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Profit is Not a Dirty Word

By John Hilston

March 5, 2013 - Profit is not a dirty word.

It’s unfortunate that some view profit as a dirty word that is inextricably linked with greed.

I’m not suggesting that every profit is earned ethically, but let’s not throw out the clean baby (markets and profit) with the dirty bathwater (unscrupulous individuals).

Profit is a key component and incentive in a market-based economy and is defined as the difference between total revenue and total cost.

It’s a reward for entrepreneurs and business people. If an entrepreneur serves customers well and is careful with costs, he or she will reap monetary benefits. These rewards then create the incentive to do more.

Take local entrepreneur Gary Bronga. He had an idea for a better way to wear an identification badge.

Starting with this idea, a computer and $500, he managed to rack up enough rejection letters to wallpaper his home office. Undeterred, he built a business that has now sold more than three million CLIPEZE badge holders.

Did I mention that he worked in the aerospace industry in Cape Canaveral for 21 years before he started his business?

We can learn many lessons from individuals such as Bronga.

For one thing, persistence is essential. Successful entrepreneurs must work hard and often make great sacrifices. As such, they deserve to be compensated well.

America was founded on ideals such as life, liberty and the pursuit of happiness.

A guarantee of happiness was never mentioned at the founding. This is important because the opportunity to pursue happiness – with happiness not being a foregone conclusion – is what drives many to keep pushing in the business world.

Unfortunately, good business ideas sometimes don’t work.

If an entrepreneur isn’t serving customers well or managing resources efficiently, a free market tries to push them out of business which can be a good thing for consumers.

However, those in America who argue that profit is a dirty word often argue for more government intervention in markets. When the government intervenes for the purpose of running an industry or saving a failing business, that market ceases to be a free market, and the profit incentive is distorted or even destroyed.

However, if the government allows the built-in correction mechanisms of the market to work, many more people like Gary Bronga will emerge.

It’s up to you, America. Let’s get to work.

Dr. John Hilston is an associate professor of economics at Brevard Community College.