Blackwell Reference Online

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In popular usage, profit is loosely associated with a “markup” of merchandise or a rate of return on capital. The average person typically thinks of profit as what is left over from revenues after all the bills have been paid. A normal profit is often defined as the implicit cost of the resources contributed by the owners. A more technical definition of profit becomes quite elusive, and probably no concept in economics is used with such a wide range of meanings. The history of economic thought regarding the word “profit” is important to the field of business ethics. What generally makes the issue of profit an ethical issue are distributional questions such as “Who gets to profit?” and “How much do they deserve?” Answers to these questions depend on being able to determine the source of profits. Many factors enter into the profitable business venture: available capital, competent management, entrepreneurial ideas, skilled labor, market advantage, and sheer luck. Ethically speaking, profit should be distributed to the most deserving source, and economists have argued for 200 years over the nature of profit. Adam Smith was one of the first to articulate a theory of profit. He argued that social classes were partly defined by their source of income: landlords collected rent, laborers received wages, and businessmen earned profits. Smith was one of the first to see that profit was a ... log in or subscribe to read full text