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Putting
People before profits - 8/19/2003,
Bozeman
By: Pete Geddes
The Saturday of Thanksgiving weekend my family and I awoke
to four inches of sewage in our basement. While we have
many close friends, we didn’t call them for help.
No doubt some would have interrupted their plans and come
over. But we didn’t want to impose this bug, unpleasant
job on their Thanksgiving plans. Further, they have neither
the equipment nor the expertise of professionals.
The motto of the entrepreneurs who cover this niche, Buffalo
Restoration, Inc., says it will: “We make it feel
like home again.” In our case they surely did. Here’s
the story and its message.
Thirty minutes after we called, a cheerful, competent
crew arrived. In a matter of minutes they had tackled
our problem. Soon the owner arrived. He and his crew spent
most of the day cleaning our basement as my wife and I
cleaned and salvaged our belongings.
All of this on a holiday weekend. Many believe that capitalism
and the pursuit of profits is somewhat unseemly if not
immoral. Naïve critics claim that capitalism presupposes
selfishness and greed. I demur. Capitalism presupposes
only that people act in their own self-interest. Usually
this self-interest benefits others, e.g., the man from
AAA who comes out on a sub-zero night to start your car.
Even those who disdain capitalism concede that it delivers
services and products like no other system. Capitalism
may work, they say, but does it produce a moral society?
Profit is the positive spread between costs and revenue.
The potential for profit induces individuals to take business
risks. They gain when others find benefit in their work.
Entrepreneurs may be motivated by self-interest, concerns
about family, ego, or the love of the game. However, it’s
the value of their services, not underlying motivations,
that measure their social contributions.
Like fish in water, we take this social environment for
granted. Yet it is this process that provides us with
fresh fruit in winter, extra turkey in supermarkets at
Thanksgiving, and yes, even cleanup crews on holidays.
What about alternative institutions to organize society?
The MIT economist Lester Thurow writes: “Attempts
have been made to organize productive societies without
the profit motive. Communism is the best recent example.
But in the modern work these attempts have failed spectacularly…Capitalism
requires profits and profits require ownership. Ownership
generates responsibility.”
One key problem is that the information needed to create
products and coordinate human activity is widely scattered.
Central planners are not omniscient. They obtain only
a ting fraction of this knowledge. They are thereby precluded
from recognizing people’s wants and fostering innovative
ways to meet them.
Here’s a simple example of the pervasive problem
of acquiring the knowledge necessary to make good decisions.
A driver waiting for the later passenger to catch the
bus cannot possibly know whether the good he does for
her outweighs the harm he does to other passengers by
delaying their trip. True, he delays each only a little.
But it may be enough to miss a connection for a flight
to visit a critically ill family member. The late passenger
may be on a mission of mercy. She also might be on the
way to meet her drug dealer or rob a store.
The important point is the driver can’t know. And
because he can’t, he has a moral obligation to follow
the rules. By waiting he is more arrogant than virtuous.
Here are two great advantages of the free market: It reduces
the potential for human conflict while minimizing the
amount of knowledge required to act responsibly. The peaceful
competition of the marketplace is a profoundly cooperative
process which increases net social benefits. And the material
success that free societies enjoy allows us to pursue
all sorts of “non-market” matters (e.g., spirituality,
leisure, and volunteerism).
My insurance claims adjuster is located in Washington.
He called while I was writing this column and gave me
his number is case there was anything else I needed. He
acted as though he was genuinely concerned about my family’s
welfare. He is quite unlikely to ever meet us, yet he
acted as thought he cared about the desires of complete
strangers.
That’s the way the world should work. |
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