Profit, Scarce Resources, and Survival

Given the quality of life we enjoy today compared to that of those who lived before us, it is easy to forget that the efficient allocation of scarce resources is a very serious matter. In fact, it is imperative for our survival. The history of mankind from ancient to modern times is full of examples of the suffering and death people have endured because of the misallocation of scarce resources. I submit that much of the massive starvation we have experienced around the world during my lifetime is directly related to the misallocation of scarce resources.

The institution that concerns itself with the efficient allocation of scarce resources is business. The engine that drives the allocation process is profit. And the fuel used by this engine is the pursuit of profit.

Profit and the efficient allocation of scarce resources are not mutually exclusive. They are two sides of the same coin. In fact, I would even go so far as to say that they are synonymous. Without profit, there is no incentive to allocate resources efficiently. If businesspeople do not allocate scarce resources efficiently, there will not be any profit. Therefore, if the efficient allocation of scarce resources is imperative for our survival, so is profit.

In those economic systems where profit was removed from the resource allocation equation, the results have been disastrous. Look at what happened to Eastern Europe and the Soviet Union. Food crops rotted in the fields while store shelves and human stomachs stayed empty because no profit motivation existed to fill these shelves and stomachs. All of these countries are now acknowledging that profit is a politically acceptable dimension to the efficient allocation of scarce resources.