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
TERRE HAUTE — Profit is a beautiful thing.
Social Security: Changes on the horizon for Social Security
A new year is a time for change. People across the world make resolutions and set goals to better themselves and the world around them. Whether you want to shed a few pounds, secure your finances for retirement, devote more time to charity or go on a vacation you’ve always dreamed about, chances are you have some ideas for a fresh start in 2014.
Business Cents: So does your advertising plan pass the sniff test?
Having been a business consultant for more than a decade now, there are some things that never fail to catch my attention, one of which is negative advertising.
Chamber of Commerce: Time to give a nod to local businesses
Are you familiar with a business deserving of recognition for achievements in 2013? Has it excelled in terms of business growth, implementation of green policies, creating a healthy workplace for its employees or overall business success? Maybe you are the owner of a company that meets these criteria? If so, consider completing a nomination for the Terre Haute Chamber of Commerce’s 2013 Business Recognition Award.
On the move: March 9, 2014
Stacey Joseph, broker associate with Remax Real Estate Associates in Terre Haute, was recently recognized by Remax of Indiana at the 2013 Awards Celebration at the JW Marriott in Indianapolis.
- Newsmakers: March 9, 2014
Milestone: March 9, 2014
On Wednesday Vermillion County Sheriff’s Department employee Robert (Pete) Jackson was recognized for 30 years of service.
Refrigerator recycling incentive increased to $50
Duke Energy customers who recycle outdated refrigerators or freezers will now receive a $50 incentive through the Duke Energy appliance recycling program.
Next Lunch with a Lawyer educational event set
Lunch with a Lawyer will feature attorney John Klotz from 11:30 a.m. to 1 p.m. March 17 at Wabash Senior Activity Center, 300 S. Fifth St.
Restaurant cuts ribbon for opening in Marshall
Country Kitchen celebrated its grand opening Friday with a Marshall Chamber of Commerce ribbon-cutting ceremony at the restaurant’s location at 710 Archer Ave., in Marshall, Ill.
Indiana startup launches social music player at SXSW
Caktus Music Inc. has announced the release of Caktus, the first true social music player, for iPhone.
Free tax preparation for low-income residents
Stadler & Company Tax Service is offering free tax preparation March 20-21 to low-income individuals and families in Wabash Valley.
Greater Clinton Chamber to meet at Dairy Queen
The Greater Clinton Chamber’s monthly luncheon is scheduled for noon Tuesday at Dairy Queen in Clinton.
US employers add 175K jobs despite harsh weather
U.S. employers stepped up hiring in February despite a blast of harsh winter weather, renewing hopes that the economy could accelerate this year.
Meet and greet March 7 at Tater & Joe’s Coffee Grounds
An informal meet and greet at the new Tater & Joe’s Coffee Grounds ,423 Wabash Ave., begins at 6 p.m. on Friday.
Sony DADC halting local distribution operation, cutting 34 jobs
Sony DADC, a major electronics and digital equipment maker, confirmed today it is closing a distribution operation at its Terre Haute plant.
Advisers make students apply theory to practice
Master’s students in a strategic management class at Indiana State University received professional advice and insights from local companies during a semester-long project.
Social Security: In Iditarod and retirement, prep is key
The Iditarod Trail Sled Dog Race, which started Saturday in Alaska, is one of the harshest, most challenging races known to man — or dog. Mushers embark on a nine- to 15-day race from Anchorage to Nome.
Contestants bear sub-zero temperatures with gale-force winds that can cause wind chills as low as negative 100 degrees Fahrenheit. It takes endurance, preparation and careful planning to make it from start to finish. The same can be said for your race toward retirement and Social Security.
- On the move: March 2, 2014
- Newsmakers: March 2, 2014
Biz prof outlines management practices
A strong dollar backed by the gold standard and perceived to be “as good as gold” has boosted America’s credibility with trading partners worldwide and facilitated rich exchanges of goods and services that allow the U.S. economy to grow and prosper.
FIO director to be keynote at D.C. summit
On the heels of his report to Congress proposing changes in insurance regulation, Michael McRaith, director of the Federal Insurance Office, will be the keynote speaker for Networks Financial Institute’s 10th anniversary Insurance Public Policy Summit.
Produce program taking applications
Melon Acres, north of Vincennes on U.S. 41, is preparing for another season of providing families with access to fresh, locally grown fruits and vegetables. The Oaktown farm’s Community Supported Agriculture program will begin the week of May 18. The 18-week season will run through September and shareholder registrations are now being accepted.
Students sought to paint houses during summer
While most college students will be spending the summer by the pool or relaxing with friends, James Welch will be running his own exterior painting business through an organization called Student Painters.
Best Places to Work in Indiana companies named
Union Hospital has been selected for the Indiana Chamber of Commerce “Best Places to Work” award for the sixth consecutive year.
ASAP makes 2 business degrees possible in 3 years
Motivated students interested in a career in business can jumpstart their futures with Ivy Tech Community College’s new Associate Accelerated Program.
IPL to host second class of principals
The Indiana Principal Leadership Institute at Indiana State University’s Bayh College of Education is accepting applications until March 15, which has been extended because of winter storms and school cancellations.
- Briefly: March 2, 2014
Downtown coffee shop reopens under new ownership
A popular coffeehouse, with roots in downtown Terre Haute’s revival, has returned after a six-month absence.
Indiana Limestone Co. closing shop, idling 166
BLOOMINGTON, Ind. (AP) — An 88-year-old Indiana company that supplied limestone to the Empire State Building, the Pentagon and other iconic buildings is going out of business and laying off its 166 workers.
Taco Bell takes aim at McDonald’s with breakfast
NEW YORK (AP) — Egg McMuffin, meet the Waffle Taco.
Taco Bell is readying for the launch of its national breakfast menu on March 27, with items such as the A.M. Crunchwrap designed to appeal to its fan base of younger men. And the chain says breakfast will be available until 11 a.m. — a half-hour later than McDonald’s offers its Egg McMuffins.
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- Social Security: Changes on the horizon for Social Security