Free «Role of Profits in the Economy» Essay Sample

The concept of profits occupies a central place in modern discipline of economics. The aim of this essay is to examine its significance, as well as to outline the implications of Biblical view on business profits.

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Profits may be operationally defined as the excess of revenues from the good’s sales over the operational costs incurred by the firm (Gwartney, Stroup, Sobell, & Macpherson, 2011, p.64). In such interpretation, an entrepreneur’s profits is inexorably connected with the former’s ability to satisfy the customers’ expectations, as well as to provide the sellers with the motivation necessary to agree to the respective opportunity cost of the good (Gwartney, Stroup, Sobell, & Macpherson, 2011, p.65). Accordingly, profits may be construed as the reward for the firm’s resource maximization.

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In particular, such viewpoint has been corroborated by Baumol (1990), with the latter’s emphasis on “productive” entrepreneurship as an activity aimed at innovations and expansion of the society’s productive capacities. Baumol (1990) arrives at the conclusion that entrepreneurs’ undertaking of risks and fulfillment of productive functions generally increase society’s opportunities and thus may be taken as the ground for entrepreneurial profits rewards. This point of view is generally in agreement with the perspective provided in Gwartney, Stroup, Sobell, & Macpherson (2011).

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Real world examples of such productive entrepreneurship may include the efforts by such companies as Apple, Google, or Microsoft that are aimed at providing the widest range of services to their customers through the respective intellectual products. Their innovation-oriented approach leads to these companies securing the largest share of the market, as their customers agree to the opportunity cost involved. In addition, these companies evidently maximize the productive resources under their guidance.

The Biblical perspective on profits emphasizes the transience and limited nature of the profit-making activities. While Deuteronomy 8:18 (New International Version) mentions the “ability to generate wealth” as the God-given gift, Luke 12:21 (New International Version) warns that “whoever stores up things for themselves” may not be “rich towards God”. Thus, the key criterion for evaluating the profit making activity in the Scriptures seems to be centered not on its nature per se, but on its correlation, or lack thereof, to God’s wishes and desires.

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