"But I'm still bothered, chief, and I'm sure most people are still bothered, by the huge profits made by a few enterprisers. Surely such huge profits aren't necessary in order to get them to produce the right goods!"
"Your trouble, Adams, and the trouble of these people you speak of, is that you and they still persist in looking only at the winners of the biggest prizes. You assume these to be typical; you forget about the offsetting losses of the losers. Let's look at a lottery. Let's say that the man who runs the lottery sells 1,000,000 goldgrams worth of tickets, and hands out 900,000 goldgrams in prizes, keeping 100,000 goldgrams for himself."
"Very reasonable of him," said Adams sarcastically.
"I'm not interested in him for the moment," continued Peter. "I'm talking about the subscribers to the lottery. Collectively they must lose money."
"Collectively they lose 100,000 goldgrams."
"Right, Adams. But each individual who subscribes dismisses this collective result from his mind, if it ever occurs to him. He subscribes precisely because he hopes that he, individually, will be a winner. He is not interested in the fate of the other subscribers. Now if the people outside of the lottery looked only at the winners of the huge prizes and thought these were typical, and forgot about the huge mass of losers, and if they began to talk as if these winnings were made at their - the outsiders' - expense, they would be talking the same way you are talking about profits under our new free enterprise system."
"But aren't these big profits, chief, at the expense of workers?"
"You will usually find, Adams, that the enterprisers who make the biggest profits pay the highest wages. If the profits of the successful enterprisers are at the 'expense' of anybody, I should say that they were mainly at the expense of the unsuccessful enterprisers who made the poor guesses and misdirected labor and capital....And why should you assume that the high profits of the successful enterprisers are any more at the expense of their own workers than at the expense of the owners of their borrowed capital, or of the consumers?"
Adams seemed lost in thought.
...
These two quotes come from different conversations. I felt the need to mention that. BTW, Adams is uncomfortable with calling Peter Uldanov, dictator of Wonworld, by his first name, as but he feels comfortable with "chief." Once you've read the book, you can point out how the previous sentence is inaccurate, but then you'll also know why. Shh.
"...Then it wouldn't be very accurate, chief, to call your new system a 'profit' system?"
"Certainly not in a declining or even in a stationary economy. It is of course, a profit-seeking system. But then I suppose there is a sense in which all of us are seeking 'profit' under any conceivable system. We speak. We speak of spending a 'profitable' evening when we mean merely that we have enjoyed ourselves. We say that reading a book has been 'profitable' when we mean that we have been instructed by it. 'Profitable' action of any sort is merely action that achieves, or partly achieves, the end we are seeking, regardless of whether that end is self-regarding or not.... I can't understand this unpopularity of 'profit' except as envy of the successful. Why should there be any more stigma attached to the word 'profit' than to the word 'wage' or salary'? Why should one form of income be considered less honorable than another? Why should the people who are afraid to take risks begrudge the rewards of those who have taken them successfully?"
...
I mentioned that you can download the book for free from Mises.org, and that I'd tell you how to buy a copy after the excerpts. Actually, I forgot that I can make the title into a link on this blog, so that's what I've done.
I don't suppose the boys would mind if I posted the blurb from the Mises Print on Demand Store:
A novel by Henry Hazlitt, first published in 1951 and revised in 1966. The plot line explores the economic theories of capitalism and socialism. It begins in a fully socialist society in which the new leader begins to rethink the economic basis of the system. Slowly, piece by piece, he dismantles central planning and replaces it with a market system. All the while, the characters engaged in a Socratic-style discussion about the implications of money, exchange, ownership, markets, entrepreneurship, and more. Hazlitt was well equipped to be a fiction writer. He was literary editor of The Nation for 3 years and the successor to H.L. Mencken at the American Mercury. This novel is an excellent introduction to the problems of economic systems, and can be a great benefit to young people who are curious about the meaning of economic analysis. It is, in fact, suitable for all ages.
There was one other bit that I thought was awesome. Let's see if I can find it...
Oh, here! From page 290-1 of the pdf:
"Precisely, Adams. We must absolutely forbid coercive monopoly. Perhaps that was the central evil of state socialism. The state's monopoly of power, and its monopoly of production. But we must do more than fight monopoly and encourage competition. We must draft our laws in such a way as to raise the level of competition. We must so draft them that a man who seeks his personal profit cannot attain that selfish goal except by promoting the public welfare."
"And how are we going to do that?"
"We must forbid him, Adams, to do anything that injures the public welfare. Therefore we must forbid theft, fraud, deceit and all misrepresentation of goods. We must illegalize every form of force violence, extortion, intimidation, coercion. We must compel men to keep their contractual promises, to pay their just obligations and to fulfill their contracts. The corollary to private property is private responsibility. We must not allow a private industry to thrive at the cost of killing or maiming its workers, or injuring consumers of its products, or menacing the public health, or polluting public streams, or polluting the air, or smudging whole communities with the residue of smoke. We must force every industry to pay the costs of the injury it inflicts on the person or property of others."
That's actually the earliest of the excerpts. Perhaps it would be better salesmanship on my part to place that one first. But I'm just too lazy.
