(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;.           

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(L65) Some Answers Must Wait

I will sell my business when it makes a profit of [$??] a year, so that I can [??].

There are a few reasons why I cannot yet accurately provide an answer to this question.

The first being the fact that, I have no idea how much money I would be putting into this particular business to get it started. Would it be out of pocket, or from loans? How much money will I have ultimately paid in interest on those loans?

The second reason being that if my business is doing good enough to sell, that may just be all the reason in the world NOT to sell it! After all the hard work, sweat, and tears, I am just going to sell the polished business? I don’t think so! I will make more money owning the business myself than I will selling it. However, when it is time for me to retire and my days are almost done, it is more likely than not that I would pass this business in my family. This business is my legacy, and I will only leave it in the hands of those I most trust to upkeep my morals and standards within it.

There are plenty of reasons to sell a business, and while I cannot predict the future, I can be nearly sure that something I pour my lifeblood into will not so easily be bought.