On Profit
In his economic theory, Karl Marx defines profit as the difference between the sale price of a product and the total cost of manufacture of the product, including fixed costs and worker wages. Because of his theory of labour value, he wants the workers to be paid all of the difference between the sale price and production costs, and regards the capitalist owner’s acquisition of the profit as exploitation.
Whether that is a reasonable position is not the subject of this essay. However, this association of profit with exploitation is a recurring theme across many political and economic writers. The very idea that a person or enterprise can sell something for more than it cost to make it, is seen as morally suspect. The existence of companies whose only purpose is to extract profits is cited as the cause of numerous ills, not least of which is the destruction of the environment.
Underlying this perspective is a misunderstanding of the nature of value, which is that different people can and do value the same thing in different ways.
Suppose I want to buy a pair of shoes. Several kinds of shoes are available at different prices. I buy the pair which best fits my needs, and let’s say the price is £40. Who has profited here?
We can assume the shoe shop has profited, because they are unlikely to be selling shoes at a price which makes them a loss, at least not for long. Perhaps they bought the shoes from their wholesaler for £25, along with hundreds of others. Across many shoe sales, the shoe shop can afford to pay their staff and their wholesaler, and still come out ahead.
What about me? Did I profit? We can assume that I was better off after buying the shoes, because if I was not going to be better off, then I would not have bought the shoes. I did buy the shoes, therefore I believed that I would be better off for having bought them. I profited from buying the shoes.
The shoe shop valued the shoes at less than £40 and thus made a profit by selling them at £40. I valued the shoes at more than £40 and thus made a profit by buying them for only £40. Both parties to this sale made a profit and were better off, in their own estimation, after the sale. This was not a zero-sum game.
Did anyone get exploited in this transaction? Maybe somewhere off down the production chain is someone making shoes in a sweatshop. Maybe I am a fashion victim getting exploited by consumerist magazines and influencers telling me that last year’s shoes are just no good anymore. But is that relevant to this specific sale transaction?
If the freely chosen sale occurs, at a price between the value to the seller and the value to the buyer, then both sides profit.
Going back to Marx’s factory workers, we can consider the choice of each worker to be employed in the factory. Each worker presumably thought they would be better off, if they exchanged their time and energy for their wages, by working in the factory. If they didn’t think they would be better off, then they would have done something else. The factory workers also profited.
Now of course, we can debate whether the factory workers should have received a larger share of the income from the factory. We can enquire where the factory owners got the money to build the factory, and whether that capital was acquired in a legal or moral fashion. We can examine the market value of unskilled or semi-skilled labour, and enumerate what other employment options were available.
But none of that detracts from the fact that the factory workers also profited from their employment. Because it is not the case that for you to profit, I must have lost. Profit is not a zero sum game.
On Competition
In a free market economy, the dynamic between companies is often presented as a competition. So for example, each of the companies which manufacture or sell shoes is envisaged to be competing with each other for market share, and always trying to outdo each other on price or quality or comfort or fashion. They will naturally be seeking productivity enhancements in design and manufacture, and attempting to push down their costs.
This analysis of competition works when considering just one product, but neglects the wider dynamic of the free market which is almost entirely co-operative.
The principle of the division of labour asserts that production is most efficient where each participant (company or person) does one thing, and does that expertly, rather than every participant (company or person) attempting to do everything. The shoe manufacturer does not compete with the bus company or the ice cream maker or the football team or the hairdressing salon or the solicitor or the hardware store or the garden maintenance contractor or the electrician or the plumber or the computer programmer or filmmaker or the dressmaker or the baker or the author or the musician. None of them compete with each other. Instead, they, or shall I say, we all co-operate with each other.
Because we are all different, having different skills and different inclinations, we can co-operatively produce far more goods and services, than if we each tried to do everything ourselves. Whether at the level of companies or at the level of individuals, we act co-operatively rather than competitively. Of course, we might negotiate on price for the things that we want, but most of the time we can find a mutually agreeable price. We might not have enough money to buy everything we want, but we can find usually find a tolerable price for everything that we can afford.
One we recognise that profit is not a zero sum game, we can each improve our material position without having to lie or cheat or steal. Trade is fundamentally about co-operation not competition.
RJ7: Feb 2026