Comments on: Does a Profit Driven Business Model Corrupt http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/ Politics and Culture from a Catholic perspective. Tue, 22 May 2012 12:58:56 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: j. christian http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/#comment-10764 j. christian Thu, 11 Dec 2008 18:59:14 +0000 http://the-american-catholic.com/?p=2847#comment-10764 As a practical matter, no organization can consistently operate at a loss, and hitting the break even point exactly is almost impossible, so all organizations (even ostensible "nonprofits") seek to make a profit. It's the only thing a wise manager can do: try to make sure that revenues exceed costs. Your pastor in your local parish probably thinks this way, too. Another thing we can add to the list of market failures is missing markets. Sometimes there's a bad outcome because we don't have a market for something -- like information or risk -- that might make us better off. Think of credit rating agencies, for example, and the informational role they play in finance. Missing markets aren't something that government can typically supply; they're often an innovation that makes other markets more competitive and efficient. As a practical matter, no organization can consistently operate at a loss, and hitting the break even point exactly is almost impossible, so all organizations (even ostensible “nonprofits”) seek to make a profit. It’s the only thing a wise manager can do: try to make sure that revenues exceed costs. Your pastor in your local parish probably thinks this way, too.

Another thing we can add to the list of market failures is missing markets. Sometimes there’s a bad outcome because we don’t have a market for something — like information or risk — that might make us better off. Think of credit rating agencies, for example, and the informational role they play in finance. Missing markets aren’t something that government can typically supply; they’re often an innovation that makes other markets more competitive and efficient.

]]> By: Matt http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/#comment-10763 Matt Thu, 11 Dec 2008 18:24:35 +0000 http://the-american-catholic.com/?p=2847#comment-10763 Great post and great comments. As an ex-distributist convert to free markets, I think that the biggest problem is that "anti-capitalists" frame the argument incorrectly. They rely on undefined terms. They also overlook opportunity costs. Maybe there are trade-offs in the market system. But there are trade-offs in anything in life, and the market offers the most choices and minimizes adverse impacts. As blackadderiv noted, socialists tend to exaggerate the potential for exploitation within a market/rule of law system. They ignore the egregious political, moral and economic exploitation under a controlled economy, as I saw when in the former Eastern bloc in the early 90s. Great post and great comments. As an ex-distributist convert to free markets, I think that the biggest problem is that “anti-capitalists” frame the argument incorrectly. They rely on undefined terms. They also overlook opportunity costs. Maybe there are trade-offs in the market system. But there are trade-offs in anything in life, and the market offers the most choices and minimizes adverse impacts. As blackadderiv noted, socialists tend to exaggerate the potential for exploitation within a market/rule of law system. They ignore the egregious political, moral and economic exploitation under a controlled economy, as I saw when in the former Eastern bloc in the early 90s.

]]> By: blackadderiv http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/#comment-10762 blackadderiv Thu, 11 Dec 2008 16:31:07 +0000 http://the-american-catholic.com/?p=2847#comment-10762 <i>The greedy man will seek his own interests at the expense of others, by causing harm to others if that harm helps him in a cost-benefit analysis.</i> The greedy man will do this if he can get away with it. Most people, I think, greatly overestimate the degree to which he can get away with it in a market setting. <i>A profit-making organization is only as good- or bad- as those within it.</i> I disagree. Obviously the people that make up a profit-making organization (or any other type of organization) matter a great deal. But they aren't the whole story. The "rules of the game" also tend to matter quite a lot. The greedy man will seek his own interests at the expense of others, by causing harm to others if that harm helps him in a cost-benefit analysis.

The greedy man will do this if he can get away with it. Most people, I think, greatly overestimate the degree to which he can get away with it in a market setting.

A profit-making organization is only as good- or bad- as those within it.

I disagree. Obviously the people that make up a profit-making organization (or any other type of organization) matter a great deal. But they aren’t the whole story. The “rules of the game” also tend to matter quite a lot.

]]> By: Ryan Harkins http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/#comment-10761 Ryan Harkins Thu, 11 Dec 2008 16:02:36 +0000 http://the-american-catholic.com/?p=2847#comment-10761 One of the things that I think is important to look at in the question of greed versus honest profit is the worth of the job. DC brought up good points in the carpenter/mechanic example he gave, but there's a flip side to it. Suppose I'm offering a general service (say, computer repair and virus-cleaning) to people, and I charge a much lower rate than my competitors but barely eek by on my earnings. If I then raise my prices and earn more money, that's not necessarily greed, but getting a more accurate reflection of the value of my work. We had some discussions a while ago about just wages, and the concept applies here, as well. If I, as a private practitioner, raise my rates, one could try to argue that it is simply greed and I'm price gouging; but on the other hand, the raised rates could simply be me ensuring I receive a just wage for my work. One of the things that I think is important to look at in the question of greed versus honest profit is the worth of the job. DC brought up good points in the carpenter/mechanic example he gave, but there’s a flip side to it. Suppose I’m offering a general service (say, computer repair and virus-cleaning) to people, and I charge a much lower rate than my competitors but barely eek by on my earnings. If I then raise my prices and earn more money, that’s not necessarily greed, but getting a more accurate reflection of the value of my work. We had some discussions a while ago about just wages, and the concept applies here, as well. If I, as a private practitioner, raise my rates, one could try to argue that it is simply greed and I’m price gouging; but on the other hand, the raised rates could simply be me ensuring I receive a just wage for my work.

]]> By: DarwinCatholic/Brendan http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/#comment-10760 DarwinCatholic/Brendan Thu, 11 Dec 2008 15:36:38 +0000 http://the-american-catholic.com/?p=2847#comment-10760 And no, Cheryl, I've actually never been to Chicago. Though we do have our share of "community run" organizations here in Austin, the blue spot in the heart of Texas. And no, Cheryl, I’ve actually never been to Chicago. Though we do have our share of “community run” organizations here in Austin, the blue spot in the heart of Texas.

]]> By: DarwinCatholic/Brendan http://the-american-catholic.com/2008/12/10/does-a-profit-driven-business-model-corrupt/#comment-10759 DarwinCatholic/Brendan Thu, 11 Dec 2008 15:35:34 +0000 http://the-american-catholic.com/?p=2847#comment-10759 <i>A profit-making organization is only as good- or bad- as those within it. Particularly those at top of food chain.</i> Indeed, good point. I think that a free market tends to reward good people running businesses well (with well being defined as: in the way that their customers want them to) but it certainly doesn't make people good! Also ditto on Kyle's point about the necessity of virtue for free institutions to work. Though I'd add: free institutions tend at least to reward virtue, while command-control institutions often do the opposite. And of course to J. Christian's point, there are certain circumstances where a market isn't really free and equal, in which case the attempt to act like it is can run into problems. A profit-making organization is only as good- or bad- as those within it. Particularly those at top of food chain.

Indeed, good point. I think that a free market tends to reward good people running businesses well (with well being defined as: in the way that their customers want them to) but it certainly doesn’t make people good!

Also ditto on Kyle’s point about the necessity of virtue for free institutions to work. Though I’d add: free institutions tend at least to reward virtue, while command-control institutions often do the opposite.

And of course to J. Christian’s point, there are certain circumstances where a market isn’t really free and equal, in which case the attempt to act like it is can run into problems.

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