I was struck by an observation made
recently attributed to Thomas
Sowell “profit is a price paid for efficiency.” It was part of a larger quote relating to
efficiency and socialism. Certainly I
have heard people express a disparaging view of people who do things for the
purpose of making a profit. At various
times in my life, I have found myself agreeing with that sentiment. So, I was intrigued with Sowell’s describing
profit as a price we pay for efficiency.
Part of my interest stemmed from the somewhat negative connotation
associated with having to pay a price; it smacks of having to do something we
would rather not. This less than
completely glowing description of the idea of profit seemed somewhat surprising
coming from an economist who is an unabashed energetic supporter of a system of
economic liberty. It lends support to
one of the suppositions of my post, a supposition I will return to after a
brief detour into the substance of his aphorism.
This is my blog and I am an
enthusiastic practitioner of the art of speculation the rise of which Michael
Crichton identified in a speech entitled “Why Speculate”:
“In keeping with the trend, I will try to express my views without any factual support, simply providing you with a series of bald assertions.”To which I say amen. I will provide no evidence for my assumptions; if you think they are mistaken you are welcome not to accept any of the conclusions I draw based on those assumptions. It is of little moment to me whether you accept them or not; I am conducting this exercise today mainly to work out my own thinking on this topic.
Sowell assumes that enterprises or activities not undertaken
for the purpose of generating a profit are less efficient in producing results
than enterprises or activities that are undertaken for the purpose of
generating a profit. My experience leads
me to conclude that this assumption is generally correct. I say generally because I can think of
exceptions and the exceptions illustrate, to me at least, thesis I wish to
develop. But let’s leave exceptions
aside for a moment and think about why the assumption regarding profit and
efficiency might be correct. I believe
that the relationship between the two ideas can be explained by a single
universal human trait: self interest.
I do not know what Sowell intended by efficiency, but for my
purposes I will define being more efficient as providing a good or service more
quickly or cheaply or of a higher quality and less efficient as providing a
good or service more slowly or expensively or of a lower quality. Under this definition greater efficiency requires
greater effort. It is more difficult to
act faster, reduce cost or improve quality.
By the same token lower efficiency requires less effort. Self interest dictates that as between two
activities the one requiring less effort will be chosen unless some outside
motivation exists to choose to the more strenuous activity or a person finds
the activity inherently rewarding. So,
for example, if I have a choice of reviewing ten applications an hour or twenty
applications an hour I will choose to review ten unless I perceive some reward
for reviewing twenty, I’m paid more, I get to keep my job, I increase my
chances for promotion or I really like reviewing applications and ten per hour
will simply not satisfy my craving for application review. So, to me, on a very general level, Sowell’s
assertion makes sense because profit is the outside motive to induce the
expenditure of greater effort. But what
about the exceptions you ask? Patience.
First let’s return to the hint of negativity suggested by
Sowell’s formulation and key it into a larger concern. Why won’t the idea of collectivism
(socialism, communism, utopianism, etc.) die?
The world is littered with the bones of people sacrificed on the alter
of crafting a more equal society. When
it doesn’t kill
millions of people outright, it produces poverty and scarcity. In the known history of the world, no society
has successfully implemented a socialistic or communistic polity because of the
principle embodied in Sowell’s aphorism.
With profit removed, efficiency decreases until the social order
collapses; universal human self interest ensures this result. Yet, the dream of a society in which all
members participate equally in society’s material goods, in which no poor exist
and all live together in harmony lives on.
Academics, activists, politicians and ordinary folks continue to try to
push society towards that particular cliff regardless of the evidence that the
fall will be extremely destructive.
Why? Some I believe are simply
lazy and want to enjoy the fruits of others’ labor without expending any effort
themselves. Envy motivates some. And some view it as an easy route to power. But, I believe in part this desire is an echo
from our pre-mortal existence. At some
level many recognize that conditions even in the best societies, where poverty
is relative to the massive abundance of a few, are out of kilter somehow; that
conditions are meant to be more equal in terms of material distribution. For these people trending towards socialism seems
to be the only viable means of correcting the imbalance regardless of the
inevitable failure.
Let’s leave that discussion for
a moment and turn to another aspect of Sowell’s assertion. He framed profit as a “price” that must be
paid in order to obtain efficiency. This
turned my mind to a discussion I had with one of my sons. He told me one day that after some thought he
had concluded that everything one gained in life required that a price be paid,
not merely in monetary terms, but also in terms of effort. Failure to pay the price means failure to
obtain what you want whether it be an object, a skill, an attribute or a
relationship. So profit is the price of
efficiency which leads to a society many view as unfair and unequal, but failure
to pay the price of profit leads to lives of miserable poverty. Are we doomed then to vacillate between these
two states approaching one extreme or the other without ever achieving a
society all agree is ideal?
Now we reach the idea that
occurred to me when I read Sowell’s comment.
The answer lies in a question I put aside and in a deliberate
misstatement I made earlier. Let’s deal
first with the misstatement since that is a serious transgression. I asserted that no society had successfully
implemented a socialistic society.
Astute readers will have said to themselves, hey, wait a minute how
about the early Christian Church at the time of the Apostles, what about the
Nephites and Lamanites described in Fourth Nephi after Christ’s visit and what
about the City of Enoch described as a society in which there were “no poor”? What all of those societies had in common was
a societal wide implementation of the exceptions to the profit motive price for
efficiency I hinted at above. The
exceptions to the rule of profit purchasing greater effort or efficiency of
which I can think all involve love. In
the three examples named above love, a regard for others greater than a regard
for self, took the place of profit in the purchase of efficiency. If we want to purchase efficiency, that is
the choice of making a greater effort, the only alternative to profit in the
purchase of efficiency is love. So we
can reformulate Sowell’s statement as profit or love is a price paid for
efficiency.
And now we are down to it.
Anything we want to obtain comes with a price to be paid. If we want to pay for efficiency with love we
have first to obtain the kind of selfless love that must lie at the heart of a functioning
communal society. And to do so, we have
to pay the price. What is that
price? It is accepting Christ as our savior
and obeying his word in every particular.
That is the price that must be paid to obtain a society in which there
are no poor and all are equal. Who is
willing to pay that price today?
