A few weeks ago I was out to lunch with a group of friends when the subject of money came up. One person at the table said that we should replace the phrase “In God We Trust” on currency with “This Is Your God.” To my surprise, there was very little pushback to that and even a few people nodded at the wisdom contained in that statement.
Setting aside the issue of whether or not references to God should be on our currency, my friend’s statement speaks volumes on the misunderstanding of the role of money and the pursuit of profit within society. My good friend and colleague Alex Salter has done an excellent job of discussing the role of money and its creation for those interested in reading about it. But to give a quick, one-sentence summary of the role of money in society — money serves as a common medium of exchange that greatly reduces the cost of trading with one another. To be sure, there’s more to money than that, but that explanation will suffice for our purposes here.
That leads us to a discussion of the role of profit seeking within society and its virtues. In a free society governed by the rule of law, the only exchanges that take place must be completely voluntary and agreeable to both parties. I cannot, for example, produce a car in my backyard and compel you to purchase it. Instead, I must produce the car and then offer it for sale to you. Should you find the terms of my offer agreeable, you give up your dollars in exchange for my car. Both of us are thus made better off: you get the car, which you value more than the dollars that you gave up, and I get the money, which I value more than the car that I gave up. If those conditions were not simultaneously true, the trade would not take place because one of the parties would not have agreed to it.
Similarly, I cannot shove money into your pocket and compel you to do something for me. Instead, if I want you to serve me, I must first specify what it is that I would like you to do and then offer you compensation in exchange. If you find the terms of my offer agreeable, then you do the work for me and I give you the money. Again, both of us are made better off. You give up your time and effort in exchange for my dollars, which you value more highly; and I give up my dollars for your time and effort, which I value more highly. Both of us are made better off through this exchange. Again, if that weren’t true, the exchange wouldn’t take place.
Profit, in this system, can be earned only when a person has served his fellow man in a productive way by providing others with either a good or a service that they value at a price that they are willing to pay. Pursuing profit in a free society, therefore, is nothing more than pursuing a means of serving one’s fellow man. People who can do that successfully earn a profit, while people who fail to do it earn losses. How beautiful of a system is that? We are rewarded for doing good by our fellow man and punished for doing bad. For that reason, markets are best viewed as a civilizing force. I would even go so far as to say that markets have done more to civilize man than any religion, social movement, or cultural reform. For that reason, as Peter Boettke has said, economics can rightfully lay claim to the Nobel Peace Prize, because our discipline is one that celebrates “cooperation and productive specialization among free and responsible individuals.”