Profit motive

For maximization and minimization in the mathematical sense, see optimization (mathematics).

The profit motive is the concept in economics that refers to individuals being provided incentive to relinquish some of their spending power (i.e. capital) for deployment to a productive purpose. If humans are rational and self-interested (see Homo economicus), then they should only divert some of their capital toward production for others in society (i.e. invest) if there is some payback for their self-sacrifice and risk. If there was no profit motive then the rational actor would merely conserve their capital for personal use and no investment would occur. The concept of profit motive was first raised by Adam Smith to explain why rational actors should invest their personal capital and why they needed to be provided a rent for use of that capital. Adam Smith also explained why the profit motive was an intrinsic enabler of the efficient utilisation of an economy's resources toward society's overall benefit.

Economies that are utilising their economic resource for maximum sustainable societal benefit need to be both profit efficient and productivity efficient (including labour efficiency, resource efficiency and sustainability). The profit motive must be sufficiently high to incentivise owners of capital to deploy their capital, but not so high as to extract too much rent from the productive capacity of the economy.

The theory proposed now by most modern economists is that goal of an economy is the maximization of growth and therefore profit (see Milton Friedman). This being the key difference between classical economists like Smith and modern economists. As a result, in modern economics, profit has been elevated from being merely a key plank in optimising societal benefit (the goal of classical economists), to becoming the sole purpose of economies.^{[citation needed]}

References

• Kottak, Conrad Phillip. Windows on Humanity. New York: McGraw-Hill, 2005.

This economic theory related article is a stub. You can help Wikipedia by expanding it.v · Categories: Economics terminology Economic theory stubs Wikimedia Foundation. 2010. Игры ⚽ Поможем написать курсовую Maximising Employment to Serve the Handicapped Ranked pairs Look at other dictionaries: profit motive — ˈprofit ˌmotive noun [singular] ECONOMICS the desire to make money, which makes people want to be involved in a business activity: • People believe that the profit motive is behind the recent decline in standards of nursing care. * * * profit… …   Financial and business terms Profit Motive — The intent to achieve monetary gain in a transaction or material endeavor. Profit motive can also be construed as the underlying reason why a taxpayer or company participates in business activities of any kind. Profit motive must be determined… …   Investment dictionary profit motive — the desire for profit that motivates one to engage in business ventures. [1930 35] * * * profit motive, the expectation or goal of making profit as an incentive for investing in or starting a business: »The students…refer to the profit motive as… …   Useful english dictionary profit motive — the desire for profit that motivates one to engage in business ventures. [1930 35] * * * …   Universalium Profit (economics) — In economics, the term profit has two related but distinct meanings. Normal profit represents the total opportunity costs (both explicit and implicit) of a venture to an entrepreneur or investor, whilst economic profit (also abnormal, pure,… …   Wikipedia motive — n. 1) to establish, find a motive 2) to question smb. s motives 3) altruistic; base; honorable; humane; noble; selfish; ulterior motives; the highest motives (to have nothing but the highest motives) 4) the profit motive 5) an underlying motive… …   Combinatory dictionary profit — noun ADJECTIVE ▪ big, considerable, decent, enormous, fat, good, greater, handsome, healthy, hefty, high …   Collocations dictionary profit — [[t]prɒ̱fɪt[/t]] ♦♦ profits, profiting, profited 1) N VAR A profit is an amount of money that you gain when you are paid more for something than it cost you to make, get, or do it. The bank made pre tax profits of ₤3.5 million... You can improve… …   English dictionary motive, motif, incentive — A motive is a desire, need, or emotion that prompts or causes a person to act in a certain way; it is an inner urge that produces an act, but it also applies to the result of action: Jeb s motive was to get even with those who had not helped him …   Dictionary of problem words and expressions motive — noun ADJECTIVE ▪ hidden, ulterior ▪ good, strong ▪ I d say he had a very strong motive for wanting her dead. ▪ altruistic, high …   Collocations dictionary 18+ © Academic, 2000-2024 Contact us: Technical Support, Advertising Dictionaries export, created on PHP, Joomla, Drupal, WordPress, MODx. Mark and share Search through all dictionaries Translate… Search Internet Share the article and excerpts Direct link … Do a right-click on the link above and select “Copy Link”