(L135) Profit & Loss: The Free Market According to Mises

Mises was confronted with many questions concerning the free market economy. However, amongst his many detailed and sensible answers, one of the most telling responses that he ever provided was to the question of how profit could possibly arise in a free market (considering the fact that every factor of production is paid what it is worth to customers).

“Thus, profit and loss are generated by success or failure in adjusting the course of production activities to the most urgent demand of the consumers…Profit and loss are ever-present features only on account of the fact that ceaseless change in the economic data makes again and again new discrepancies, and consequently the need for new adjustments originates (Mises).”

Simply put, I could not agree more; ignorance is the name of the game. Humans are bound to make errors, but not 100% of the time. These mistakes, (or the lack thereof) are what create profit and loss in the economy. Outside of a free market economy, profit and loss are generated through exploitation (of workers, companies, natural resources, etc.), coercion, and monopolies (subsidies).

Bibliography

             Mises, Ludwig Von. “Profit & Loss.” Mises Institute. Mises Institute, n.d. Web. 5 Feb. 2016. <https://mises.org/library/profit-and-loss-0&gt;.           

(L25) Government Funding & Income Inequality Debunked

1.) What are the arguments for and against government science funding?

The two main arguments for (and against) government science funding are this:
1. Claim: Because there is no profit in basic science, there is no chance it will ever be privately funded.
Response: In reality, 90% of new research stems from previously existing technology, and basic/academic science research only accounts for 10% of new discoveries and technologies. Also, when looking back in history, one would find that despite the fact that Britain had no government funding for science, and there was substantial government funding for scientific research in Germany and France, they both consistently lagged behind Britain.
2. Claim: Private firms cannot claim exclusive profits from scientific discoveries, and so they will not get involved in funding scientific research in the first place.
Response: Firms are known to trade laboratory space to scientists
for the up-keep on the latest knowledge in the scientific community. This is done by having scientists working in their lab space agree to attend conferences, saving everybody time and money by keeping scientists from having to spend all their time in libraries reading previous studies rather than doing their own (in the labs). Basic/academic science has been funded by foundations, private university endowments and private industry in the past, not to mention being extremely more generous than government funding has even been.
On another note, government funding has been 
the well known cause of the politicization of scientific research in may cases; it also stifles opposing claims and approaches, causing a clog in the free-flowing wealth of information and communication between scientists that is so crucial to the discoveries we have already, and are yet to discover. 

2.) Is “income inequality” a problem, in your opinion? Why or why not?

Income inequality is not a problem in my opinion, because the real issue affecting income is economic freedom. This is proven by looking at the fact that no matter what country you live in, the bottom 10% of earners will earn 2.6% of the country’s total income. (As of 2011) in less free countries, 2.6% of the countries total income was equal to about $932; however, in more economically free countries 2.6% was equal to an average of about $10,556! According to these statistics, people residing in “unequal” countries are earning more, because these countries are the ones that are the most economically free.