Two Kinds of Profit

The Indian constitution states that the state shall “direct its policy to securing that the ownership and control of the material resources of the community are so distributed as best to subserve the common good”; and that “the operation of the economic system does not result in the concentration of wealth and the means of production to the common detriment.” See Planning Commission, Government of India, The New India (New York: Macmillan, 1958), p. 52. The Indian government does permit and occasionally encourages private enterprise, but only in accordance with over-all plans fitting the above general policy.

See the implied position of cigaret manufacturers in “Senate Unit Backs Cigaret-Pack Warnings, but its Bill Stays FTC's Ad Rules 3 Years,” in Wall Street Journal, May 7, 1965, p. 4.

See Lessing Lawrence , “Laws Alone Can't Make Drugs Safe,” Fortune, LXVII:3 (March 1963), 123, for discussion of one major recent problem—the thalidomide scandal of 1962.

Businessmen might read with profit some of the current science fiction literature and ponder the implications for the private enterprise system contained therein. Professional viewers of the future have little hope for the next one hundred years or so for the capitalist system. All is doom, gloom, and despair. See, for example, Blish James , Year 2018 (New York: Avon, 1957), or Blish A James Case of Conscience (New York: Ballantine, 1958). On a more rigorous scientific level, the strange contrast between the optimism of the natural scientists and the feelings of gloom and doom of the social scientists about the future has been noted. See Gordon T. J. Helmer Olaf , Report on a Long-Range Forecasting Study (Santa Monica: The Rand Corporation), Report P-2982, Appendix, p. 39.

See Knight Frank H. , “Profit,” in Readings in the Theory of Income Distribution (Philadelphia: Blakiston Company, 1949), pp. 533–546, for a classic treatment of the various historical views of profit.

Dean Joel , Managerial Economics (New York: Prentice-Hall, 1951), pp. 12–28.

See Farmer R. N. , “Municipal Ownership of Transit Facilities in Smaller Cities,” Traffic Quarterly, XVII:1 (Jan. 1963), 57–67, for an elaboration of this point.

This is the Schumpeterian view of profit. See Clemence Richard V. Doody Francis S. , The Schumpeterian System (Cambridge, Mass.: Addison-Wesley Press, Inc., 1950).

Spencer Milton H. Siegelman Louis , Managerial Economics (rev. ed.; Homewood, Ill.: Richard D. Irwin, Inc., 1964), pp. 1–41.

Bain Joe S. , Barriers to New Competition (Cambridge, Mass.: Harvard University Press, 1956).

For transportation thinking, see Daggett Stuart , Principles of Inland Transportation (4th ed.; New York: Harper & Brothers, 1955), pp. 285–298.

Clough Shepard B. , The Economic History of Modern Italy (New York: Columbia University Press), pp. 328–366.

This notion of resource allocation has been developed in economics for over one hundred years. See Due John F. Clower Robert W. , Intermediate Economic Analysis (4th ed.; Homewood, Ill.: Richard D. Irwin, Inc, 1961), pp. 65–292; 510–531, for a modern, careful exposition of this critical point.

See Cyert Richard M. Marsh James G. , A Behavioral Theory of the Firm (Englewood Cliffs, N.J.; Prentice-Hall, 1963), pp. 128–182, for a modem model of this type of profit feedback use.

Development of an operational replacement theory for this purely capitalistic device was badly needed after 1920, as Socialist and Communist economies began to function. But to date, no really effective (or even complete) resource allocation theory has yet been devised by Marxists. See Halm George N. , Economics Systems (New York: Holt, Rinehart and Winston, 1960), pp. 159–252.

Richman B. M. , Soviet Management: With Significant American Comparisons (Englewood Cliffs, N.J.: Prentice-Hall, 1965), pp. 241–252.

Richman B. M. Fanner R. N. , “The Red Profit Motive: Soviet Industry in Transition,” Business Horizons, VI:2 (Summer 1963), 21–28.

Halm , op. cit., pp. 161–164.

See Chestnut Harold , “Feedback Control Systems,” in Grabbe E. M. , ed., Automation in Business and Industry (New York: John Wiley & Sons, 1957), pp. 41–88, for a description of these control systems in engineering use.

Hathaway Dale E. , Government and Agriculture (New York: Macmillan, 1963), pp. 1–23.

Pegrum Dudley F. , Transportation: Economics and Public Policy (Homewood, Ill.: Richard D. Irwin, Inc., 1963), pp. 383–508.

Richman , op. cit., pp. 245–246.

Ibid., pp. 228–235.