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Profit and Production

20 Pages Posted: 7 Jul 2008 Last revised: 28 Jul 2008

Art Carden

Brock School of Business, Samford University; Independent Institute

Date Written: July 7, 2008

Abstract

Profits and losses provide powerful incentives. This essay explores the roles of profits and entrepreneurs in a market economy. In a market with secure private property rights, profits are a reliable guide that directs productive activity. Profits reward entrepreneurs for successfully adjusting the structure of production to better suit the wants of consumers. This has implications for Michel de Montaigne's thesis that one's profit is another's loss: while this seems like an attractive (and intuitive) proposition, profits arise when an entrepreneur is able to satisfy consumer wants. This essay applies Ludwig von Mises' thesis that the source of human action is the desire to remove "felt uneasiness." For example, in a situation in which an entrepreneur alleviates discomfort, it is the opportunity to alleviate the discomfort that is the source of the profit and not the discomfort itself.

Keywords: profits, losses, entrepreneurs

JEL Classification: A1, M2, P1

Suggested Citation

Carden, Art, Profit and Production (July 7, 2008). Available at SSRN: https://ssrn.com/abstract=1156391 or http://dx.doi.org/10.2139/ssrn.1156391

Art Carden (Contact Author)

Brock School of Business, Samford University ( email )

800 Lakeshore Drive
Birmingham, AL 35229
United States

HOME PAGE: http://www.artcarden.com

Independent Institute ( email )

100 Swan Way
Oakland, CA 94621-1428
United States

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