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Do You Approve of Profits?

Dec 18, 2010 • Behavioral Economics, Businesses, Demand, Supply, and Markets, Economic Debates, Economic History, Economic Thinkers, Innovation • 199 Views    No Comments

Two Questions:

1.How do you feel about profit?

In their paper, “Is Profit Evil? Associations of Profit With Social Harm,” 3 University of Pennsylvania researchers discuss two studies that display people’s negative response to profit seeking activity. Ultimately, they conclude that most “people doubt the ability of profit-seeking business to benefit society.”

2. How do you feel about technological progress?

A century ago, a typical housewife needed approximately 7 hours each week to do the laundry. During one year, for one child, she washed more than 4,000 diapers. Lacking modern plumbing (15% of all families had flush toilets), she hauled 9,000 gallons of water into the house annually. To do a wash, this woman had to boil the water, use her scrub board, wring out the water, hang up the clothes, and carry out the dirty water. The Model T? Not yet.
By contrast, now, we live longer, we enjoy better health, and we use many more labor-saving devices. Profit seeking entrepreneurs and business firms were responsible for many of these benefits to society.

How to explain the contradiction?

The Economic Lesson

Talking about the impact of self-interest takes me to an Adam Smith quote from the Wealth of Nations.”It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages…”

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