The Pursuit of Profit Is Pro-Social

by Matthew Mccaffrey  You can’t throw a rock these days […]

by Matthew Mccaffrey 

You can’t throw a rock these days without hitting someone who’s talking about entrepreneurship and why we need to encourage more of it. In the public and private sectors — especially in higher education — innovation, enterprise, and entrepreneurship are buzzwords like never before.

A big beneficiary of this trend is the field of social enterprise. Unlike ordinary businesses, the conventional explanation goes, social enterprises use their commercial activities to promote a broader aim of human well-being rather than simple profit maximization.

An example is Jamie Oliver using the restaurant business to provide culinary training to disadvantaged youth or sell food that encourages healthier living, even if doing so hurts the bottom line. Because of these kinds of expansive goals, social enterprises tend to be looked on favorably by business students, governments, and the media.

But while social enterprises certainly do create value, emphasizing “social” goals over profits can be misleading because it implies that traditional profit-seeking entrepreneurship fails to produce wide-ranging benefits for large numbers of people. Thinking of social enterprise as distinct from conventional business helps obscure the vital truth that profit seeking is not only compatible with increases in human welfare, it is probably the most powerful force for producing them ever devised.

In fact, that’s the beauty of free-market enterprise: it’s social whether it pursues an explicit social agenda or not. Critics of government intervention often point out that good intentions don’t equate to good policies. Likewise, the absence of good intentions doesn’t equate to bad policy, and lacking a specific social goal doesn’t make entrepreneurs antisocial. Think of Adam Smith’s observation about the butcher, brewer, and baker, which reveals that commerce is social because it’s mutually beneficial, not because entrepreneurs necessarily have a larger agenda.

When a company like Uber charges a price for its services, it’s being social in the sense that it’s creating value for consumers, not just for itself. And the market is simply an elaborate network of voluntary exchanges in which buyers and sellers constantly make each other better off — which is why they do business to start with.

Free enterprise is therefore social enterprise, but the reverse is true as well: enterprise is social if and to the extent that it’s free. We are truly social when we choose our relationships and refrain from choosing our neighbors’. In a free market, the term “social enterprise” is redundant because it’s in the marketplace that human beings express some of their most fundamental social instincts. Buying and selling teach us about peaceful interaction for mutual gain — and reveal to us just how profoundly our well-being depends on our commitment to benefiting others.

However, if we choose coercion over peaceful cooperation, we abandon hope of a working social order. Any social enterprise worthy of the name is therefore hostile to economic intervention, because every intervention is a step away from social cohesion and toward conflict.

Unsurprisingly, the corporate state is the primary cause of antisocial tendencies in real-world enterprises. Take, for example, intellectual-property law. What could be more antisocial than prohibiting people from sharing ideas and using them to improve the welfare of others? Yet many who promote enterprise take it for granted that “protecting” ideas is an essential part of entrepreneurship.

This attitude hints at a broader institutional problem: the sort of enterprise supported by public rhetoric is rarely the kind of healthy economic activity that would be produced in a free economy. Instead, public support for enterprise tends to mean support for a few privileged ventures at the expense of others. Sadly, it’s common for governments the world over to emphasize the need for more entrepreneurship while simultaneously promoting policies that distort, penalize, or even outlaw it. That’s why it’s more important than ever to be wary of the different meanings attached to words like “social” and “enterprise” and how these useful terms come to be associated with harmful economic ideas.

If economics tells us anything, it’s that we can’t effectively promote enterprise without first abandoning the networks of privilege and regulation that undermine entrepreneurship and divert human talent into destructive practices. A vital step toward that goal is seriously considering the rhetoric we use to describe the market. Language radically alters perceptions of commerce and can make the difference between thinking of enterprise as zero-sum profit seeking or as the key to the countless benefits of peaceful exchange.

Source: FEE


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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