WEBVTT NOTE 25. The Profiteer 1 00:00:00.000 --> 00:00:04.000 Chapter 25 The Profiteer 2 00:00:04.000 --> 00:00:11.000 It is clear that profits and everything associated with them have been under attack for a long time. 3 00:00:11.000 --> 00:00:15.000 What is not so clear is the reason for these attacks. 4 00:00:15.000 --> 00:00:19.000 Several different patterns can be discerned. 5 00:00:19.000 --> 00:00:28.000 The objection most often made is that profits, unlike other sources of income such as wages, rents or even interest, 6 00:00:28.000 --> 00:00:32.000 payment for weighting risk are unearned. 7 00:00:32.000 --> 00:00:39.000 There is no honest labor or effort associated with profit-making to justify the benefits. 8 00:00:39.000 --> 00:00:44.000 Most people do not understand the process by which profits are attained 9 00:00:44.000 --> 00:00:48.000 and assume that there is something untoward going on. 10 00:00:48.000 --> 00:00:53.000 It isn't fair to make profits without having to work for them. 11 00:00:53.000 --> 00:00:59.960 Another objection often voiced against prophets and especially against profiteering, unreasonable 12 00:00:59.960 --> 00:01:05.040 prophets, is that such prophets impoverish the rest of mankind. 13 00:01:05.040 --> 00:01:11.080 The notion is that there is only a finite amount of wealth available, and if the profiteers 14 00:01:11.080 --> 00:01:14.440 get more of it, there is less for everyone else. 15 00:01:14.440 --> 00:01:21.160 Thus, not only are prophets undeserved because they are unearned, but they actually harm 16 00:01:21.160 --> 00:01:26.280 from People by diverting funds from the rest of society. 17 00:01:26.280 --> 00:01:31.740 It also appears to many that profits are earned by taking advantage of the helplessness of 18 00:01:31.740 --> 00:01:33.340 others. 19 00:01:33.340 --> 00:01:40.240 This view constitutes a third type of objection, and is reflected in the scornful popular expression 20 00:01:40.240 --> 00:01:45.460 that profiteers earn their income from the misery of others. 21 00:01:45.460 --> 00:01:51.140 When the helplessness consists of a lack of knowledge, the critics of profits are especially 22 00:01:51.140 --> 00:02:13.140 is particularly vociferous in their condemnation. For example, the case where a profit is earned solely because the customer is unaware that the same commodity is being sold close by at a lower price is particularly vexing. When the customer is poor, the profiteer is even more condemned. 23 00:02:13.140 --> 00:02:20.340 The usual defenses of the idea and practice of earning a profit leave a great deal to be desired. 24 00:02:20.340 --> 00:02:26.340 They have in the past been limited to pointing out, one, profits are patriotic, 25 00:02:26.340 --> 00:02:31.540 and that to attack them is un-American, or perhaps communistic. 26 00:02:31.540 --> 00:02:34.740 Two, they are not very big anyway. 27 00:02:34.740 --> 00:02:40.540 And three, they are used in many cases for charitable contributions. 28 00:02:40.540 --> 00:02:44.700 Needless to say, these are not very formidable defenses. 29 00:02:44.700 --> 00:02:50.420 Consideration must be given to the function of profits in a modern economy and an effort 30 00:02:50.420 --> 00:02:57.620 made to provide a somewhat more spirited defense for the ancient and honorable vocation of 31 00:02:57.620 --> 00:02:58.980 profiteering. 32 00:02:58.980 --> 00:03:06.000 First, profits are earned by entrepreneurs who see and seize upon opportunities which 33 00:03:06.000 --> 00:03:09.780 are not readily apparent to other people. 34 00:03:09.780 --> 00:03:16.780 The opportunity grasped by the entrepreneur may vary from case to case, but in all cases 35 00:03:16.780 --> 00:03:22.320 people are offered trades which they hold to be in their advantage, and which would 36 00:03:22.320 --> 00:03:26.460 not be offered in the absence of the entrepreneur. 37 00:03:26.460 --> 00:03:33.400 In the most usual case, the entrepreneur sees a discrepancy between different prices, strawberries 38 00:03:33.400 --> 00:03:39.800 is selling at 25 cents per jar in New Jersey and 45 cents in New York. 39 00:03:39.800 --> 00:03:46.440 As long as the costs associated with the transport of strawberries—transportation, insurance, 40 00:03:46.440 --> 00:03:53.720 storage, breakage, spoilage, etc.—are less than the price differential of 20 cents per 41 00:03:53.720 --> 00:04:00.640 jar, the enterprising entrepreneur is in a position to offer two sets of trades. 42 00:04:00.640 --> 00:04:06.640 He can offer to buy strawberries in New Jersey at a price slightly higher than the prevailing 43 00:04:06.640 --> 00:04:15.180 25 cents per jar, and then offer to sell strawberries to New Yorkers at a price below the 45 cents 44 00:04:15.180 --> 00:04:19.180 per jar that prevails in that market. 45 00:04:19.180 --> 00:04:25.400 In both cases, if he finds any takers, he will benefit those he deals with, either by 46 00:04:25.400 --> 00:04:31.140 by offering a higher price for their goods than they have been accustomed to receiving, 47 00:04:31.140 --> 00:04:37.560 or by offering to sell them goods at a lower price than they are accustomed to paying. 48 00:04:37.560 --> 00:04:44.340 In addition to the intratemporal price discrepancy case, there is the intertemporal case, where 49 00:04:44.340 --> 00:04:50.620 a price discrepancy between present goods and future goods is perceived. 50 00:04:50.620 --> 00:04:53.460 Take frisbees as an example. 51 00:04:53.460 --> 00:04:59.740 Consider all the factors of production, land, labor and capital, which are embodied in the 52 00:04:59.740 --> 00:05:03.460 final good of the frisbees offered for sale. 53 00:05:03.460 --> 00:05:09.380 The factors of production are goods of a sort themselves, and therefore have prices attached 54 00:05:09.380 --> 00:05:11.100 to them. 55 00:05:11.100 --> 00:05:16.300 After taking due account of the time it will take to convert these factors into the final 56 00:05:16.300 --> 00:05:19.900 good, three possibilities emerge. 57 00:05:19.900 --> 00:05:26.180 1. There is no price discrepancy between the prices of the factors and the price of the 58 00:05:26.180 --> 00:05:33.540 future good. 2. There is a discrepancy and the factor prices are high relative to the 59 00:05:33.540 --> 00:05:41.820 price of the good. And 3. There is a discrepancy and the price of the final good is high relative 60 00:05:41.820 --> 00:05:47.900 to the prices of the factors. If there is no price discrepancy, the successful 61 00:05:47.900 --> 00:05:57.900 A valuable entrepreneur will not act. But if the factor prices are relatively high, the entrepreneur will withdraw from production. 62 00:05:57.900 --> 00:06:05.900 It would be wasteful to devote relatively valuable resources on a final good that will be relatively valueless. 63 00:06:05.900 --> 00:06:10.900 He might sell his shares in the companies which engage in such production. 64 00:06:10.900 --> 00:06:17.220 Or, if he does not hold shares, he can contract to sell them in the future at their present 65 00:06:17.220 --> 00:06:23.720 high price, which does not yet reflect the production error of manufacturing frisbees 66 00:06:23.720 --> 00:06:29.420 with resources that are more valuable than the frisbees themselves will be. 67 00:06:29.420 --> 00:06:34.860 He can cover these sales by purchases of the same amount of shares in the future, when 68 00:06:34.860 --> 00:06:40.400 he expects their value to be lower because of the production error. 69 00:06:40.400 --> 00:06:46.640 There are many people who are mystified by this process, often called selling short. 70 00:06:46.640 --> 00:06:52.360 They wonder how it is possible to sell something that you do not own, in the future, but at 71 00:06:52.360 --> 00:06:54.720 today's prices. 72 00:06:54.720 --> 00:07:00.500 Strictly speaking, one cannot sell anything that one does not own, but it is certainly 73 00:07:00.500 --> 00:07:07.720 possible to promise to sell something in the future that one does not yet own, on the understanding 74 00:07:07.720 --> 00:07:14.720 If, on the other hand, the entrepreneur thinks that the price of the final good is like a 75 00:07:37.720 --> 00:08:03.720 The third type of hidden opportunity which the entrepreneur can seize upon does not involve any price discrepancies, either inter or intra-temporal. 76 00:08:03.720 --> 00:08:11.720 This type of opportunity involves goods that have not yet been produced and therefore have no prices at all. 77 00:08:11.720 --> 00:08:17.720 Consider in this regard the frisbee before it was produced or invented. 78 00:08:17.720 --> 00:08:22.720 There was no guarantee at that time that the public would accept it. 79 00:08:22.720 --> 00:08:30.720 In cases of this kind, the entrepreneur feels, thinks or devines that there is something, 80 00:08:30.720 --> 00:08:36.560 The lack of which may not even be apparent to anyone else, that consumers would greatly 81 00:08:36.560 --> 00:08:44.220 value if they could but be told of its existence and convinced of its beneficial attributes. 82 00:08:44.220 --> 00:08:51.480 In this case, the entrepreneur plays nursemaid to the idea through the processes of invention, 83 00:08:51.480 --> 00:08:59.480 financing, advertising and all other steps necessary to bring an idea to public acceptance. 84 00:08:59.480 --> 00:09:04.440 After having considered some of the types of activities profit-making entrepreneurs 85 00:09:04.440 --> 00:09:11.120 are likely to engage in, the results of profit-seeking can be assessed. 86 00:09:11.120 --> 00:09:17.560 One result is immediately apparent, the collection and dissemination of knowledge. 87 00:09:17.560 --> 00:09:24.540 The knowledge of hitherto unproduced products is an obvious and dramatic example, but as 88 00:09:24.540 --> 00:09:29.960 As we have seen, the knowledge engendered by profit-seeking behavior is by no means 89 00:09:29.960 --> 00:09:33.640 limited to such exotic occurrences. 90 00:09:33.640 --> 00:09:40.000 On a daily basis, the profit-seeker is constantly bringing to the market knowledge about price 91 00:09:40.000 --> 00:09:45.280 differentials, both inter- and intra-temporal. 92 00:09:45.280 --> 00:09:49.200 This knowledge is of great benefit to all concerned. 93 00:09:49.200 --> 00:09:53.160 Without it, people in New Jersey would be eating strawberries which they would much 94 00:09:53.160 --> 00:10:06.160 The New Jerseyans only eat the berries because of their lack of knowledge of people who value 95 00:10:06.160 --> 00:10:09.480 them more than they themselves. 96 00:10:09.480 --> 00:10:15.680 In addition, without this knowledge, there would be people in New York not eating strawberries 97 00:10:15.680 --> 00:10:22.720 because they assume that the only way to get them is to pay 45 cents a jar, when in truth 98 00:10:22.720 --> 00:10:25.560 they could be had for less. 99 00:10:25.560 --> 00:10:31.740 Of course, the profit seeker does not bring this knowledge to bear as a teacher might. 100 00:10:31.740 --> 00:10:37.760 He is not one who goes about the countryside explicitly imparting information. 101 00:10:37.760 --> 00:10:44.360 As a matter of fact, after his work is done, none of the people in New Jersey and New York 102 00:10:44.360 --> 00:10:50.360 may even be aware of the relative prices of strawberries in those markets. 103 00:10:50.360 --> 00:10:56.320 What the prophet-seeker does is make sure that the effects of knowledge of prices in 104 00:10:56.320 --> 00:10:59.120 the different areas are felt. 105 00:10:59.120 --> 00:11:03.660 The prophet-seeker does not directly spread the knowledge himself. 106 00:11:03.660 --> 00:11:09.240 He merely spreads the strawberries, which in the absence of knowledge of their prices 107 00:11:09.240 --> 00:11:12.620 would not have been so allocated. 108 00:11:12.620 --> 00:11:17.720 It is perfectly true, then, that the prophet-seeker takes advantage of the ignorance of other 109 00:11:17.720 --> 00:11:19.200 people. 110 00:11:19.200 --> 00:11:24.160 If the relevant knowledge were present, the entrepreneur could hardly earn profits by 111 00:11:24.160 --> 00:11:28.320 shipping strawberries from New Jersey to New York. 112 00:11:28.320 --> 00:11:32.800 Although true, however, it is hardly reprehensible. 113 00:11:32.800 --> 00:11:39.220 Anyone whose function it is to sell a commodity must sell it to those who lack it. 114 00:11:39.220 --> 00:11:45.640 The fact that the lack is determined by ignorance does not make the lack or the need any less 115 00:11:45.640 --> 00:11:46.840 real. 116 00:11:46.840 --> 00:11:52.260 The profit-seeker takes advantage of the lack of knowledge of his customers in the same 117 00:11:52.260 --> 00:11:57.880 way that the farmer takes advantage of the hunger of his customer, by providing that 118 00:11:57.880 --> 00:12:00.560 which his customer lacks. 119 00:12:00.560 --> 00:12:06.920 The profits of the entrepreneur, therefore, are not made at the expense of anyone else. 120 00:12:06.920 --> 00:12:15.000 It is not true that there must be losses elsewhere in the economy equal to the gains of the entrepreneur, 121 00:12:15.000 --> 00:12:20.500 It is not true that the entrepreneur fails to create anything. 122 00:12:20.500 --> 00:12:23.340 The entrepreneur does create. 123 00:12:23.340 --> 00:12:29.800 He creates the possibility of cooperation between disparate and, in many cases, widely 124 00:12:29.800 --> 00:12:32.140 separated groups. 125 00:12:32.140 --> 00:12:37.640 He is a broker or intermediary in opportunities, as it were. 126 00:12:37.640 --> 00:12:44.840 It is his function to see to it that mutually beneficial opportunities are not bypassed. 127 00:12:44.840 --> 00:12:51.240 Why this type of effort should be singled out and denigrated as not honest work is beyond 128 00:12:51.240 --> 00:12:53.560 the scope of reason. 129 00:12:53.560 --> 00:12:59.320 In addition to serving as a focal point for the utilization of knowledge, the profit-seeking 130 00:12:59.320 --> 00:13:06.360 entrepreneur benefits people by offering them choices otherwise not open to them. 131 00:13:06.360 --> 00:13:11.920 The case in which the entrepreneur presents the public with an entirely new product is 132 00:13:11.920 --> 00:13:14.600 again an obvious example. 133 00:13:14.600 --> 00:13:20.440 But the principle has applications even in the more mundane case of intertemporal price 134 00:13:20.440 --> 00:13:22.600 discrepancies. 135 00:13:22.600 --> 00:13:29.120 For society benefits when valuable resources are not committed to final products which 136 00:13:29.120 --> 00:13:33.360 are less valuable than the resources themselves. 137 00:13:33.360 --> 00:13:39.200 Such resources can be used in the production of more valuable final products, that is to 138 00:13:39.200 --> 00:13:52.640 It should be borne in mind that all entrepreneurial transactions are strictly voluntary. The people 139 00:13:52.640 --> 00:13:59.720 with whom the entrepreneur deals are just as free to reject as to accept his offers. 140 00:13:59.720 --> 00:14:06.000 If they accept, therefore, it can only be because they feel that they benefit from trading 141 00:14:36.000 --> 00:14:44.000 be made on behalf of government transactions, because they cannot be said to be fully voluntary. 142 00:14:44.000 --> 00:14:51.000 Another result of the profit-making process is that after it is undergone in any given market, 143 00:14:51.000 --> 00:14:59.000 there is less scope for its continuation. Its success sows the seeds for its demise. 144 00:14:59.000 --> 00:15:04.000 Once the opportunity has been pointed out and fulfilled by the entrepreneur, 145 00:15:04.000 --> 00:15:11.320 However, his function is completed. Like the lone ranger of a bygone era, the lone entrepreneur 146 00:15:11.320 --> 00:15:19.060 must move on to make other pastures greener. However, if imbalances in prices should arise 147 00:15:19.060 --> 00:15:26.540 shortly thereafter, the profit-seeker will return. The incentive behind the entrepreneur's 148 00:15:26.540 --> 00:15:33.080 attempt to hold together the disparate parts of the economy is, of course, the profits 149 00:15:33.080 --> 00:15:36.020 he hopes to gain thereby. 150 00:15:36.020 --> 00:15:42.080 This is an excellent example of the beneficial effects of a profit and loss system. 151 00:15:42.080 --> 00:15:48.580 For the successful entrepreneur, the one who earns profits, holds the economy together 152 00:15:48.580 --> 00:15:52.500 by decreasing price discrepancies. 153 00:15:52.500 --> 00:15:59.340 But the entrepreneur who buys when he should sell, or sells when he should buy, who instead 154 00:15:59.340 --> 00:16:06.540 of Decreasing Price Discrepancies and Holding the Economy Together, Increases Them and Disrupts 155 00:16:06.540 --> 00:16:09.660 the Economy, Loses Money. 156 00:16:09.660 --> 00:16:15.420 The more mistakes he makes, the less able he is to continue in his error. 157 00:16:15.420 --> 00:16:22.060 We cannot hope to completely rid the economy of errors, but a mechanism that automatically 158 00:16:22.060 --> 00:16:29.100 tends to improve the performance of the entrepreneurial class at every given instant is not to be 159 00:16:29.100 --> 00:16:31.940 be dismissed lightly. 160 00:16:31.940 --> 00:16:37.860 Although a case has been made for the beneficial effects of profits, profiteering has not 161 00:16:37.860 --> 00:16:39.500 been mentioned. 162 00:16:39.500 --> 00:16:45.220 It is important to do so, for there are many who would contend in the spirit of the Aristotelian 163 00:16:45.220 --> 00:16:51.980 golden mean that profits in moderation are acceptable, perhaps even beneficial, but that 164 00:16:51.980 --> 00:16:57.860 the extremism of profiteering can only be deleterious. 165 00:16:57.860 --> 00:17:03.940 The word profiteering has always been used in a smear context. 166 00:17:03.940 --> 00:17:11.020 Profits plus I hate the son of a bitch equals profiteering, in the same way that firmness 167 00:17:11.020 --> 00:17:16.140 plus I think he is wrong equals stubbornness. 168 00:17:16.140 --> 00:17:21.700 Bertrand Russell has said, to illustrate this point, I'm firm, you're stubborn and he's 169 00:17:21.700 --> 00:17:24.580 a pig-headed son of a bitch. 170 00:17:24.580 --> 00:17:31.940 We do not have an equivalent term of opprobrium for the wage earner, wageer, who seeks exorbitant 171 00:17:31.940 --> 00:17:39.460 or unconscionable wage rates, perhaps because public opinion, the mass media establishment, 172 00:17:39.460 --> 00:17:43.860 favors high wages, but not high profits. 173 00:17:43.860 --> 00:17:50.500 Semantics aside, it would appear that if profits are a benefit to our society, then profiteering 174 00:17:50.500 --> 00:17:53.140 is of even greater benefit. 175 00:17:53.140 --> 00:18:01.140 The possibility of profits, as has been demonstrated, is a sign that something is amiss in the economy, 176 00:18:01.140 --> 00:18:07.140 indicating that people are not taking advantage of mutually beneficial trades. 177 00:18:07.140 --> 00:18:12.740 The actualization of profits indicates that something is being done about these missed 178 00:18:12.740 --> 00:18:15.240 opportunities. 179 00:18:15.240 --> 00:18:20.160 Entrepreneurs are seeing to it that the strawberries get properly spread around. 180 00:18:20.160 --> 00:18:26.960 But if the possibility of profits indicates something amiss, then the possibility of profiteering 181 00:18:26.960 --> 00:18:31.860 signifies even greater gaps in the economic fabric. 182 00:18:31.860 --> 00:18:38.540 And if mere profits indicate an economic cure in progress, then profiteering is a sign that 183 00:18:38.540 --> 00:18:45.120 something of a substantial magnitude is operating to rectify the situation. 184 00:18:45.120 --> 00:18:52.600 of Moderate Profits being acceptable and profiteering being exploitative, we can see that the greater 185 00:18:52.600 --> 00:18:59.080 the profits and the greater the profiteering, the better off the economy is. 186 00:18:59.080 --> 00:19:01.960 A medical analogy comes to mind. 187 00:19:01.960 --> 00:19:09.100 If band-aids are good because the body can be cared for by them, then surgery, profiteering 188 00:19:09.100 --> 00:19:15.860 is better because it shows that a much more needy patient is being cared for. 189 00:19:15.860 --> 00:19:21.780 The most important defense of profit-making is based on political freedom. 190 00:19:21.780 --> 00:19:26.000 There are basically only two ways to run an economy. 191 00:19:26.000 --> 00:19:32.260 The first, voluntaristically, with decentralism and reliance on the price and profit and loss 192 00:19:32.260 --> 00:19:36.540 system to provide information and incentive. 193 00:19:36.540 --> 00:19:43.340 The second, compulsorily, with central planning, economic orders and directives, reliance on 194 00:19:43.340 --> 00:19:49.480 the initiative of the economic dictators and the obedience of everyone else. 195 00:19:49.480 --> 00:19:53.300 These two systems are the two polar extremes. 196 00:19:53.300 --> 00:20:00.900 All other economic systems are permutations and combinations of these two pure types. 197 00:20:00.900 --> 00:20:06.300 The compulsory or command economy is simplicity itself in outlook. 198 00:20:06.300 --> 00:20:12.420 The economic leaders simply decide what is to be produced, who is to produce it and how, 199 00:20:12.420 --> 00:20:16.200 and who is to reap the benefits of such production. 200 00:20:16.200 --> 00:20:22.220 By contrast, the voluntary or free market economy is quite complex. 201 00:20:22.220 --> 00:20:27.540 The individual must decide what to produce and how to produce it. 202 00:20:27.540 --> 00:20:33.340 The incentive is his own enjoyment of the product and what he may get for it by trading 203 00:20:33.340 --> 00:20:36.020 it with other people. 204 00:20:36.020 --> 00:20:42.620 Instead of being coordinated by economic directives, the free market economy, as we have seen, 205 00:20:42.620 --> 00:20:47.260 is coordinated by the profit and loss mechanism. 206 00:20:47.260 --> 00:20:50.060 Now consider this paradox. 207 00:20:50.060 --> 00:20:56.020 Those who are frequently the most virulent critics of profiteers, and by extension of 208 00:20:56.020 --> 00:21:02.680 the whole free market system, are frequently also vociferous champions of decentralism 209 00:21:02.680 --> 00:21:07.160 and the Rights of the Individual in Personal Matters. 210 00:21:07.160 --> 00:21:14.560 Yet insofar as they attack profits and profiteering, they are attacking not only the right of individuals 211 00:21:14.560 --> 00:21:21.120 to function freely in the economic domain, but the very foundation for freedom in every 212 00:21:21.120 --> 00:21:24.240 other area of human life. 213 00:21:24.240 --> 00:21:30.780 In their attacks on profits and profiteering, indeed, on all things profitable, they show 214 00:21:30.780 --> 00:21:35.420 show themselves to be in league with despots and dictators. 215 00:21:35.420 --> 00:21:42.600 If they were to have their way, and profits were severely restricted or outlawed entirely, 216 00:21:42.600 --> 00:21:47.140 coercive collectivism would be to that degree strengthened. 217 00:21:47.140 --> 00:21:52.280 Personal liberties would be washed away in a tide of orders from the top. 218 00:21:52.280 --> 00:21:59.300 The individual cannot be free if his economic existence is based on the decree of an economic 219 00:21:59.300 --> 00:22:07.000 Dictator, from whose dictates there is no appeal. In a free market, if you quit your job, an 220 00:22:07.000 --> 00:22:13.680 employee leaves your service, a customer refuses to buy from you, or a supplier refuses to 221 00:22:13.680 --> 00:22:22.540 sell to you, there are other actual or potential bosses, employees, customers or suppliers. 222 00:22:22.540 --> 00:22:27.620 But in a controlled economy there are no other alternatives. 223 00:22:27.620 --> 00:22:34.740 Deviations, eccentricities or non-orthodox inclinations are not tolerated. 224 00:22:34.740 --> 00:22:41.060 The champions of civil liberties have a uniquely brilliant insight and a truly humane dictum 225 00:22:41.060 --> 00:22:46.820 which they apply assiduously in the area of sexual morality. 226 00:22:46.820 --> 00:22:53.580 Nothing goes between consenting adults, and, implicitly, nothing goes but that which is 227 00:22:53.580 --> 00:22:56.580 between consenting adults. 228 00:22:56.580 --> 00:23:02.580 But they steadfastly refuse to apply this rule to any area other than that of sexual 229 00:23:02.580 --> 00:23:04.060 morality. 230 00:23:04.060 --> 00:23:09.160 Specifically, they refuse to apply it to the economic arena. 231 00:23:09.160 --> 00:23:16.100 But this humane dictum should be applied to all parts of human life, including the profiteer 232 00:23:16.100 --> 00:23:23.060 as well as the sexual pervert or deviant, to the entrepreneur as well as the fetishist, 233 00:23:23.060 --> 00:23:27.020 to the speculator as well as the sadomasochist. 234 00:23:27.020 --> 00:23:33.220 To argue that perverts, deviants and others of this ilk have been unjustly denigrated 235 00:23:33.220 --> 00:23:36.400 is one of the main burdens of this book. 236 00:23:36.400 --> 00:23:42.900 We cannot, therefore, be accused of having played fast and loose with the deviant community. 237 00:23:42.900 --> 00:23:50.780 But it is just as unfair to treat members of the profiteering community as pariahs. 238 00:23:50.780 --> 00:23:55.980 One last criticism of profiteering and the free market is the view that in the distant 239 00:23:55.980 --> 00:24:02.380 past, when there was an agrarian economy and life was simpler, perhaps a free enterprise 240 00:24:02.380 --> 00:24:04.260 system was viable. 241 00:24:04.260 --> 00:24:10.140 Today, what might have been appropriate for farmers and small tradesmen simply will not 242 00:24:10.140 --> 00:24:11.380 do. 243 00:24:11.380 --> 00:24:17.680 In our complex industrial society we cannot afford to leave things to the anachronistic 244 00:24:17.680 --> 00:24:19.820 whims of individuals. 245 00:24:19.820 --> 00:24:26.280 We need the strong central control of an economic planning board and the elimination of profits 246 00:24:26.280 --> 00:24:30.520 and profiteering from our transactions. 247 00:24:30.520 --> 00:24:32.600 This view is widespread. 248 00:24:32.600 --> 00:24:35.880 In some circles it is thought to be self-evident. 249 00:24:35.880 --> 00:24:41.600 But the analysis of profits as intimately tied up with a lack of knowledge must lead 250 00:24:41.600 --> 00:24:43.820 to the opposite view. 251 00:24:43.820 --> 00:24:49.620 The institution of profits is an invaluable aid in the gathering and dissemination of 252 00:24:49.620 --> 00:24:53.400 knowledge and the effects of knowledge. 253 00:24:53.400 --> 00:25:00.400 If anything can be taken as a mark of a highly complex, modern, non-agrarian economy, it 254 00:25:00.400 --> 00:25:06.860 is this self-same lack of economic knowledge and the utilization of it. 255 00:25:06.860 --> 00:25:12.560 It would therefore seem to follow that the profit system becomes more valuable as the 256 00:25:12.560 --> 00:25:15.920 economy becomes more complex. 257 00:25:15.920 --> 00:25:21.940 For in such an economy the information provided by the automatic price and profit and loss 258 00:25:21.940 --> 00:25:25.360 system is essential. 259 00:25:25.360 --> 00:25:33.300 Dictatorship, if it is ever viable, which it is not, is so only in a simple economy, 260 00:25:33.300 --> 00:25:38.840 one which can be easily managed by one group of bureaucrats. 261 00:25:38.840 --> 00:25:45.980 In conclusion, a sharp, rigid and basic distinction must be drawn between the profits that can 262 00:25:45.980 --> 00:25:52.420 be earned in the marketplace, and the profits that can be earned through government subsidies 263 00:25:52.420 --> 00:25:58.940 Profits and Influence, in short, through the system of corporate state capitalism. 264 00:25:58.940 --> 00:26:06.300 In the market place, all transfers of funds must be voluntary, therefore all profits must 265 00:26:06.300 --> 00:26:13.500 be based on the voluntary choices of the economic actors, and must hence be indicative of, and 266 00:26:13.500 --> 00:26:17.700 bring about solutions for, the wants of the economy. 267 00:26:17.700 --> 00:26:25.060 Thus, the assertion that the possibility of profits shows the scope of unrequited trades, 268 00:26:25.060 --> 00:26:31.260 and that the actual earning of profits indicates that these gaps are being filled, applies 269 00:26:31.260 --> 00:26:35.140 only to the free market economy. 270 00:26:35.140 --> 00:26:40.420 These assertions cannot be made in the absence of the free market. 271 00:26:40.420 --> 00:26:46.060 Profits in the mixed economy, an economy that has elements of the free market as well as 272 00:26:46.060 --> 00:26:52.860 The elements of coercion might well be due to no more than the prohibition of competition. 273 00:26:52.860 --> 00:26:59.600 For example, a tariff on imports will increase the demand for the domestic product, and profits 274 00:26:59.600 --> 00:27:02.740 in the domestic industry will rise. 275 00:27:02.740 --> 00:27:08.940 But it can hardly be concluded from this that any new information was uncovered, or that 276 00:27:08.940 --> 00:27:13.440 consumer satisfaction was in any way increased. 277 00:27:13.440 --> 00:27:20.080 If anything, the opposite would be the case. The tie between profits and well-being is 278 00:27:20.080 --> 00:27:25.640 thus sundered, and we can no longer infer the latter from the former.