Analyzing Making Profit A Public Good

1. Abstract

This paper considers profit as a public good, where economics is aligned with social welfare. Here the usual notion of  “profit- benefiting the private interests” is being examined from a different point of view. This paper emphasizes the theory of shared value, bringing benefits to society in the long term. In the course of the analysis, a simple and intuitive version is presented, and some of the problems confronting empirical attempts to measure the distributive incidence of public goods are resolved. Assessing the extent to which various public goods should be provided, determining how the provision of public goods affects the desirability of income redistribution, and providing a meaningful description of the distribution of well-being. The objective is to identify how the distributive incidence of a public good affects the extent to which the good should be provided. This paper takes the position that businesses should take the initiative in making the modern economy more inclusive. To achieve this ideal, the traditional goal of profit maximization or the maximization of shareholder wealth, in the case of publicly held companies, needs to be re-conceptualized in terms of creating value for all groups that contribute to the process of value creation.

Keywords: public good, social enterprise, profit-maximization, corporate social responsibility, free markets, social welfare, welfare capitalism.

2. Introduction 

The COVID-19 pandemic, refugee crises, and climate change have exposed the need for public goods that are likewise global, and the world rendered even more unequal therefore a new language of “prosperity” and “welfare” will have to be explored. What are public goods, and how can they be supplied globally? The government plays a significant role in providing goods such as national defense, infrastructure, education, security, and fire and environmental protection almost everywhere, often referred to as “public goods”. Public goods are of economic and developmental interest because of their provisioning, to varying degrees, essential to the smooth functioning of society economically, politically, and culturally and because of their close connection to problems concerning the regulation of externalities and the free-rider problem. Without infrastructure and their protection goods cannot be exchanged, votes cannot be cast, and it would be harder to enjoy the fruits of cultural production but due to their connection to externalities and the free-rider problem, the provision of public goods raises profound economic and ethical issues. 

Rather than serving as a means to achieve social welfare, profit has always been the primary objective of business practice resulting in constraints on the practice of prosocial business management. However, there has been a marked shift in the way people view businesses after the 2008 global financial crisis. Businesses are beginning to be thought of as profit-maximizing entities while this is true for a few entities, most companies work to create value for not only their shareholders but also for their customers and employees. The movement now in capitalism is addressing societal challenges through market-based solutions. Companies are creating measurable business value by identifying and addressing social problems that intersect with their business. This is what is termed ‘Creating Shared Value’ (CSV).

3. Profit as a Public Good

In a welfare economy, profit appears when production and distribution are organized by maintaining commodity relations. In a capitalist economy, individuals or companies own the capital assets. The general market’s supply and demand govern how commodities and services are produced. In this system, businesses would manage the markets by competing with one another to captivate the market, with the government taking a backseat. Capitalist society is a profit-maximizing society, so their involvement in important industries will hamper the basic services that are offered to common people at affordable prices. If big players get involved in rendering basic services which were offered by the government then they can only be afforded by the wealthy and affluent members of the society. Having said that that, both public and private sectors are important for the growth and development of the nation but seeing the size of the population, the literacy rate of citizens, and the unequal distribution of income it can be said that the government should have more control over the assets of the nation to overlook that the resources are fully utilized and equally distributed among citizens.

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Author: Shivalika Pateriya