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January 01, 2007

Pithing on the Profit Motive: Markets and Incentives

The ever-quotable Jim Henley gives a nice pithy explanation of the inherent values of the profit motive. That such common sense advantages and incentves of free market economics need to be restated for intelligent and well-meaning human beings is cause for existential sadness. That I myself cannot express it so well only adds to the despair. In any event, this is why markets do better, not utopian -- just better.

"[Steven Taylor's] point is apparently that some of the “larger providers,” the ones DEA is targeting, are trying to make a buck. To which [the] arch-capitalist me responds, So? The basic tenet of not just libertarianism but of economics since Adam Smith is that markets harness self-interest to productive purposes. That’s why grocery stores and drug companies and construction companies want money in exchange for food, shelter and medicine. More importantly, it’s why grocery stores provide more food to the public than I do; why construction companies build more housing than Steven Taylor does, and why drug companies produce more pharmaceuticals than my daughter’s brownie troop: there’s money in it for them. There are people who provide food, shelter and medicine for free. We call that charity, and it’s a worthy supplement to market activity, but that’s what it is, a supplement."

Posted by Matthew Hogan at January 1, 2007 05:50 PM
Filed Under: Egghead Stuff


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