The Profit Puzzle
"When I use a word," Humpty Dumpty said, in rather a scornful tone, "it means just what I choose it to mean-neither more nor less."
"The question is," said Alice, "whether you can make words mean so many different things."
"The question is," said Humpty Dumpty, "which is to be master-that's all."
-- Lewis Carroll
It has been recognized at least since Adam Smith that profits are the driving force in a capitalist economy. There are no state planners to issue directives concerning the productive use of the state's resources. Habit, though not without importance, cannot be held responsible for the production and exchange of goods. And benevolence, however widespread, does not supply sufficient inducement for individuals to use their own labor and property in generating output, especially when there is no guarantee of reciprocal benevolence. It is instead the desire for personal gain, the promise of profit, that motivates the entrepreneur to initiate productive activity. "The consideration of his own private profit is the sole motive which determines the owner of any capital to employ it either in agriculture, in manufactures, or in some particular branch of the wholesale or retail trade."1
The nature of such profit must therefore be an issue of fundamental importance. It is perhaps surprising, then, to discover that