A wonderful talk In this talk, Howard Baetjer talks about the the role that profit and loss play in directing our efforts and resources for the satisfaction of our wants. We often hear people talking with contempt about profit, but rarely do we pause to consider the role it plays in society. In a society, we face the question of how to best use our scarce resources for the satisfaction of our wants. How do individuals in society coordinate with each other to make decisions that would result in the optimum use of our resources? How do we decide what is to be produced, and the best way to produce things? The answer lies in market prices, aided by the system of profit and loss. If businesses make profit in a free market, it means that they have added value; if they make a loss--it is a signal from society that they have subtracted value, or that they need to direct their resources elsewhere. In this way, the market constantly provides feedback to businesses on how to best channel resources to add value. The system of profit and loss keeps businesses in check, and on their toes. The device of profit and loss not only helps in directing our resources and efforts into productive outlets, it also encourages us to be creative. It spurs innovation and provides incentives to discover new things. The system of profit and loss thus directs our efforts and energies in socially useful directions.
Posted on: Sat, 20 Dec 2014 07:12:54 +0000
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