There is a debate in many countries about the morality of profit seeking, especially in such essential industries as energy, water, communications, education, and health care. Is it fair to profit from a necessary service and perhaps deny the service to those who can’t pay? I recently read an old article (in The Economist 12/9/95) trying to explain how profiteering fat cats are not robbing the poor but rather enriching the whole economy through their seemingly selfish actions, and this got me thinking.

In Britain and many other European countries, profit is understandably looked upon as a somewhat dirty thing. When companies announce their profits, high-minded journalists often pounce, announcing to the world the enormous sums of money (often calculated in pounds per minute to further dramatize the idea) that the lavishly rich companies have managed to pilfer from the hard-working common man. Even more disturbing to the average newspaper reader are the types of companies that are often among the top corporate thieves: companies that supply the community with water, electricity, health care, and other necessary services. Shouldn’t they be working for the best interests of the community rather than themselves?

Not necessarily. Although Americans are used to the idea of a profiteer behind every product, Europeans feel uneasy about utilities making money, and they are mortified by the idea of companies providing health care and education out of greed. As immoral as it may seem, the Americans have it right, and it all has to do with the flawed European perception of profits. A little economic reasoning shows that profits serve much greater functions than paying some tycoon’s rent for the most expensive penthouse in town. It is true that the most important aspect of profits is how they act as a reward. However, instead of the popular European perception that profits are rewards for swindling the public, Americans see profits as rewards for risk-taking, technological innovation, and efficiency. Without profits, there would be no incentive to investing money in risky propositions. There would be no reason to upgrade to faster machines or learn how to make things more cheaply. Profits push the economy in a modern, competitive, efficient direction, and allow the companies who help the economy grow to share in the reward.

Critics point out that utilities are often natural monopolies, companies that by their very nature have a monopoly. Having more than one company delivering power (which would mean having more than one set of power lines) is very inefficient. If profits are the only goal, why would the one power company go out of its way to string power lines to rural areas where maybe only a few people can pay for the service? This is why governments are so heavily involved in the operations of such companies. Governments can allow monopolies, as long as they are heavily regulated. This explains why governments need to meddle with companies that provide health care, education, power, water, and other necessary items. Without any incentive except profits, companies in these fields would most likely harm the community rather than help it. Government interference makes certain that the enterprise is both profitable for the company and the community.

Whenever possible, however, it is advantageous for the government to play as small a role as possible. When a few smaller competitive companies can replace state-sponsored monopolies, the government should make sure that the competition is encouraged and that profit is the main incentive. This is the best way to ensure that the services provided will be cheap, modern, and efficient. Whereas pricing restrictions and numerous regulations are needed for monopolies, competition and profits give the best results because they allow the natural drive to earn rewards to fuel the bettering of the economy.

Although it may seem immoral to make money by exploiting people’s needs, these needs will only be best met when someone is exploiting them.

Is it fair to profit from a necessary service and perhaps deny the service to those who can't pay?

It's rather sad to me that anyone would see the denial of something basic to a person just because of money as anything other than a bad thing.

Once upon a time, there were settlements and cities in some areas, but there was plenty of open land. Someone could decide to "opt out" of the "society" and go live on their own. Live off the land. Hunt, gather, and scavenge for food, use lakes and rivers for water, and just generally live the way it had been done by various species for millions of years.

That's no longer the case. You CAN'T opt out. You can't live off the land, because it's been decided that land that was here for billions of years before people suddenly is owned by this relatively new species who can determine who can and can't use it, and anything on it.

So if someone can't get along well in the society, well, they can't leave it. If someone can't pay for food, they can't just go out and find some, because it's already owned by other people. And in many places, they can't even do that with water because some megacorp was there first and used it as a waste dump. (Yes I'm a silly tree-hugger because I don;t think a megacorp has the right to turn a lake into a sludge pit)

So now that we've taken away the right to find food and water, and even shelter (find me a cave that isn't owned and a public or private park, or a place where someone can chop down trees and make their own shelter without being arrested), we're going to try and find a way to feel like we're doing the right thing by denying it to people?

It seems only a step away from doing the same with oxygen - either allowing the atmosphere to be owned, or be so polluted that we have to buy air to breath, and letting people suffocate if they can't afford it.


That would be fine if we knew that profit as incentive would always encourage them to provide the best and most efficient product. But we all know that when the goal is money, the most effective way to get that money becomes the method used, and if that means manipulating the market via intentional shortage, inferior services, or the like so as to maximize profit, then that's how it's done.

I see it claimed over and over that a free market is always the most efficient, that it produces the best results. Heck, Adam Smith/Ayn Rand worshipping libertarians seem to use it as a mantra. But honestly, I've only seen it as an assertion, nothing else. I still believe that it's only the most efficient and best way to generate profit, and that only part of the time will any side effects like the quality of the product/service produced also happen to be the best, and that other times the public good is just another casualty, and with a public utility, that doesn't seem acceptable.

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