every moment of your life, you’re seeking to profit, and concomitantly are trying to avoid losses.
Every single moment!
Human life is a continuous sequence of single purposeful actions. The purpose of every one of our actions is to profit in some way, or exchange one end result for another that we value more at the moment.
Every action requires us to trade both our limited time, and some form of our energy (or labor) for the end result that we desire.
If you have an itch that makes you uncomfortable, you decide to trade a few seconds of your time, along with the labor of moving your hand and fingers to scratch it.
If the itch goes away as a result of your action?…And you’re satisfied?
Profit! …… PROFIT!!!
That’s it!
That’s what profits are. Action that leads to the removal of some dissatisfaction. We’re doing this all day … every day. We’re doing it right now.
Seems rather strange to “hate profits,” doesn’t it?
If there’s something worth hating, it’s losses, not profits.
Let’s take another scenario. Your son has a baseball game in another town, and you want to catch it after work. You don’t know exactly where the field is, but you’ll wing it.
After work, you get in your car (capital) …. and drive (labor/energy) … for an hour (limited time).
You have an end in mind to see your son play his baseball game, and you’re going to act by using your capital, labor, and time to achieve that end.
If you achieve your end and you’re satisfied? …. Profit!
But let’s say that after an hour of driving, you don’t end up at the baseball field, but at a shopping mall! Uh…oh….problem….
You stop at a gas station to ask where the baseball field is, and they have no idea what you’re talking about. You can’t call anyone because your phone is dead.
You’re now suffering LOSSES….one after another. The end result that you’ve chosen is not being reached, and you’re squandering your limited time, energy, and money (on gas).
Isn’t it rational, not to hate profits, but to hate losses instead? Doesn’t it make more sense, not to hate the proper allocation of time, energy and resources, but the improper allocation?
Now, it’s smart not to hate losses either. No human is all-knowing and omnipotent. We all make mistakes in judgement and we make them quite often. It’s best to learn from our mistakes, so that we make them once, and never again.
Now you may be thinking to yourself…..
“No, you don’t understand. I don’t hate those profits. I only hate profits that have to do with money.”
To which I would respond: “Well you don’t understand monetary profits either then.”
Monetary profits operate on the same exact principle.
Let’s go to our scenario:
Let’s say that the American military empire finally has to close its doors. It can’t afford to fight any more wars because they’re now completely broke.
As a result of this, the vast majority of Americans are as happy as ever. Troops are coming home from all over the world.
An entrepreneur thinks to himself: “I’ve never seen Americans so happy. I bet there’s going to be another baby boom. I’ll take a risk with my resources.”
The entrepreneur then starts putting everything together. He has savings built up, so he allocates those. He sets aside a large amount of his limited time. He hires employees and provides jobs to those who sell their labor, talents and skills. He gets manufactures and warehouses lined up, etc…etc…
Keep in mind, this is all a risk that the entrepreneur is taking. He doesn’t know if there’s going to be a baby boom in 9 months.
Everyone else gets paid though, no matter what happens. The employees don’t assume the risk. They get their paychecks no matter what. The manufacturers are paid up front as well. They make…They don’t sell.
Sure enough, the entrepreneur was right.
Americans ended up being really happy with the end of the military empire, and 9 months later the Internet is filled with stories of a lot of babies being born; well above the average.
The entrepreneur guessed right!
All the new mothers rush out to the stores (and Amazon) and there are baby products galore waiting for them!
Hardly anyone thinks this, because it’s taken for granted, but ‘Thank God for The Entrepreneur!’
In miracle-like fashion, a big demand is met with an abundant supply.
Consumers reward the entrepreneur with profits. His risk is now being rewarded. If the entrepreneur didn’t have the foresight, and the stomach to take a risk, there would be a lot of mothers looking at empty shelves.
This miracle could have easily went the other way.
If a baby boom did not occur, the entrepreneur would have lost his time, lost his capital, would have paid employees for something that no one wants to buy, and he’d be stuck with a huge inventory of baby products.
In a free society, there’s no one to bail him out.
Profits & Losses ….. It’s how human beings allocate scarce resources to achieve their desired ends.
If you think about it deeply enough, you realize that we’re all entrepreneurs on some level; even if it’s on a personal level. We’re always striving for profits and trying to avoid losses.
In a free society, this all takes place under one overarching condition: Don’t use aggressive force against anyone else as you strive to achieve your ends.
There’s nothing to “hate,” and there’s nothing better than Liberty.
The only time that there’s something to “hate,” is when government interferes.
When government introduces aggressive force, everything becomes distorted and economic life goes into a perpetual downward spiral until the government’s actions are reversed.
Trade is a key to a rising standard of living in society, especially for those at the bottom of the economic ladder.
In every exchange, both sides benefit from their own individual subjective perspective. That’s because at the moment of the trade, they are both giving up something they value less for something they value more. Thus, trade enables people to improve their standard of living. The greater the ability of people to trade, the better off they are.
A simple example: Suppose John has 10 apples and George has 10 oranges. John would like some oranges and George would like some apples. They decide to enter into a trade. What would be a “fair” trade? 5 apples for 5 oranges? We can’t say that. It is impossible to say what would be “fair.” That’s because trades are always based on the subjective valuations of the traders. It depends on how much value that each of the traders places on what he is giving up and on what he is getting in exchange.
Suppose John and George reach a deal in which John gives George 9 apples and George gives John 1 orange. Would that be an “unfair” trade? Of course not because John is voluntarily giving up something he values less (9 apples) for something he values more (1 orange). And George is giving up something he values less (1 orange) for something he values more (9 apples). Both sides have increased their own standard of living through the mere act of exchange.
It stands to reason, therefore, that the wider the ambit of possible trades, the better off people are economically. They have more opportunities to improve their standard of living if there are 1,000 people with whom to trade as compared to, say, 10 people.
A corollary to this principle becomes obvious: To the extent that government interferes in any way with people’s freedom to trade, to that extent the government is suppressing the ability of people to improve their standard of living. The harsher the restrictions, the bigger the trade “wars,” or the more brutal the sanctions and embargoes, the worse off the government is making its own citizens in terms of economic well-being.
Thus, among the greatest things that could ever happen to the American people would be the U.S. government’s liberating them, fully and completely, to travel wherever they want and trade with whomever they want. No more tariffs, trade restrictions, trade wars, sanctions, and embargoes.
What if other countries refuse to follow suit? So be it. The fact that some foreign government is imposing restrictions on the freedom of its own citizenry to trade with others should not serve as an excuse for U.S. officials to “retaliate” by doing the same to American citizens. If a foreign regime restricts the ability of its citizens to trade with Americans, that is something American sellers and consumers will have to deal with it. It is no business of the U.S. government.
Finally, and much more important than the utilitarian arguments for free trade, we should always keep in mind that trade involves the exercise of fundamental, natural, God-given rights. Such rights include the right to private property, the right to do what one wants with his own money, economic liberty, freedom of travel, liberty of contract, and freedom of association.
God has created a consistent universe, one in which freedom, including free trade, is the moral system and also works to improve the lot of mankind.
This article was originally published at The Future of Freedom Foundation
