Explainer Features of Capitalism

Profit Motive

In a capitalist system, much economic activity is driven by the desire to earn a profit – to bring in more money than is spent. The profit motive is thought to be a driving force, or even the driving force, that pushes people and businesses to produce goods and services in the first place.

Let’s say that a guy – John – decides to open a small coffee shop. John doesn’t open the shop simply because he enjoys coffee (though he might). He opens it because he believes he can earn more money selling coffee than it costs him to rent a space, buy equipment, and pay workers.

That expectation of profit shapes any number of decisions:

• What products to produce
• Where to locate a business
• What prices to charge
• Whether to expand or shut down

Some economic thinkers argue that the profit motive encourages innovation and efficiency. If someone invents a faster way to produce shoes, or a new app that millions of people want, or a new coffee drink that is all the rage, the potential for profit provides an incentive to take risks and invest time and money. The profit motive can, this line of thinking goes, actually benefit society more broadly. A business might develop a new kind of sunscreen in hopes of making a profit – and if this product is effective, it can promote health and safety for consumers.

Others point out that the profit motive can also create problems.

Businesses might cut corners – or workers’ wages – to reduce costs.

They might fail to account for environmental damage in pursuit of profit.

Or, they might devote enormous resources to producing and marketing luxury goods because they generate high profits…

…while essential services such as childcare remain underprovided because they are less profitable.

Others point out that the profit motive can also create problems.

Businesses might cut corners – or workers’ wages – to reduce costs.

They might fail to account for environmental damage in pursuit of profit.

Or, they might devote enormous resources to producing and marketing luxury goods because they generate high profits…

…while essential services such as childcare remain underprovided because they are less profitable.

Others point out that the profit motive can also create problems.

Businesses might cut corners – or workers’ wages – to reduce costs.

They might fail to account for environmental damage in pursuit of profit.

Or, they might devote enormous resources to producing and marketing luxury goods because they generate high profits…

…while essential services such as childcare remain underprovided because they are less profitable.

In other words, when profit is the central goal, other values – like environmental sustainability or community well-being – may take a back seat.