Question

Consider the following quote in Economics: “Businesses should exist for reasons beyond just making a profit. We need red blood cells to live (the same way a business needs profits to live), but the purpose of life is more than to make red blood cells (the same way the purpose of business is more than simply to generate profits).” Surely, this quote is well intended, but this quote also surely misses a key part of the invisible hand idea. In particular, explain why a business must exist for reasons beyond just making a profit, as though it is guided by an invisible hand to have a conscience (and do good for society) that is perhaps not intended.

Answer 1

The idea of purpose and guidance towards something optimistic and positive , is not new to the world , as for centuries people are trying to identify the purpose of why the humans have ended up with such gift of brains . The area of work for humans, as the civilization has grown , is not just limited to survival but also a thrive to grow and flourish the idea of humanity . The nature of humans although , can sometimes be limited to personal growth and this is where the social structure of capitalism finds it's roots.

Comparing the buisness growth with red blood cell is quite fascinating. The body needs red blood cell and the business needs profits to run. This is comparing the bare minimum necessities for both business and body to survive. Just like how the body doesn't work with absence of red blood cells , without profits how can a company , not just grow but also flourish and expand from its initial horizons.

But just like how the purpose of body is not just to survive , but also contribute it's share towards the societal development, the role of a firm is not specific only to make it's own profits but provide the society with goods making their life easy or just convenient. Example to such business are that of alcohol manufacturing units, although they are an all time profit bearing business, but the state tries to discourage it's use, although these units acting as the most taxable source for generating revenue. If we study into the economics of it, this business only causes profits but actually it is harmful to the man kind.

The business must focus on generating their profits out of goods which are useful like technology, packed food at lower prices etc, the goods which can actually bring good to society. Otherwise only profit making motives, in long term can lead to damage which is not repairable for the profit makers only.