Why Profits Are So Misunderstood

By Chris Rossini

In a free market economy (or even an economy choked by government, like ours) profits and losses act as the beating heart. Get rid of either one and an economy-wide heart attack must ensue. Unfortunately, what profits are and the extremely valuable function that they serve are almost universally misunderstood in modern America.

If profits and losses were understood, you wouldn't hear trite cliche's like "people over profits" or "sustainable capitalism" or "corporate social responsibility." These are the slogans of meddlers and busy-bodies who seek to wield political force. And unless you've been in a long coma, you know full well that political force has come to dominate life in America today. 

If civilization is to continue moving forward, the time must come where Americans once again desire to roll-back the political barbarians. 

So let's get to understanding profits and losses. 

First, it's important to understand that we live in a world with scarce resources. This is not the Garden of Eden. There is a finite amount "stuff," which includes human labor, that must be used to satisfy our desires.

Next, our desires are infinite. You and I can sit down with a piece of paper and write all the things that we desire for ourselves. The list would never have to end. In fact, if we were to acquire every single thing on our original list, we could sit down again and make an entirely new list of wants.

So here we are, human beings with infinite wants, living in a world with scarce resources. Quite the challenge, don't you think?

With that being the setup, the first conclusion that must be accepted is that all of our wants cannot possibly be satisfied. Instead we must choose. What do we desire most?

Some of our wants can be satisfied right now, some perhaps at a later date, and some maybe never at all. We have no choice but to choose, and we have to make these choices while simultaneously wanting everything and wanting it all right now!

How are we supposed to choose? How does a landowner know whether he should keep his trees in the ground or cut them down to build houses? What if he were to use the wood to build boats instead of houses? Or what if he could start a business manufacturing baseball bats with the wood?

How is he supposed to choose, rationally? How is he supposed to know? 

Well before we get to making rational choices, lets get the irrational out of the way. That's where the political barbarians come in. You see the pompous barbarians believe that they should decide how the wood will be used. They know what's best for "society" and will make their master plans on how the resources should be used.

We saw with the Soviet Union how well the political barbarians do. They created economic havoc, the likes of which have never been seen in the modern world. Mass starvation, poverty and death. There are still a few countries left that have adopted the "abolish private property and markets" mentality. You don't want to visit those countries. Even Bernie Sanders refuses to even mention them when he's challenged.

Politicians are slick. They know that people have infinite wants, and that people always want things right now. So the politicians lie and pretend that they can satisfy those wants.....for FREE!!!

Let's get back to the real world and making rational decisions. In the real world, you must have private property. People then exchange their property with others. Each individual always valuing what they get more than what they're giving up. These exchanges, which happen every second of everyday form prices. 

Prices are so monumentally important because they give everyone a snapshot of what the supply and demand of anything is at any moment. If the price of a certain item is high, it means that demand for that item is high. It means people want it!!!

Read that last sentence again. It answers the question as to what should be produced! When prices are high, and the producer is making big profits, it means he's satisfying a very urgent want. This is not an evil act, as many are led to believe. He is satisfying a very urgent want.

Other people with resources spot these high prices and profits, and start to produce the same thing in order to earn some of those profits for themselves. As a result, more resources pour into an area to satisfy a great desire. As more resources pour in, and a larger supply is created, prices of the item in question begin to fall, and the profits are reduced. The end result is that buyers have their most urgent desires satisfied.

Losses are merely the other side of the coin. If someone is experiencing losses, it is an indication that (no matter how much they might love what they're selling) others don't have a desire to buy it. And since we live a world with scarce resources, those suffering losses should take their resources and apply them in an area where they're more desired.

This is called the invisible hand. No force, no dictates, no mandates, no bureaucratic "regulations".

It just is.

The political barbarians hate the invisible hand. They want direct and control things. So naturally they start to attack those who are making profits. That is, they're attacking the very people that are satisfying the most urgent wants of consumers. Sounds pretty irrational, doesn't it?

Well it gets worse.

The political barbarians reward those who suffer great losses. They "bailout" their buddies with other people's money. They keep in business those who should have closed up shop.

It's backwards, it's bizarre, and it's running wild in America today. 

Profits and Losses are the key. The political barbarians should do us all a favor and go get a real job.

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