Prophet
Profit is at the heart of all existence. Life exists because of profits; when you generate more energy from food than it took to eat/digest, the difference is your profit, which keeps you alive.
Human society profits by using its natural resources to satisfy the wants of its members. The more efficient this process is, the higher the profit. How prosperous a society is, is determined by how well it translates its natural resources into what people want; prosperity is a direct result of profits.
Profit can be divided into two parts; the accounting profits earned by the entrepreneur, and the psychic profits that the buyer receives, because they value the good or service higher than the purchase price. Every transaction happens because each party values the good/service the other has for more than what they are trading. All values are subjective, and transactions only happen when both parties feel they are getting more value than they are giving up, otherwise the transaction would not happen. Thus every mutual transaction results in profit for both parties.
When someone purchases an item for $10, it must be worth more than $10 to them, otherwise they wouldn’t purchase it. If the item is worth $12 to them, they made a psychic profit of $2. If the item cost $8 to produce, then the sale generated $4 of profit, $2 in money profits for the entrepreneur, and $2 of psychic profit for the purchaser. The higher the profit of the exchange, both entrepreneurial & psychic, the richer society has become.
Unlike psychic profits, entrepreneurial profits enrich other members of society. Those profits turn into savings, and savings become investments in capital goods, which make natural resources (land and labor) more productive. Profits drive investment in capital goods, which make everybody involved in production more productive, and able to earn more. The most important step in reducing poverty is raising the productivity of workers, and this is done through generating profits, which raise productivity.
Profits are often looked at in a negative light, as if they are earned unfairly. The only way profits are unfair is if granted rights by the government that others don’t have access to. Higher profits signify that less resources were used up in production, freeing up land & labor to satisfy even more wants. An entrepreneur in a competitive market who makes higher profits isn’t price gouging, they are using few resources to fill wants.
If a bottle of water usually sells for $1, but there is a drought, is it morally acceptable to sell it for $10? If people are paying $10 for water, that means that they value it higher than $10. Maybe they value the water for $50, because they are worried about running out. When the entrepreneur sells the normally $1 bottle for $10, he is making an extra $9 due to the situation of limited supply. But the purchaser is making even a higher psychic profit, $40; even though they are paying 10x the usual price, the benefit to their life is even greater at that moment. Is selling the bottle for $10 price gouging?
