Profit motive

In economics, the profit motive is the motivation of firms that operate so as to maximize their profits. Mainstream microeconomic theory posits that the ultimate goal of a business is to make money. Stated differently, the reason for a business’s existence is to turn a profit. The profit motive is a key tenet of rational choice theory, or the theory that economic agents tend to pursue what is in their own best interests. Accordingly, businesses seek to benefit themselves and/or their shareholders by maximizing profits.

As it extends beyond economics into ideology, the profit motive has been a great matter of contention.

The profit motive ensures that resources are being allocated efficiently. For instance, Austrian economist Henry Hazlitt explains, “If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself." In other words, profits let companies know whether an item is worth producing. Theoretically in free and competitive markets, maximizing profits ensures that resources are not wasted. Free and competitive markets rarely exist in reality, so market intervention is required to ensure maintenance of the profit efficiency of an economy. The profit motive is a good of value to the economy. It is needed to provide incentive to generate efficiency and innovation. However over-remuneration of the profit motive creates profit inefficiency.

The majority of criticisms against the profit motive center on the idea that profits should not supersede the needs of people. Michael Moore’s film Sicko, for example, attacks the healthcare industry for its alleged emphasis on profits at the expense of patients. Moore explains:

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