The profit motive is a cornerstone of capitalism. Adam Smith claimed that each individual’s pursuit of his own self-interest led to optimal social outcomes through what he called the “invisible hand” of the market. Capitalists have repeatedly had recourse to this argument against collectivists who denounce profit as a social evil.
We must, however, be careful about what we mean by “profit.” If we mean that the entrepreneur seeks financial compensation for their work, then of course profit is a positive thing. The problem with the profit motive is the tendency for capital to pursue unlimited growth. This was noticed by Marx in his equations of exchange. Exchange starts with barter, which may be represented as C –> C, where C represents a commodity. Commodities are exchanged for other commodities perceived to be of equivalent value. Money helps facilitate this exchange by standing in for other commodities and representing value. Thus, exchange becomes C –> M –> C, where M represents money. Marx noted that for the capitalist, this is reversed, such that we have M –> C –> M’, where money is invested in commodities in order to reap more money(represented by M’), thus earning a profit. The process goes on indefinitely to continually accumulate more and more profit.
