To many people, no current slogan appears more self-obvious than “people before profits.” For the Nth time, I saw it repeated, a few days ago, in a bien pensant attack on social media’s freedom: “How Social Media Platforms Put Profits Before People,” Financial Times, July 28, 2022). I suggest that there are few incantations as simplistic or non-sensical as that one.
Profits go to people, not to animals or gods. So the slogan can only mean “some people before some people,” and it has to be explained why the redistribution or discrimination envisioned or intuited is better than some other among an infinity of possible ones. A priori, it makes no more sense to say “people before profits” than “profits before people.”
In contradistinction, classical liberalism and libertarianism aim for no discrimination among individuals. If the idea should be reduced to a slogan, it would be something like “no set of people before any other set of people” or, more properly, “no individual before any other individual,” because a set can contain only one element. The statement must of course be taken as calling for the formal equality (equality of rights, equal liberty) of all individuals because material equality would require constant redistributive meddling and, thus, the violation of the formal equality of those sent to the wrong side of the wicket. This idea can be found in the writings of all modern (classical) liberals, notably perhaps F.A. Hayek and Robert Nozick.
Incidentally, profit is simply the form of remuneration that goes to residual claimants, who get whatever remains in the enterprise after everybody else has been paid, whether the residue or bottom line is positive (profit proper) or negative (loss). It must be distinguished from executive remuneration. Crony capitalism and “state capitalism” work differently.
Stating the liberal solution does not, of course, solve all problems. One problem is that individuals who violate the basic requirements of life in a free society (unprovoked violence is the obvious case) may and should be punished. In a sense, these criminals are discriminated against, but the rule of law would insure that they knew in advance what is forbidden. Not all problems are solved but we are, intellectually, on the way to a liberal society.
READER COMMENTS
Richard W Fulmer
Aug 2 2022 at 9:15am
People can’t survive without profits. All living creatures must consume more Calories than it takes to obtain, prepare, and digest their food. And they need to eat enough additional Calories to fuel all their other actions. We make a net energy profit, or we die.
Similarly, primary energy producers (oil, natural gas, hydroelectricity, nuclear, solar, wind, biofuels, etc.) must create more energy than they consume if their activities are to be of any use. That is, they must produce more energy than they use to locate, extract, transport, and refine hydrocarbon fuels and uranium; to build power plants, dams, wind turbines, and solar panels; and to construct power transmission lines.
Profits are neither moral nor immoral; they’re simply necessary.
Jon Murphy
Aug 2 2022 at 9:36am
Good stuff. Another point I would like to add is that, at least insofar as a market system generally dominates, profits cannot long exist absent of serving people. Profits exist only by creating value. It’s a false dichotomy to say “people or profits.” It’s “people and profits.”
Pierre Lemieux
Aug 2 2022 at 10:30am
Jon: Good point. Profit is the value added by a business. (I think it is not technically correct, as analysts often do, to add salaries paid in the value added by a business. Each salaried worker owns his own value added, his own profit, which is better represented by his consumer surplus.)
Craig
Aug 2 2022 at 10:52am
I agree RE: salaties, generally. They are an operating expense which obviously reduces profit. There is one exception whicb would be when the owners of a business pay themselves a salary that isn’t fair market value. So if Elon Musk doesn’t pay himself a salary (and I think he doesn’t actually), the value added by Elon Musk, individually, looks lower than it reallt is and Tesla’s would be higher.
The converse can also happen and then the value added by the individual looks higher than the value added by the business.
Thomas Lee Hutcheson
Aug 2 2022 at 12:41pm
I judge that Capitalism does a pretty good job of aligning the interests of profit-making firm owners with those of people. Economic theory helps understand circumstances in which the alignment is less than perfect — externalities like pollutants and CO2 and methane emissions being perhaps the biggest exception. Theory also helps understand how to tax raise resources to transfer to those whose participation or inability to participate in the market economy yield insuffuent levels of consumption, especially of services like health care.
Much evil has been done in misapplying theory to make Capitalism align better with the interests of people (and more in tryin to replace Capitalism with other systems).. As Libertarians generally understand how and why this mis-alignment occurs, I invite then to join with Liberals and Progressives to find ways to reform the policies that seek that better alignment
robc
Aug 3 2022 at 9:55am
You have the order of operations backwards.
First, the liberals and progressives (and conservatives) need to stop misapplying theory. Then, and only then, could we libertarians work with them in those few instances where is might make sense to find a better alignment.
Until then, stopping them is the greater task.
Pierre Lemieux
Aug 3 2022 at 10:50am
robc: Hayek, in The Road to Serfdom, would agree with you.
Don Boudreaux
Aug 4 2022 at 6:34am
Thomas Lee Hutchison: With respect, you confuse blackboard theories for reality. Almost anything can be shown on a blackboard, and welfare economics is full of lovely pictures explaining just how god would intervene in reality if god were a government official. But god isn’t in charge. The human world is manned only by imperfect human beings. These human beings – including Nobel-laureate economists – cannot begin to comprehend the complexity of modern economic reality.
In its details, this complexity is literally incomprehensible to mere mortals, and it will remain so. The only way to make welfare-economics demonstrations of ‘optimal’ interventions into the market remotely plausible is to reduce the complexity of the modern economy to such a degree that its details become close to being comprehensible to we mere mortals. But any such reduction in the complexity of the modern economy to make it conform to the unstated assumptions of welfare economics would first torture and then destroy the patient that the welfare-economics doctors are trying to make more perfect.
Of course the real-world economy is imperfect; each of us can see countless imperfections every day. And just as many people pray to god to cure their cancer or to improve their job prospects, many people – especially Progressives – pray to the state, which they treat as a god, to make the world more perfect by eliminating these imperfections. But this move is based only on faith. Far too much of welfare economics is secular theology that is mistaken for science.
Apart from failing to come to grips with the enormous, incomprehensible reality of modern market economies, Progressives commit another scientific error: The assumption of individual self-interest that drives many of welfare-economics conclusions about alleged market failures is dropped when Progressives theorize about the politicians, bureaucrats, and judges who are to be in charge of correcting market failures. Why do Progressives consistently turn a blind eye to the reality that human beings in government are at least just as self-interested as are human beings in the market?
The typical welfare economist and typical Progressive consistently fails to explain where the flesh-and-blood persons in government will acquire the detailed knowledge necessary to intervene in ‘improving’ ways – equations and graphs on blackboards, in textbooks, and in journal articles do not supply such knowledge – and why the self-interest of these government officials will be put aside as they attempt to move us closer to imagined perfection.
…..
One of the many features that distinguish true liberals from Progressives and from conservatives in the Trumpian mold is the following. True liberals understand that reality is imperfect, but that markets generate outcomes that are pretty good – outcomes that are vastly better, for ordinary people, compared to what life was like before capitalism and what it would be like without capitalism. We liberals, appreciating the enormous treasures of modernity made possible by what Deirdre McCloskey calls “market-tested betterment,” don’t agonize over the relatively minor deviations here on earth from heaven. (Compared to what life was like before capitalism, we moderns are damn close to being in heaven; we’re certainly far closer to heaven than we are to the hell in which nearly every human being lived until just a few hundred years ago.) Progressives and other statists seem to have little appreciation for just what the market order has in fact accomplished. Able to imagine heaven on earth, Progressives and other statists resort to coercion to attempt to move society from pretty good to perfect. This attempt is not only destined to fail on its own terms, it’s also invariably fatal.
Pierre Lemieux
Aug 4 2022 at 1:31pm
Don: Yours are important points. They remind me of Buchanan’s arguments in his 1962 Economica article “Politics, Policy, and the Pigovian Margins” (which I may first have read after you cited it):
James N
Aug 4 2022 at 2:44pm
“And where are you going to get these angels who are going to run society for us?”
Milton Friedman
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