Profit

The term profit is a source of contention whenever economics are discussed. To the socialist, profit deprives the worker who is being exploited by a greedy capitalist expropriating from "the full value of the worker's labor." To the average American "capitalist" armchair theorist, profit is the reward for being a savvy businessman. Both are wrong.

A voluntary exchange can only occur when both parties perceive a benefit to the exchange. This applies to kids trading baseball cards, a pure barter economy, and the market of prices and monetary transactions alike.

Value is a subjective perception of goods and services, not an intrinsic property. People can widely value those intrinsic properties at a generally-accepted level, but this still does not negate the fact that value exists solely in the minds of individuals making value judgements. Prices on the market, whether in barter requests or monetary values, are an offer to make an exchange that is believed to be beneficial. These offers can be accepted, negotiated, or rejected.

As such, profit is essentially the reward for serving the wants of others, and both parties perceive a profit in a voluntary exchange in order for it to occur in the first place. The market economy is just a decentralized information network that links people who wish to make myriad exchanges in an impossibly complex web so they can all profit according to their respective value scales and provide the goods and services other people value.

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Myopic focus on the monetary side of an exchange can only be deliberate blindness to the value perceived by the other party in the exchange, and can only result in a skewed perspective. In the case of employment, this is fundamentally an offer of payment in exchange for labor. The employee need not invest up front in the resources of production, and does not hold any personal risk should the business falter. These have value, even if they are never expressed in monetary terms. The evil capitalists who made initial investments and accepted risk in hope of obtaining future benefits that may not even occur are being exploited by the employee at least as much as the employee's immediate labor is being exploited by the employer. It is a mutually-beneficial exchange, whether some outside observer agrees or not. One side may profit monetarily, but the other side profits in time preference, avoidance of initial investment, and other non-monetary factors alongside the wages.

However, this is not to say the modern corporate status quo is a bedrock of virtue and benevolence. A corporation is a government-granted legal status with special privileges and immunities in government courts. Many corporations rely on government to subsidize their operations, drown competitors in regulatory burdens, establish international trade rules to their benefit, and otherwise impose violence upon the market of voluntary exchanges. The United States in particular is often an especially egregious example of un-free markets, where every stage of production for every good and service is taxed, regulated, and licensed. Government is the unjust profiteer, and the corporations with the clout to become cronies of the political system use that power to plunder others. This is not a consequence of free markets, and without protectionism from the government, these bloated bureaucracies would collapse under competition. Profits from politics are proof of plunder, not evidence of economic benefit.

When profit in general is condemned, it reveals economic ignorance. When specific profits are called out as unjust, it may be a righteous accusation against political plunder. Don't automatically assume all profit is inherently corrupt, but don't assume that condemnation of profits is automatically communist bullshit either. There is a much more nuanced view than the extremes with which we are usually presented in public discourse from the "left" and from the "right."

Do you disagree? Civil and constructive comments are welcome below.

Recommended reading: I, Pencil by Leonard Reed