TERRE HAUTE — Profit is a beautiful thing.
I know many people regard profit as “obscene” — or at least “big” profits are regarded as “obscene.” But profits are actually wonderful and necessary for a growing, expanding, prosperous civilization.
All human action is aimed at “profit” in a sense. Humans act in order to bring about goals that they believe will make things better. They also take into account the opportunity costs of reaching their goals. You may have a goal of learning to play golf well, but that goal includes the cost of many hours of practice, the expense of equipment, lessons, etc.
If the cost is too high from the point of view of the actor, the action is either stopped or not started. In this sense, all human action can be said to be aimed at achieving benefits that exceed costs — that is, a “profit.”
To reach our “profitable” goals, we often cooperate with others through voluntary exchanges. Voluntary exchange — “trade” — is also a wonderful thing because any voluntary trade is always regarded as beneficial to both people trading. In other words, trade allows people to voluntarily increase their levels of satisfaction.
Trade also is wonderful because it allows people to specialize in specific fields of production or service. In a trading society, someone especially good at knitting can concentrate of making clothes and leave farming, carpentry and baking to someone else.
This specialization also is wonderful because it allows people to produce only those things at which they are best, meaning more stuff can be produced by the same number of hands. It also allows for the specialist to increase his skills and his efficiency, which also increases the amount of goods and services available.
The scope of possible trades between people increases dramatically when some “medium of exchange” — money — is used. The invention of money permitted humans to exchange with each other much more easily than if they could only barter with each other. Without money, for example, a brewer who wanted shoes would need to find a shoemaker who likes beer. That’s why money is also a wonderful thing.
Finally, money is also wonderful because it leads to “money prices.” And prices are wonderful because they allow people to figure out whether a certain item is profitable — or not — to produce.
The things required to produce an AM/FM radio, for example, have monetary costs. The parts, labor, assembly, transportation and time (in the form of interest rates) required all have money prices.
When the radio is completed and brought to market, it will command a market price of some level. If that price is below the price of the things consumed in production, we say the radio is not a profitable venture and productive resources are being wasted.
In a market economy, entrepreneurs discover quickly whether a product or service is profitable or not thanks to market prices. Profitable items are produced and wasteful items are abandoned. Without market prices for productive goods, it would be impossible to discover profitable uses for those goods.
I recently had the opportunity to travel to Poland and while there I attended a debate involving a “new left” professor, who had at one time supported the former Polish communist system but was now simply a European-style socialist. This professor amazed me at the end of the debate when he stated quite clearly, “Free market prices are necessary for a rational economy.”
This is exactly right because without money prices, profits and losses don’t exist. In a modern economy, with millions of possible uses of productive resources, an absence of market prices would mean no one could tell whether those productive resources were being employed wastefully or not.
The absence of market prices, in short, leads to economic chaos along the lines of what was seen in the former Soviet Union and its satellite countries, including Poland before 1989. No doubt, this professor, who was echoing the late Austrian economist Ludwig von Mises, understood this from personal experience as well as from economic theory.
That’s why I believe profits, trade, specialization, money and free market prices are all wonderful things. I hope Americans don’t have to go through the experience of Poland to find this out.
Arthur Foulkes is a Terre Haute native and longtime resident. The Tribune-Star reporter writes a column on business and economics. He can be reached at (812) 231-4232 or arthur.foulkes
@tribstar.com.
Business
Related Photos
-
Joseph C. Garza
Discussion
Arthur Foulkes: Love it or hate it, make a profit is vital to civilization
- Business
-
-
Projected Learning: Indiana State class teams with Delta Faucet for educational efforts
Indiana State University senior Candace Greubel scoured newsletter articles before her class forwarded its project to its eager audience, Delta Faucet Company employees.
-
Eight join Scott College of Business advisory board
Eight graduates from the past decade have recently joined the Scott College of Business’ Young Professionals Board at Indiana State University.
-
NEWSMAKERS: Feb. 12, 2012
* Edward Motley
* John Wilkinson
* Clabber Girl Corp.
-
BUSINESS CENTS: Is your company ready to become a franchise?
In the past few articles, we have discussed small business tax issues.
-
Mayor of Clinton to speak at Chamber luncheon
Clinton Mayor Jack Gilfoy will be the guest speaker at the February Luncheon Meeting of the Greater Clinton Chamber of Commerce.
-
SOCIAL SECURITY: A Valentine tip from Social Security
Valentine’s Day is just around the corner, making this a popular time of year for proclamations of love.
-
Small businesses invited to enter ‘Push’ contest
The sixth annual Staples National Small Business Survey found that seven out of 10 small business owners are optimistic about the future.
-
MORTON MARCUS: Examining the vitality of the economy in local communities
Euturn Wright, the noted economic development specialist, was in Indianapolis for the Super Bowl extravaganza.
-
ON THE MOVE: Feb. 12, 2012
Big Red Liquors Inc., a leading wine, beer, and spirits merchant since 1972 with 25 retail locations throughout southern Indiana, has hired Don Rix, vice president for Marsh Supermarkets LLC with 32 years of experience in the grocery industry, as its new president.
-
Mike’s Carwash washes its 100,000,000th vehicle
Mike’s Carwash has recorded a significant milestone, washing its 100 millionth vehicle.
-
Look for random acts of kindness at mall
Honey Creek Mall in Terre Haute will again celebrate National Random Acts of Kindness Week, Feb. 13-19.
-
Estate planning, wills topic of Lunch with a Lawyer program
Senior Education Ministries Inc. has scheduled Lunch with a Lawyer from 11:30 a.m. to 1 p.m. Feb. 20 at the Wabash Senior Activity Center at 300 S. Fifth St. in Terre Haute.
-
Leslie leaving Terre Haute Chamber
The Terre Haute Chamber of Commerce today notified members that Rachel Leslie, Chamber executive vice president, has accepted a position as director of advancement operations for St. Mary-of-the-Woods College.
-
Toyota to increase Highlander output in Indiana
Toyota will increase production of the Highlander mid-size SUV in late 2013 at the company’s Princeton, Indiana plant. Hybrid and export versions will be included. The project is expected to create about 400 new jobs at Toyota Motor Manufacturing Indiana Inc.
-
AT&T expands mobile broadband network
AT&T has expanded its mobile broadband network in several southwest Indiana communities, extending access for advanced mobile services, devices and feature-rich audio and video content to customers in the area.
-
ON THE MOVE: Feb. 5, 2012
• Debbie Dillow
• Vani Manyam
• Shabaz Gill
-
Nominate someone for HR Professional of the Year
Nominations are currently being sought for the 2012 Ogletree Deakins/HR Dimensions Human Resources Professional of the Year.
-
Time Warner offers new levels of Internet service
Time Warner Cable is expanding the next generation of Internet service to customers across the Midwest using DOCSIS 3 equipment and its advanced fiber network.
-
NEWSMAKERS: Feb. 5, 2012
Irving Haber at 1818 N. Third St. in Terre Haute announces that he is the first physician in the Wabash Valley to offer on-site digital imaging with the new Sonosite Sonogram machine.
-
First Financial Corp. reports 2011 results
First Financial Corporation announced results for the year and the quarter ended Dec. 31.
-
Terre Haute Chevrolet to incorporate new GM image elements
Terre Haute Chevrolet, a division of the Romain Automotive Group of Evansville, has announced a new look coming to the dealership in 2012.
-
SOCIAL SECURITY: Social Security FAQ on disability
Question: I applied for disability benefits three months ago and still haven’t received an answer. How long does it take to get a decision?
-
MORTON MARCUS: State government increasingly decides how we live in our cities
The ongoing trend in state-local government relations in Indiana is increasing paternalism.
-
Innovative Staff Solutions offers job openings
Innovative Staff Solutions has more than 180 positions open and available right now.
-
Free career advancement workshop scheduled
University of Illinois Extension is hosting a free career advancement workshop from 5:30 to 7 p.m. Feb. 23 in Marshall.
-
Verizon Wireless invests $159 million in Indiana
Verizon Wireless has invested $159 million in 2011 to enhance its network in Indiana, which includes the expansion of 4G LTE to 23 Hoosier cities, 10 major universities and four professional sporting venues.
-
Rose-Hulman Winter Career Fair experiences 37 percent gain in company attendance
The good times have returned for college job seekers in such technical fields as engineering and computer science.
-
Gordon Chiropractic celebrates grand opening of new location
The Terre Haute Chamber of Commerce in partnership with Gordon Chiropractic Family Health and Wellness celebrated the grand opening of its new location on Feb. 4.
-
Magnolia gives in on rezoning
A potential $20-million investment in Terre Haute’s east side has been blocked by public opposition.
-
Magnolia drops retirement complex plans for Ohio Boulevard
The company that had been hoping to build a new senior living complex along Ohio Boulevard has canceled its plans.
- More Business Headlines
-
Projected Learning: Indiana State class teams with Delta Faucet for educational efforts
Raw Video: Kim Jong Il Statue Unveiled
Authorities: Houston Found Underwater in Tub
Raw Video: Hearse Arrives at N.J. Funeral Home
Arm Wrestler Not Guilty Plea in Wife's Death
Trial Opens for Ala. Man in Bride's Diving Death
Baltimore's 'Crime Stopper' Is a Basketball Star
Raw Video: Houston Body Flown From L.A. to N.J.
First Person: Westminster Kennel Club Dog Show
Bacteria Keep Swimmers Off Some Fla. Beaches
Raw Video: Whitney Houston's Last Performance
Obama's New Budget: The Winners and Losers
Police: Houston Found Under Water, Unconscious
Reaction to Houston's Death at Clive Davis Party
Gregoire: Marriage Equality Is Right for Wash.
Raw Video: Israeli Embassy Car Attacked
Israeli Diplomats Targeted in India, Georgia
Coroner: Don't Know Houston's Cause of Death Yet
ShowBiz Minute: Houston, Grammys, BAFTAs
Sandusky Can See Grandkids, Have Local Jury
Attempted Bomb Attack Stopped in Georgia
Watch: Whitney Houston's Golden Hearse
Kate Upton MLB 2K12 Commercial
Olympic Swimmer Proposes on Podium After Big Win
Scarlett Johansson's Bikini P-D-A
Man Allegedly Drowns Wife While Scuba Diving
Sports Illustrated Cover Leaked
Wash. becomes 7th state to okay same-sex marriage
Romijn's 60 Pound Weight Loss
The 'Celebrity Apprentice' Cast Meets Donald Trump
Kissing contest heats up
Hugh Hefner's Son Arrested
Jacqueline Kennedy's personal papers released
Did Tyler Perry Have a Secret Wedding?
Iran denies Israeli embassy bombings
'Bachelor' Free Falls into the Ocean
Facebook Parenting: Father Posts Video Responding to Daughter's Post
Bobby Brown on Houston's Death
