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Saturday, March 26, 2005

Profit vs. Charity

The Angry Economist is writing on the role of profits:

Profit has two pleasant characteristics. First is that profit attracts capital investment. If a company is making money, then more people are going to enter into the business. If the business of the company is saving the world, then the world will be saved all the faster. Second, profit tells you that you are actually helping people. Take, for example, the case of Christian missionaries who teach people how to read....the Bible. While the ability to read is surely a good thing, it's not clear that the people who now know how to read the Bible are better off. A primary tenet of profits in a free market is that everyone who trades is better off. Somebody who runs around a third world country teaching people how to use contraception because their country is overpopulated is not clearly doing them a favor.
Click here for the whole article.

Thomas Sowell has written at length on the role of profit. He says that "for profit" firms should be more correctly called "profit AND loss firms", because losses indicate that the resources employed in the business would better benefit society as a whole elsewhere.

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