The profit motive is an economic concept which posits that the ultimate goal of a business is to make money. Stated differently, the reason for a business’s existence is to turn a profit. The profit motive functions on the rational choice theory, or the theory that individuals tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profits.
As it extends beyond economics into ideology, the profit motive has been a great matter of contention.
According to economists, the profit motive ensures that resources are being allocated efficiently. For instance, Austrian economist Henry Hazlitt explains, “If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself." In other words, profits let companies know whether an item is worth producing. In economic terms, maximizing profits ensures that resources are not wasted.
Karl Marx railed against the profit motive by arguing that profits come from the exploitation of workers. According to his labor theory of value, "All goods, considered economically, are only the product of labor and cost nothing except labor." He believed that that the bourgeoisie, or ruling class, profit by paying the proletariat less than his labor is worth.
The majority of criticisms against the profit motive center on the idea that profits should not supersede the needs of people. Michael Moore’s film Sicko, for example, attacks the healthcare industry for its alleged emphasis on profits at the expense of patients. Moore explains:
Another common criticism of the profit motive is that it is believed to encourage selfishness and greed. Critics of the profit motive contend that companies disregard morals or public safety in the pursuit of profits. The Occupy movement, for example, can be seen as a response to the profit motive. One OWS protestor remarked: “Behind the profit motive, there is the big G: greed. And this greed has become a disease across the planet.”
Free-market economists argue that the profit motive, coupled with competition, actually reduces the final price of an item for consumption, rather than raising it. They argue that businesses profit by selling a good at a lower price and at a greater volume than the competition. Economist Thomas Sowell uses supermarkets as an example to illustrate this point: “It has been estimated that a supermarket makes a clear profit of about a penny on a dollar of sales. If that sounds pretty skimpy, remember that it is collecting that penny on every dollar at several cash registers simultaneously and, in many cases, around the clock.”
Economist Milton Friedman has argued that greed and self-interest are universal human traits. On a 1979 episode of The Phil Donahue Show, Friedman states, “The world runs on individuals pursuing their separate interests.” He continues by explaining that only in capitalist countries, where individuals can pursue their own self-interest, people have been able to escape from “grinding poverty.”
Author and philosopher Ayn Rand defended selfishness on ethical grounds. Her nonfiction work, The Virtue of Selfishness, argues that selfishness is a moral good and not an excuse to act with disregard for others:
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