In a very short essay, Michel de Montaigne argues “That the Profit of One Man is the Loss of Another,” I reproduce it in its entirety, from pp. 239-40 of this edition:

“DEMADES the Athenian condemned one of his city, whose trade it was to sell the necessaries for funeral ceremonies, upon pretence that he demanded unreasonable profit, and that that profit could not accrue to him, but by the death of a great number of people. A judgment that appears to be ill grounded, forasmuch as no profit whatever can possibly be made but at the expense of another, and that by the same rule he should condemn all gain of what kind soever. The merchant only thrives by the debauchery of youth, the husbandman by the dearness of grain, the architect by the ruin of buildings, lawyers and officers of justice by the suits and contentions of men: nay, even the honor and office of divines are derived from our death and vices. A physician takes no pleasure in the health even of his friends, says the ancient Greek comic writer, nor a soldier in the peace of his country, and so of the rest. And, which is yet worse, let every one but dive into his own bosom, and he will find his private wishes spring and his secret hopes grow up at another’s expense. Upon which consideration it comes into my head, that nature does not in this swerve from her general polity; for physicians hold, that the birth, nourishment, and increase of every thing is the dissolution and corruption of another:—

“For, whatever from its own confines passes changed, this is at once the death of that which before it was.”

The profit of one man, however, is not the damage of another. Hunger and thirst do not automatically translate into profits for the butcher, the baker, and the brewer. These modest entrepreneurs only profit when they are let go to relieve others’ hunger and thirst.

In the aftermath of the Texas freeze and at this stage in the Covid-19 pandemic, two recent examples come to mind. First, I saw at least one headline talking about how much money Dallas Cowboys owner Jerry Jones was making as demand for natural gas surged. Second, people have pointed out that drug companies are making billions of dollars from Covid vaccines.

Before we rush to condemn capitalist cupidity, we should think a little harder. Profit is not a superfluous charge, a tax of sorts made possible by capitalists’ greed and “economic power.” In a commercial society, firms earn profits by exercising successful judgment about the who, what, when, where, why, and how of production.

I saw this illustrated nicely in an episode of the 2015 BBC series Dickensian that my wife and I watched recently. The scene is a shareholders’ meeting for the Havisham Brewery, which was willed to Amelia Havisham by her late father. Miss Havisham proposed moving the brewery’s malt house to cut transportation costs. One of the shareholders raises an objection, commending Miss Havisham for her prudence but noting that the malt house is a fire hazard. Miss Havisham replies by explaining new production techniques that eliminate this concern. The shareholders ultimately agree with Miss Havisham’s assessment and approve of the changes she wants to make.

It is a mistake to think profits will flow automatically. Miss Havisham might be wrong about the new construction methods. The brewery might have a hard time insuring their new endeavor. They might run into any number of complications they could have reasonably foreseen and that perhaps they could not have reasonably foreseen. Any profit Miss Havisham and her shareholders would earn would be a reward for their good judgment. Any losses they might incur would be a punishment for their poor judgment.

Of course, firms can also earn profits in a political society by obstructing competition and securing special privileges from the state. I doubt this is what many people have in mind, however, when they condemn Pfizer and Jerry Jones for profiteering.

One of the problems with what Randall Holcombe calls Political Capitalism (which I review here) is that government-granted privileges allow firms to privatize the profits and socialize the losses from their undertakings. Profiteering’s critics want to reverse this by completely socializing the profits and privatizing the losses. At some point, I’m sure Pfizer and Jerry Jones will choose poorly and lose a ton of money on an ill-advised venture. I doubt their critics will be lined up to bail them out (though I have no doubt they will have lobbyists around the world lining up to ask for bailouts). Nor, for that matter, did I see many of the same critics excoriating consumers for “taking advantage of” or “gouging” oil companies near the beginning of the pandemic when high supply and suddenly-lower demand meant lower gas prices. I went a few months without buying gas; indeed, I’m pretty sure I went a few weeks at a time without cranking my car.

Speaking in vague generalities about what people need—food, clothing, shelter, water, heat—is pretty easy. Getting the specifics right is a lot harder. Prices help us bear one another’s burdens. In a lot of cases, market-determined profits and losses help us determine which burdens are biggest. As I wrote recently for AIER, we aren’t choosing markets or civil society. You don’t ask for someone’s address so you can send them an invoice when you help them push their car back on the road during a snowstorm. You cook dinner for friends who just had a baby. You empty out the jukebox when you hear your friend George is in trouble. Civilization would not be possible without these little acts of kindness.

Civilization also wouldn’t be possible without the signals markets send and that help people assess ways of getting the right amounts of the right kind of water or fuel to millions of strangers during a once-in-a-generation emergency. Profits and losses collapse a lot of complex information into easy-to-interpret signals saying “do more of this” or “do less of that.” It is not exploitation; rather, profit is a reward you earn for helping strangers in ways that waste no resources and leave them available for other strangers. Are firms earning “exorbitant” profit selling natural gas and Covid vaccines? I doubt it. If anything, people scrambling to get their hands on artificially-short supplies indicates that they aren’t making enough.