Profits and Morality.

Are profits morally justifiable? This is the focus of the collection of essays edited by Cowan and Rizzo stemming from a 1990 symposium on profits and morality. The editors author an introductory chapter, which is followed by five essays, each of which approaches the issue in a somewhat different manner. Three of the essays address profits in the context of ethics while the other two essays discuss profits, and how they originate and function. One aspect of the book that many readers will find appealing is its interdisciplinary nature, with contributions representing economics, philosophy, and law.

Cowan and Rizzo's introductory chapter is both useful and informative in setting forth the issues at hand and portraying some of the various points of view for and against profit making. Profits can be interpreted in different ways depending on the type of profit being analyzed - normal profit, supernormal profit, rents, or windfall profit. In addition, there are various moral premises from which to analyze the question of the justifiability of profit. While there are clearly many ethical positions from which to argue the morality of profits, the editors are quick to point out that this is far from an exhaustive study, but that the arguments for and against profit making are equally numerous. Cowan and Rizzo stress that typical defenses of profits such as free trade and entrepreneurship must be considered more carefully since, for example, profits following an entrepreneurial activity may in fact be windfall profits, making the claim of the entrepreneur to the profit weaker. Hence, both the intent and beliefs of the entrepreneur must be considered in evaluating the morality of profit stemming from entrepreneurial activity.

Kirzner's chapter takes an interesting look at the early theories of profit of Clark, Hawley, Knight, and Schumpeter, all of which sketch out the disequilibrium nature of profit. From his examination of the earlier theories, Kirzner turns to what he calls the arbitrage theory of profit espoused by Mises, where profit is simply the difference between the price at today's market and tomorrow's market. Thus, like unexploited or unowned resources, those who identify and act upon such profit opportunities are entitled to the reward in accord with the finders - keepers ethic.

Narveson follows with an ethical treatment of profit, defining profit as the net monetary gain from free exchange that is voluntary from the perspective of desert. The nature of desert is discussed in contrast to entitlement and then applied to the issue of profit. Narveson maintains that if one is entitled to profit and the entitlement can be defended, then the profit is also defensible. Whether the profit is deserved is irrelevant if one is entitled to it. However, one can be both entitled and deserving of profit if the profit is acquired by what are considered normal, legitimate means. Here, the criterion is not only identifying a good venture but also being first to satisfy customers with the product and doing so at a reasonable price.

Hammond, like Kirzner, analyzes the nature and function of profits, but uses a different ethical measurement to do so. Hammond relies on the Pareto principle with the added stipulation of having no extremes of poverty to analyze whether or not profits improve the allocation of resources, i.e., whether or not a Pareto improvement occurs. With the existence of informational asymmetries, profit seeking is morally undesirable in most instances since it is often at someone else's expense, thereby violating the no-poverty proviso. This is due to the fact that while trickle-down benefits might reach the general population due to the pursuit of profit, enhancing profit is often done at the expense of inefficient enterprises being shut down, people losing their jobs, and causing hardship, according to Hammond. An interesting discussion of libertarianism concludes Hammond's essay.

A detailed attack of Gauthier's view that the confiscation of rents is morally justified is the subject of Mack's essay in Chapter 5. Mack argues that rents (pure profits) are the property of their owner when they arise via putting one's talents or knowledge to use. Like the other essays with an emphasis on ethics, Mack employs a simple definition of profit to be measured by his concept of the ethical yardstick.

Cooter and Gordley complete the book with their essay which has a focus on ethics. Cooter and Gordley argue indirectly in favor of profits via the promotion of what they classify as "merit goods," namely cultural activities such as the arts, education, and literature. Herein profits are defined as pure rents (income obtained by owning something) and are not derived from necessarily doing anything. In the sense that pure rents are unearned, the morality of such profit is determined by how it is spent. Thus the problem being examined by Cooter and Gordley is to characterize ways to allocate pure rents to achieve cultural excellence. The two primary means by which individual donors support cultural activities are either by contributing to current expenditures on activities or to passively endow institutions, which can promote excellence over several generations. The latter approach is superior, according to Cooter and Gordley, and they argue in favor of endowing private institutions dedicated to cultural activities to ensure excellence. In this light, profits are justified if they are used to endow such institutions.

This collection of essays offers up plenty to ponder about profit, its nature, function, and justification. While some essays will be more to the liking of economists than others, read in its entirety, the collection presents an enjoyable introduction to the various points of view in the debate of the morality of profit. The editors are true to their word in stating that this is far from a complete work on the subject but it will undoubtedly provide readers the opportunity to argue as well as agree with the some of the authors as they proceed through this interesting collection of essays.

Audrey B. Davidson University of Louisville