Profit - Revision history

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	[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [https://~~mises.~~freecapitalists.org/~~humanaction~~/~~chap4sec4.asp~~ "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [https://freecapitalists.org/books/human-action/read/chapter-iv-a-first-analysis-of-the-category-of-action/ "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Loss==		==Loss==
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	Profits in general or "profiteering" (unreasonably high profits), have been criticized for a long time. One objection is, that profits, unlike other sources of income such as [[wage]]s, [[rent]]s, or even [[interest]], are ''unearned''. There is no honest labor or effort associated with profit making to justify the benefits. Most people do not understand the process by which profits are attained, and assume there is something untoward going on.		Profits in general or "profiteering" (unreasonably high profits), have been criticized for a long time. One objection is, that profits, unlike other sources of income such as [[wage]]s, [[rent]]s, or even [[interest]], are ''unearned''. There is no honest labor or effort associated with profit making to justify the benefits. Most people do not understand the process by which profits are attained, and assume there is something untoward going on.

	Another objection is, that such profits impoverish the rest of mankind. The notion is that there is only a finite amount of wealth available and if the profiteers get more of it, there is less for everyone else. Thus, not only are profits “undeserved” because they are “unearned,” but they actually harm people by diverting funds from the rest of society. It also appears to many that profits are earned by taking advantage of the helplessness or “from the misery of others.”<ref name="Block_Defending">Walter Block. [~~http~~://~~mises~~.org/books/defending~~.pdf~~ "Defending the Undefendable"] (pdf), Ludwig von Mises Institute, 1976, p.185-195. Referenced 2010-11-26.</ref>		Another objection is, that such profits impoverish the rest of mankind. The notion is that there is only a finite amount of wealth available and if the profiteers get more of it, there is less for everyone else. Thus, not only are profits “undeserved” because they are “unearned,” but they actually harm people by diverting funds from the rest of society. It also appears to many that profits are earned by taking advantage of the helplessness or “from the misery of others.”<ref name="Block_Defending">Walter Block. [https://freecapitalists.org/books/defending-the-undefendable/ "Defending the Undefendable"] (pdf), Ludwig von Mises Institute, 1976, p.185-195. Referenced 2010-11-26.</ref>

	===Causes and effects of profits===		===Causes and effects of profits===

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	[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [~~http~~://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [https://mises.freecapitalists.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Loss==		==Loss==
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	Profit is an indication that both producers and consumers have improved their well-being.		Profit is an indication that both producers and consumers have improved their well-being.

	In short, by investing a given amount of money, producers have secured a greater amount of money. This, in turn, enables them to secure a greater amount of goods and services, which in turn promotes their lives and well-being. Likewise, consumers, by exchanging their money for goods that are on their highest-priority lists, have raised their living standards.<ref name="Shostak_prices">Frank Shostak. [~~http~~://mises.org/story/931 "The Limits of Supply and Demand"], ''[[Mises Institute]]'', posted on 2002-09-04, referenced 2009-05-14.</ref>		In short, by investing a given amount of money, producers have secured a greater amount of money. This, in turn, enables them to secure a greater amount of goods and services, which in turn promotes their lives and well-being. Likewise, consumers, by exchanging their money for goods that are on their highest-priority lists, have raised their living standards.<ref name="Shostak_prices">Frank Shostak. [https://mises.freecapitalists.org/story/931 "The Limits of Supply and Demand"], ''[[Mises Institute]]'', posted on 2002-09-04, referenced 2009-05-14.</ref>

	==Criticisms of profit==		==Criticisms of profit==
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	==Links==		==Links==
	* [http://www.mises.org/rothbard/mes/chap8a.asp Entrepreneurial Profit and Loss], [[Murray Rothbard]]'s ''[[Man, Economy, and State]]'', Chapter 8.		* [http://www.mises.org/rothbard/mes/chap8a.asp Entrepreneurial Profit and Loss], [[Murray Rothbard]]'s ''[[Man, Economy, and State]]'', Chapter 8.
	* [~~http~~://mises.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011		* [https://mises.freecapitalists.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011
	* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.		* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.
	* [https://www.youtube.com/watch?v=-NhRYA4YO5I Great Speech in "Home Town Story"] a video explaining profit		* [https://www.youtube.com/watch?v=-NhRYA4YO5I Great Speech in "Home Town Story"] a video explaining profit
	* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia		* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia
	[[Category:Economic concepts]]		[[Category:Economic concepts]]

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	* [http://mises.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011		* [http://mises.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011
	* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.		* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.
			* [https://www.youtube.com/watch?v=-NhRYA4YO5I Great Speech in "Home Town Story"] a video explaining profit
	* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia		* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia
	[[Category:Economic concepts]]		[[Category:Economic concepts]]

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	==~~External links~~==		==Links==
	* [http://www.mises.org/rothbard/mes/chap8a.asp Entrepreneurial Profit and Loss], [[Murray Rothbard]]'s ''[[Man, Economy, and State]]'', Chapter 8.		* [http://www.mises.org/rothbard/mes/chap8a.asp Entrepreneurial Profit and Loss], [[Murray Rothbard]]'s ''[[Man, Economy, and State]]'', Chapter 8.
	* [http://mises.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011		* [http://mises.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011

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	[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

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	==External links==		==External links==
	* [http://www.mises.org/rothbard/mes/chap8a.asp Entrepreneurial Profit and Loss], [[Murray Rothbard]]'s ''[[Man, Economy, and State]]'', Chapter 8.		* [http://www.mises.org/rothbard/mes/chap8a.asp Entrepreneurial Profit and Loss], [[Murray Rothbard]]'s ''[[Man, Economy, and State]]'', Chapter 8.
			* [http://mises.org/daily/4976 Where Profit Comes From] by George Reisman, January 2011
	* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.		* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.
	* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia		* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia
	[[Category:Economic concepts]]		[[Category:Economic concepts]]

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	In short, by investing a given amount of money, producers have secured a greater amount of money. This, in turn, enables them to secure a greater amount of goods and services, which in turn promotes their lives and well-being. Likewise, consumers, by exchanging their money for goods that are on their highest-priority lists, have raised their living standards.<ref name="Shostak_prices">Frank Shostak. [http://mises.org/story/931 "The Limits of Supply and Demand"], ''[[Mises Institute]]'', posted on 2002-09-04, referenced 2009-05-14.</ref>		In short, by investing a given amount of money, producers have secured a greater amount of money. This, in turn, enables them to secure a greater amount of goods and services, which in turn promotes their lives and well-being. Likewise, consumers, by exchanging their money for goods that are on their highest-priority lists, have raised their living standards.<ref name="Shostak_prices">Frank Shostak. [http://mises.org/story/931 "The Limits of Supply and Demand"], ''[[Mises Institute]]'', posted on 2002-09-04, referenced 2009-05-14.</ref>

			==Criticisms of profit==
			Profits in general or "profiteering" (unreasonably high profits), have been criticized for a long time. One objection is, that profits, unlike other sources of income such as [[wage]]s, [[rent]]s, or even [[interest]], are ''unearned''. There is no honest labor or effort associated with profit making to justify the benefits. Most people do not understand the process by which profits are attained, and assume there is something untoward going on.

			Another objection is, that such profits impoverish the rest of mankind. The notion is that there is only a finite amount of wealth available and if the profiteers get more of it, there is less for everyone else. Thus, not only are profits “undeserved” because they are “unearned,” but they actually harm people by diverting funds from the rest of society. It also appears to many that profits are earned by taking advantage of the helplessness or “from the misery of others.”<ref name="Block_Defending">Walter Block. [http://mises.org/books/defending.pdf "Defending the Undefendable"] (pdf), Ludwig von Mises Institute, 1976, p.185-195. Referenced 2010-11-26.</ref>

			===Causes and effects of profits===
			First, profits are earned by entrepreneurs who see and seize upon opportunities which are not readily apparent to other people. The opportunity grasped by the [[entrepreneur]] may vary from case to case, but in all cases people are offered trades which they hold to be in their advantage, and which would not be offered in the absence of the entrepreneur.

			In the most usual case, the entrepreneur sees a discrepancy between different [[price]]s - for example prices in different places, or a price discrepancy between present goods and future goods. It may be also the prices of goods that have not yet been produced, and therefore have no prices at all. If there is no price discrepancy (no opportunity), the successful entrepreneur will not act.

			'''What are the results of profit seeking?'''

			One result is the collection and dissemination of [[knowledge]]. An obvious and dramatic example is the knowledge of hitherto unproduced products, but the profit seeker constantly brings to the market knowledge about price differentials. This knowledge is of great benefit to all concerned - they can buy and sell and enjoy new or cheaper goods - opportunities they would not have access to otherwise. What the profit seeker does is make sure that the effects of knowledge of prices in the different areas are felt.

			It is perfectly true, that the profit maker takes advantage of the ignorance of other people, however, it is hardly reprehensible. Anyone whose function it is to sell a commodity must sell it to those who lack it. The fact that the lack is determined by ignorance does not make the lack - or the need - any less real. The profit seeker "takes advantage" of the lack of knowledge of his customers in the same way that the farmer "takes advantage" of the hunger of his customer—by providing that which his customer lacks.

			The profits of the entrepreneur, therefore, are not made at the expense of anyone else. The entrepreneur creates the possibility of cooperation between disparate, and in many cases widely separated, groups. He is a broker or intermediary in ''opportunities''. It is his function to see to it that mutually beneficial opportunities are not bypassed. In addition the profit seeker benefits people by offering them choices otherwise not open to them.

			All entrepreneurial transactions are strictly [[voluntary]]. The people with whom the entrepreneur deals are just as free to reject as to accept his offers. If they accept, therefore, it can only be because they feel that they benefit from trading with him. They may regret their decision, and wish they had made their purchase at a lower price, or sold their goods at a higher price. But this does not alter the claim that the profit seeking entrepreneur offers a trade which, at the time it is offered, is considered beneficial by all the parties to it. This is an important claim, and it speaks well for the entrepreneur. It is a
			claim which cannot, for example, be made on behalf of government transactions because they cannot be said to be fully voluntary.

			Another result of the profit making process is that after it is undergone in any given market, there is less scope for its continuation. Once the opportunity has been pointed out and fulfilled by the entrepreneur, his function is completed and he has move on to make other pastures greener.

			The [[incentive]] behind the entrepreneur’s attempt to hold together the disparate parts of the economy is, of course, the profits he hopes to gain thereby. This is an excellent example of the beneficial effects of a profit and loss system. For the successful entrepreneur - the one who earns profits - holds the economy together by decreasing price discrepancies. But the entrepreneur who buys when he should sell, or sells when he should buy (who increases price discrepancies and disrupts the economy), loses money. The more mistakes he makes, the less able he is to continue in his error.<ref name="Block_Defending" />

			===Profiteering===
			The possibility of profits is a sign that something is amiss in the economy, indicating that people are not taking advantage of mutually beneficial trades. The actualization of profits indicates that something is being done about these missed opportunities.

			The possibility of profiteering signifies even greater gaps in the economic fabric. And if mere profits indicate an economic cure in progress, then profiteering is a sign that something of a substantial magnitude is operating to rectify the situation. Instead of moderate profits being acceptable, and profiteering being "exploitative," we can see that the greater the profits, and the greater the profiteering, the better off the economy is.<ref name="Block_Defending" />

	==References==		==References==

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	* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.		* [http://www.econlib.org/library/Enc/Profits.html Lester C. Thurow] ''Profits'', The Concise Encyclopdia of Economics.
	* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia		* [[Wikipedia:Profit (economics)\|Profit]] on Wikipedia
	[[Category:~~Economical Concepts~~]]		[[Category:Economic concepts]]

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	[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[~~costs~~]] are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>		[[Action]] attempts to exchange a less desirable condition for a more desirable one, and [[cost]]s are incurred to achieve a goal. The difference between the [[value]] of the costs and of the goal is called '''profit'''.<ref name="Mises_profit">Ludwig von Mises. [http://mises.org/humanaction/chap4sec4.asp "4. Action as an Exchange"], ''[[Human Action]]'', online edition, Chapter IV. A first analysis of the category of Action, [[Mises Institute]]. Referenced 2009-05-14}.</ref>

	==Loss==		==Loss==