The Ethics of Entrepreneurship and Profit by Hans-Hermann Hoppe, Ludwig von Mises Institute
In the most fundamental sense we are all, with each of our actions, always and invariably profit-seeking entrepreneurs.
Whenever we act, we employ some physical means (things valued as goods) — at a minimum our body and its standing room, but in most cases also various other, “external” things — so as to divert the “natural” course of events (the course of events we expect to happen if we were to act differently) in order to reach some more highly valued anticipated future state of affairs instead. With every action we aim at substituting a more favorable future state of affairs for a less favorable one that would result if we were to act differently. In this sense, with every action we seek to increase our satisfaction and attain a psychic profit. “To make profits is invariably the aim sought by any action,” as Ludwig von Mises has stated it. (Mises, 1966, p. 289)
But every action is threatened also with the possibility of loss. For every action refers to the future and the future is uncertain or at best only partially known. Every actor, in deciding on a course of action, compares the value of two anticipated states of affairs: the state he wants to effect through his action but that has not yet been realized, and another state that would result if he were to act differently but cannot come into existence, because he acts the way he does. This makes every action a risky enterprise. An actor can always fail and suffer a loss. He may not be able to effect the anticipated future state of affairs — that is, the actor’s technical knowledge, his “know how” may be deficient or it may be temporarily “superseded,” due to some unforeseen external contingencies. Or else, even if he has successfully produced the desired state of physical affairs, he may still consider his action a failure and suffer a loss, if this state of affairs provides him with less satisfaction than what he could have attained had he chosen otherwise (some earlier-on rejected alternative course of action) — that is, the actor’s speculative knowledge — his knowledge of the temporal change and fluctuation of values and valuations — may be deficient.
Since all of our actions display entrepreneurship and are aimed at being successful and yielding the actor a profit, there can be nothing wrong with entrepreneurship and profit. Wrong, in any meaningful sense of the term, are only failure and loss, and accordingly, in all of our actions, we always try to avoid them.
The question of justice, i.e., whether or not a specific action and the profit or loss resulting from it is ethically right or wrong, arises only in connection with conflicts.
Since every action requires the employment of specific physical means — a body, standing room, external objects — a conflict between different actors must arise, whenever two actors try to use the same physical means for the attainment of different purposes. The source of conflict is always and invariably the same: the scarcity of physical means. Two actors cannot at the same time use the same physical means – the same bodies, spaces and objects – for alternative purposes. If they try to do so, they must clash. Therefore, in order to avoid conflict or resolve it if it occurs, an action-able principle and criterion of justice is required, i.e., a principle regulating the just or “proper” vs. the unjust or “improper” use and control (ownership) of scarce physical means.
Logically, what is required to avoid all conflict is clear: It is only necessary that every good be always and at all times owned privately, i.e., controlled exclusively by some specified individual (or individual partnership or association), and that it be always recognizable which good is owned and by whom, and which is not. The plans and purposes of various profit-seeking actor-entrepreneurs may then be as different as can be, and yet no conflict will arise so long as their respective actions involve only and exclusively the use of their own, private property.
Yet how can this state of affairs: the complete and unambiguously clear privatization of all goods, be practically accomplished? How can physical things become private property in the first place; and how can conflict be avoided from the beginning of mankind on?
A single — praxeo-logical — solution to this problem exists and has been essentially known to mankind since its beginnings — even if it has only been slowly and gradually elaborated and logically re-constructed. To avoid conflict from the start, it is necessary that private property be founded through acts of original appropriation. Property must be established through acts (instead of mere words or declarations), because only through actions, taking place in time and space, can an objective — inter-subjectively ascertainable — link be established between a particular person and a particular thing. And only the first appropriator of a previously un-appropriated thing can acquire this thing as his property without conflict. For, by definition, as the first appropriator he cannot have run into conflict with anyone in appropriating the good in question, as everyone else appeared on the scene only later.
This importantly implies that while every person is the exclusive owner of its own physical body as his primary means of action, no person can ever be the owner of any other person’s body. For we can use another person’s body only indirectly, i.e., in using our directly appropriated and controlled own body first. Thus, direct appropriation temporally and logically precedes indirect appropriation; and accordingly, any non-consensual use of another person’s body is an unjust misappropriation of something already directly appropriated by someone else.
All just property, then, goes back directly or indirectly, through a chain of mutually beneficial — and thus likewise conflict-free — property-title transfers, to original appropriators and acts of original appropriation. Mutatis mutandis, all claims to and uses made of things by a person who had neither appropriated or produced these things, nor acquired them through a conflict-free exchange from some previous owner, are unjust.
And by implication: All profits gained or losses suffered by an actor-entrepreneur with justly acquired means are just profits (or losses); and all profits and losses accruing to him through the use of unjustly acquired means are unjust.
The Ethics of Entrepreneurship and Profit: II
This analysis applies in full also to the case of the entrepreneur in the term’s narrower definition, as a capitalist-entrepreneur.
The capitalist entrepreneur acts with a specific goal in mind: to attain a monetary profit. He saves or borrows saved money, he hires labor, and he buys or rents raw materials, capital goods and land. He then proceeds to produce his product or service, whatever it may be, and he hopes to sell this product for a monetary profit. For the capitalist, “profit appears as a surplus of money received over money expended and loss as a surplus of money expended over money received. Profit and loss can be expressed in definite amounts of money.” (Mises 1966, p.