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In It is not from the benevolence of the butcher, the brewer or the baker that we expect our dinner, but from their regard to their own interest.
Second, profit is a premium paid to the seller for the risk the seller took in brining the product to market. A portion of the profit may be extracted by the seller for personal consumption but most businesses and corporations use the profits to improve and expand production, generating more wealth, jobs, and profits.
Any producer focused exclusively on profit will ultimately collapse because of inattention to customers.
Many people falsely characterize profit as greed because the seller gets more for something than it cost the seller to make.
First, no item on the face of the planet has intrinsic economic value.
But if there is no profit the enterprise will die as well. They are essential but not the ultimate purpose for existence. Set the price to low and production costs will not be covered.
Sellers can not go out and charge what they please just because they are greedy.Just like Darwin synthesized observations about biology into a coherent model, Smith did the same for economics.At the core of his analysis were the ideas of labor specialization and trade.We each win in the exchange and wealth is created purely by the exchange.(See the “Trading Game” example I wrote of earlier in the Zero-Sum Game post.) Money faciliates these transactions so that we are technically swaping goods directly.Rather than have each individual develop a myriad of skills to provide for all the things he needed in life, Smith observed that each individual should specialize in those activities he does best.He should pay others to do those tasks he does less well.The “Capitalism Based on Greed” fallacy says that greed and selfishness are inherent in capitalism.The assertion that capitalism is based on greed and selfishness is one of the most common fallacies.As the monks prospered, markets began to form around monasteries.Merchants moved close by and sought trade with the monks and other merchants. New methods of international business sprang up with the Knights Templar as they facilitated pilgrimages to and from the Holy Land.