Wednesday, August 12, 2015

Profit is a price paid for efficiency

Hat tip to Don Boudreaux for highlighting this pithy quote from 114 of the 5th edition (2015) of Thomas Sowell’s Basic Economics.
While capitalism has a visible cost – profit – that does not exist under socialism, socialism has an invisible cost – inefficiency – that gets weeded out by losses and bankruptcy under capitalism. The fact that most goods are more widely affordable in a capitalist economy implies that profit is less costly than inefficiency. Put differently, profit is a price paid for efficiency.
No opportunity for profit, no likelihood for efficiency.

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