Print Window   
 
The Independent Institute
Commentary

A New Year's Resolution for Politicians: Understand Profit


I travel a lot, and like a lot of other college professors, I am incredibly absent-minded. Over the last few months, I have gone on a series of trips on which I’ve learned a handful of important lessons about on-the-ground economics. Specifically, I’ve learned important lessons about how the profit of one man is not, as Michel de Montaigne put it, the damage of another. When trades are voluntary, the profit of one person is the benefit of another. Taking this lesson to heart would be a worthy New Year’s Resolution for the world’s political leaders.

In a (very) short essay, Montaigne maintained that, for example, the doctor’s opportunity to earn income arose from others’ illness. The farmer’s opportunity to earn income arose from others’ hunger. And so on. The opportunity to earn income came, according to Montaigne, from the undesirable circumstances in which we find ourselves.

But this is only part of the story. What the Austrian economist Ludwig von Mises called “felt uneasiness” gives rise to opportunities for profit, but it is not the felt uneasiness as such that is the source of the profit. Rather, the source of profit is the entrepreneur’s ability to alleviate another’s felt uneasiness.

I learned this in great detail during some of my Fall travels when I discovered that I didn’t have what I thought I had: my passport in Italy, my socks and my razor in Saint Louis, and my phone charger en route to San Francisco. In the first case, I ended up stuck in Milan for a few days, where I served as a source of income for several firms. In the second, I ended up buying a pair of socks in the hotel gift shop for $7 (plus tax) and asking that a razor be brought to my room. In the third case, I bought a replacement charger at a Brookstone in the Dallas/Fort Worth airport.

As I have argued in a paper critiquing the “Montaigne dogma,” as Mises called it, profits and losses provide important signals to the providers of goods and services. Specifically, my willingness to pay for socks in Saint Louis and a phone charger in Dallas was realized by people who were willing to take a risk and who were willing to bet their own time, energy, and money that someone would need a phone charger in Dallas. I thought about asking someone if they would let me borrow their charger, but I decided against it as a lot of people were either charging their own phones or working busily. I didn’t want to interrupt (though I’m reasonably certain someone would have helped; if you ever see me in an airport and if you ever need anything, I will be happy to help).

But someone at Brookstone, someone I’ve never met, was not only willing but eager to help me in my time of need. All I had to do was find a way to help her achieve some of her goals in the process. She earned income. Brookstone earned income. I got a phone charger. Everybody won.

Some of the American founders counseled those who followed them to avoid enmeshing themselves in political relationships with other countries and advised that commerce and cooperation should be extended as far as possible. It’s a principle that we should take into our day-to-day lives, as well. The interactions and types of cooperation that take place in competitive markets are more than mundane. They are, in their own special way, beautiful. They allow people who do not know one another and who might not actually get along that well in other settings to cooperate to mutual advantage. People who would have been killing one another in centuries past are trying to find ways to make one another better off today. If anything, that should be encouraged as far as possible.

This is a time of year when people resolve to better themselves and to better the lives of others. Some of us will plan to lose weight. Others will plan to write that book they’ve always been thinking about. Still others will plan to give more to charity. I humbly propose that our political leaders understand an important lesson. Voluntary trade is not conflict, it is not combat, and there are no losers. In a voluntary society, the profit of one is not the damage of another. The profit of one is the benefit of another.

?


Art Carden is a Research Fellow at the Independent Institute in Oakland, California, and Assistant Professor of Economics at Samford University.
Full Biography and Recent Publications