Tuesday, July 10, 2012

The false dichotomy of people versus profits

One of the great criticisms of the free market thrown up by Marxists is that it is a system of production for profit instead of production for use. Another falacy is that capitalism promotes profits at the expense of people. A student of mine, Nick Freiling, very ably disposes of this fallacy in his short article, "'People vs. Profits' is a False Dichotomy."

He gets right to the heart of the matter in the second paragraph in which he writes,
Profits simply cannot be separated from "people and jobs." Indeed, the highest profits come to those who best provide for the public, usually creating more jobs and satisfying more people. This is economics 101.
That is economics 101 he learned here at Grove City College. I encourage you to read the entire essay.

I would also add that because the profit and loss calculation is the guiding criteria for entrepreneurs, it is crucial to keep society free if we want to ensure that production is directed to satisfying the most urgent desires of society. Only free market prices are determined by the personal preferences all market participants. In such a free society, was are assured that those entrepreneurs who earn profits do so precisely because they satisfy their customers in the most efficient way.

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