|We Live in a Money and Profit Economy
We do not live in a simple world. How far from simple the economic world of our time has become, we can best comprehend from a study of the day-by-day life of a pioneer, such as Knut Hamsun has given us in a remarkable book, The Growth of the Soil. Here we have a story of the simple, self-sufficient, economic life of a man who stakes out a claim in the virgin forest and proceeds, by the sweat of his brow, to wrest a living from Nature.
Such a man never need be idle for lack of work. He clears the land by his own toil; he grows potatoes and eats them; he builds a shed and uses it for his cow; he raises a heifer and barters it for a cart. Whatever he manages to produce beyond his daily needs, he himself hauls to the local market. He is his own employer, his own carrier, his own salesman. He need not doubt -- in fact, it does not occur to him to doubt -- that the harder and the more intelligently he works, the more he has to consume. And it is plain that when, instead of consuming the heifer, he exchanges it for a cart, he is just that much ahead: he actually has the cart. Read Full Article
Consumers' Freedom of Choice
Profits and losses, then, are due mainly to uncertainties that are inherent in the nature of business. Chief among these uncertainties are those that are inherent in human nature. For, since the end of business enterprise is consumption, production is regulated by distribution; and distribution in turn is regulated by the flow of money through consumers' markets. But this flow of money is directed and conditioned solely by the daily exercise of freedom of choice on the part of millions of consumers.
What will these consumers want? How much will they buy at a given price? When will they buy? Where will they buy? Nobody can answer these questions in advance, partly because nobody can forecast the vagaries of human nature. This uncertainty concerning the ways in which buyers will make use of their freedom of choice is the chief risk of business. It is, therefore, chief among the causes of profit and loss. This uncertainty is due largely to three options enjoyed by the holder of money. He can decide when he will buy, what he will buy, and where he will buy.
He has freedom of choice concerning the time of spending his money. He may withhold it from circulation as long as he pleases; at least he may withhold whatever he does not need to pay taxes and to keep him alive. Under a system of barter, on the other hand, purchasing power can be withheld only in the form of commodities -- sugar, wool, eggs, lumber, raspberries, and the like. The possibilities of profitably keeping this kind of purchasing power out of the market are rigidly limited. It is mainly on account of a medium of exchange, therefore, that buyers now have a wide range of choice with respect to the time of using stored-up purchasing power. This timefactor, which money has introduced into business, must be measured and reckoned with. Read Full Article