Difference between revisions of "Gain from effort vs. profit"
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==About== | ==About== | ||
| − | [[ | + | [[Gain from effort]] and [[profit]], though often [[conflated]], are in actuality two rather different things. |
Economic gain involves an expenditure of value in the hope of creating greater value. While such expenditures are often described as "investment", and the resulting gain as "profit" (and understandably so, since the psychology is in some ways similar), these terms are in fact not applicable: | Economic gain involves an expenditure of value in the hope of creating greater value. While such expenditures are often described as "investment", and the resulting gain as "profit" (and understandably so, since the psychology is in some ways similar), these terms are in fact not applicable: | ||
Latest revision as of 00:16, 28 May 2019
About
Gain from effort and profit, though often conflated, are in actuality two rather different things.
Economic gain involves an expenditure of value in the hope of creating greater value. While such expenditures are often described as "investment", and the resulting gain as "profit" (and understandably so, since the psychology is in some ways similar), these terms are in fact not applicable:
- Investment requires a socially-enforceable contract to repay a loan.
- Loaning requires social recognition that the owner of the loaned value continues to own it even while it is "invested".
- Profit requires social recognition that the owner of the loaned value is entitled to all of the economic gain from its "investment".
Economic gain does not require any of these things. In the examples given here, for example, it merely makes use of known natural laws or behaviors to produce net-positive benefit. One or more entities may be held responsible if the project does not do as well as expected, but nobody would be expected to "repay" the expended value as if it were merely a "loan".