PRINCIPLE 6

Profit = Economic Value + Social Value

In brief: A firm’s profit represents the ability to sell a good or service at a higher price than what it costs to produce. Production and consumption, however, are more than merely technical decisions; they encapsulate the total value (economic and social) that is added by the firm.

A significant reason for the supremacy of market forces in delivering value, as discussed in Principle 5, is the pivotal role played by profit:

The existence of a profit is an indication prima facie that the business has succeeded in producing something which consumers want and value. . . . [A] business that fails to make an adequate profit is a house of cards. It cannot grow or provide more jobs or pay higher ...

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