Q-How does profit motive affect innovation and economic productivity? (Pages 43 – 50).Profit Motive Leads to Innovation and Increased Productivity According to Bruno Leone (1986), “In order to build and maintain a profitable concern, a businessman’s products would have to be needed, well-made, and competitively priced . Moreover, he would be creating jobs and helping to expand the general economy” (18). Profit motive promotes efficiency and productivity in an economy. The investor is constantly seeking new ways to effectively and efficiently provide goods and services to consumer, because, Mises (1986) stated, “Profit and loss are entirely determined by the success or failure of the entrepreneur to adjust production to the demand of the consumers” (40). The behavior of the consumer makes profits and losses occur, and this can result in a change of ownership from those who are inefficient to the efficient ones. Webley (1967) stated, “The successful firms are those that respond to the demands of the market” (36).Profit motive does not only provide a necessary ingredient in wealth creation, but it is also the engine that drives research, along with development, leading to new innovation and, consequently, increase in productivity. According to Frank Broadway (1967), “Modern capitalism had its genesis in the urge to exploit and develop the possibilities of technical innovation” (p. 42). He explained that since consumers are kings in decision making as to goods bought, and in an effort to attract the favor of consumers producers must innovate to come up with better or cheaper products. In the competitive business world, entrepreneurs are constantly improving products and their processes. It is to innovate or die. However, innovation is risky and expensive. Broadway (1967) stated, “Successful innovations must not only pay for themselves. They must ultimately pay for all the unsuccessful attempts to develop and innovate. And if they have to provide the stimulus and resources for further innovation, they must earn worthwhile profits. These profits must be significantly higher than those on established products, or innovation becomes an uneconomic exercise” (52). According to Robert Tracinski (2010),“Each individual thinker has the opportunity to put his ideas into practice and to succeed or fail based on the merits of his idea. Those who succeed bring us new and improved products and an ever-lower cost, creating economic progress and prosperity” (48).He further explained that the prospect of making a profit causes us to work harder, longer, and smarter. We take more risk because of the profit reward. “The market mechanism . . . acts in a ruthless efficient way in allocating scarce resources and in eliminating both the inefficient and the unprepared” (Webley 1967, 36).“Modern capitalism had its genesis in the urge to exploit and develop the possibilities of technical innovation” (Broadway 1967, 42).Reasons for Innovation -First, businesspeople want to improve products and processes. Second, innovation is the result of competition. The ideology in business is to innovate or die. Third, consumers are kings in the decision making as to goods bought; therefore, in an effort to attract the favor of consumers, one must innovate to come up with better or cheaper products. Broadway (1967) posited, The spectacular success of capitalism transforming the world through innovation is a matter of historic fact .the inventive success of capitalism rest firmly on the foundation that the system provides both the resources to finance the work of innovation and the incentive to shoulder the high risks it involves. (50)Increased taxes on businesses will reduce the resources available for companies to plough back into innovation and, at the same time, will diminish the prospective rewards of the innovator (Broadway 1967, 50). A nation that discourages innovation this way will be left behind. Broadway (1967) also stated that “capitalism, the world over, has proved itself an unparalleled vehicle for beneficial innovation. Nothing else so far tried has come anywhere near achieving its innovative speed, scope and economy” (p. 57).However, innovation is risky and expensive, as Broadway (1967) concluded, Successful innovations must not only pay for themselves, they must ultimately pay for all the unsuccessful attempts to develop and innovate. And if they have to provide the stimulus and resources for further innovation they must earn worthwhile profits. These profits must be significantly higher than those on established products, or innovation becomes an uneconomic exercise. (52). To increase profits, businesses are constantly investing in ways to increase the efficiency in which goods and services are produced. This leads to innovation and technological improvements. This process drives job creation and economic growth. According to Robert Lampman (1967), Critics' obsession with the self-interest concept associated withinvestment undertakings is missing the fact that regardless of themotive, there are tremendous, positive, unintended consequencesthat are a benefit to society. What people care about is whether thegoods or services are delivered, not the motives of those whoprovide them. It is irrelevant whether a physician studied medicinefor his or her personal gain. What matters most is that the sick getswell and lives are saved. Does it matter whether the Wrightbrothers had selfish intentions in their quest to invent the airplane?The consequence of their actions has led to tremendousimprovement in transportation. Similarly, for the economy, as anoutcome of the “selfish" intentions of producers, income isgenerated and jobs are created, which lead to economic prosperity.Another important role of profit is to help evaluate the efficiencyin the use of resources. It is an integral part of the learning processof the market (Nilsson 2003). In capitalism, business businessesaim to earn the most profit they can. Their intentions are notnecessarily to create jobs or provide health care for employees.However, in the process of maximizing profit, jobs are created andfringe benefits are received by employees. Therefore, the moralityof profit seeking is not relevant to the judgment of capitalism. Theresults of profit motive are the chain reactions of increasingemployment, increasing income, and the increasing governmentrevenue through taxation, which lead to economic prosperity andthe overall benefit of the society. If consumers receive the goodsand services they want at an affordable price, it does not matterwhat the intentions of the producers were to begin with. In acapitalist society guided by effective laws and institutions, profitmotive cannot come at the expense of everything else.Due to profit motive, there is investment and business survival in acapitalist society that requires innovation. The activities associatedwith a market system have led to an enhancement in the overallwell-being of humankind. It is irrelevant whether Bill Gates had aselfish money-making motive for his work with computers. ElonMusk, whose net worth is over US $19 billion, would certainly becriticized by many for being one of the 1% who is filthy rich(Forbes 2018).They would not see the inventor, engineer, and/orinvestor who have made significant contributions in the areas ofspace technology and transportation engineering, as well as thetechnological enhancements in which people are conductingbusiness. No one should care about the intentions of the Wrightbrothers. Does it matter that Steve Jobs just wanted to be abillionaire or that those inventors during the Industrial Revolutionjust wanted material gain? Think about the "selfish" motive of allthose involved in the discoveries in medicine and the advancementin technology and scientific improvement. Rather, think about howdigital technology and medical advancement have transformed theworld for the better. Remember that these discoveries andinnovations required huge funding. In capitalist societies, profit isthe source of income and prosperity. Bowles(2007) stated, Thetransition to capitalism also required a change in motivation so that"profit seeking" became legitimate and the primary motive forentering into production. It is the profit motive that not only givescapitalism its coherence as an abstract system but also explains itsdynamism through time. (12) The growth in the value of product per person is generallyunderstood to arise out of more capital, economies of scale andspecialization, better management and business, innovation withregard both to the end product and the techniques of production,greater mobility of factors, and improved quality of labor. All ofthese in turn yield additional income, which in the benign spiral,makes possible more and higher quality inputs for further growth.(174) Benefits of innovation include increased production, lowerprice, and increase in quality of goods. Donlan (2008)demonstratedby using Henry Ford's experience, which was the beneficial chainreaction of increased productivity. Using a new method of buildingthe Model T vehicle, the company adopted a sort of assembly-lineproduction. After one year, vehicles were produced eight timesfaster than the conventional method. To reinforce the point, heshowed how, in 1914, Ford had 13,000 employees to make260,720 cars. Combined, all other companies in the car industrymade 286,770 cars using 66,350 workers. Ford was able to dropthe price of its Model Ts from US $825 to US $275. Cars werenow very affordable to many people. As a result, between 1914and 1916, the company's profit doubled from US $30 million toUS $60 million, despite increasing workers' wages to US $5 a day,which was twice the going pay rate in the area. "The principalfactor distinguishing high-paid labor from low-paid labor isproductivity, and productivity is the product of investment. High-paid labor always involves labor of the mind, nowadays assisted bycomputers, which organizes and motivates the labor muscle andmachines" (Donlan 2008, 188–189). “High productivity generateshigh profits, and high profits lead quickly to unequal distributionsof wealth and income that favors the owners of capital" (p. 192).Donlan (2008) explained that because the wealth of the nation risescontinually and because scientists, engineers, and manufacturersare continually providing more and better goods, the averageAmerican standard of living rises accordingly. Americans whosestandard of living does not rise as fast as the average fall towardpoverty compared to the average. And those poor people whosestandard of living rises with the average remain poor bycomparison-but they have more stuff. (194) Donlan (2008)further stated that investment seeks the highest return, whichmeans the aim of investment is to put capital to work, enhancingthe productivity of ordinary labor. Returns on investment can bereinvested . .Capital formation-the accumulation of wealth-mustbe the first concern for a country interested in growth throughinvestment. (195) Janos Kornai (2000) emphasized that comparedto other economic systems in the capitalist society, technologicaldevelopment is faster because of the greater incentives to pursueinnovations. Capitalism and entrepreneurship clear the way forenterprise and initiation in the economy, resulting in improvedefficiency in production and increase labor productivity. Accordingto Robert Lampman (1967),The greatest achievements of moderneconomies has been the raising of living standards of the commonman and the reduction of the share of the population in poverty...the growth in the value of product per person is generallyunderstood to arise out of more capital, economies of scale andspecialization, better management and business, innovation withregard both to the end product and the techniques of production,greater mobility of factors, and improved quality of labor. All thesein turn yield additional income, which, in the benign spiral, makespossible more and higher quality inputs for further growth. (174)The outcome, not the motive, matters. As Horwitz (2008)explained, "Where profits are concerned, the consequences andoutcomes outweigh the motive and intentions (##)."

Question

Q-How does profit motive affect innovation and economic productivity? (Pages 43 – 50).Profit Motive Leads to Innovation and Increased Productivity According to Bruno Leone (1986), “In order to build and maintain a profitable concern, a businessman’s products would have to be needed, well-made, and competitively priced . Moreover, he would be creating jobs and helping to expand the general economy” (18). Profit motive promotes efficiency and productivity in an economy. The investor is constantly seeking new ways to effectively and efficiently provide goods and services to consumer, because, Mises (1986) stated, “Profit and loss are entirely determined by the success or failure of the entrepreneur to adjust production to the demand of the consumers” (40). The behavior of the consumer makes profits and losses occur, and this can result in a change of ownership from those who are inefficient to the efficient ones. Webley (1967) stated, “The successful firms are those that respond to the demands of the market” (36).Profit motive does not only provide a necessary ingredient in wealth creation, but it is also the engine that drives research, along with development, leading to new innovation and, consequently, increase in productivity. According to Frank Broadway (1967), “Modern capitalism had its genesis in the urge to exploit and develop the possibilities of technical innovation” (p. 42). He explained that since consumers are kings in decision making as to goods bought, and in an effort to attract the favor of consumers producers must innovate to come up with better or cheaper products. In the competitive business world, entrepreneurs are constantly improving products and their processes. It is to innovate or die. However, innovation is risky and expensive. Broadway (1967) stated, “Successful innovations must not only pay for themselves. They must ultimately pay for all the unsuccessful attempts to develop and innovate. And if they have to provide the stimulus and resources for further innovation, they must earn worthwhile profits. These profits must be significantly higher than those on established products, or innovation becomes an uneconomic exercise” (52). According to Robert Tracinski (2010),“Each individual thinker has the opportunity to put his ideas into practice and to succeed or fail based on the merits of his idea. Those who succeed bring us new and improved products and an ever-lower cost, creating economic progress and prosperity” (48).He further explained that the prospect of making a profit causes us to work harder, longer, and smarter. We take more risk because of the profit reward. “The market mechanism . . . acts in a ruthless efficient way in allocating scarce resources and in eliminating both the inefficient and the unprepared” (Webley 1967, 36).“Modern capitalism had its genesis in the urge to exploit and develop the possibilities of technical innovation” (Broadway 1967, 42).Reasons for Innovation -First, businesspeople want to improve products and processes. Second, innovation is the result of competition. The ideology in business is to innovate or die. Third, consumers are kings in the decision making as to goods bought; therefore, in an effort to attract the favor of consumers, one must innovate to come up with better or cheaper products. Broadway (1967) posited, The spectacular success of capitalism transforming the world through innovation is a matter of historic fact .the inventive success of capitalism rest firmly on the foundation that the system provides both the resources to finance the work of innovation and the incentive to shoulder the high risks it involves. (50)Increased taxes on businesses will reduce the resources available for companies to plough back into innovation and, at the same time, will diminish the prospective rewards of the innovator (Broadway 1967, 50). A nation that discourages innovation this way will be left behind. Broadway (1967) also stated that “capitalism, the world over, has proved itself an unparalleled vehicle for beneficial innovation. Nothing else so far tried has come anywhere near achieving its innovative speed, scope and economy” (p. 57).However, innovation is risky and expensive, as Broadway (1967) concluded, Successful innovations must not only pay for themselves, they must ultimately pay for all the unsuccessful attempts to develop and innovate. And if they have to provide the stimulus and resources for further innovation they must earn worthwhile profits. These profits must be significantly higher than those on established products, or innovation becomes an uneconomic exercise. (52). To increase profits, businesses are constantly investing in ways to increase the efficiency in which goods and services are produced. This leads to innovation and technological improvements. This process drives job creation and economic growth. According to Robert Lampman (1967), Critics' obsession with the self-interest concept associated withinvestment undertakings is missing the fact that regardless of themotive, there are tremendous, positive, unintended consequencesthat are a benefit to society. What people care about is whether thegoods or services are delivered, not the motives of those whoprovide them. It is irrelevant whether a physician studied medicinefor his or her personal gain. What matters most is that the sick getswell and lives are saved. Does it matter whether the Wrightbrothers had selfish intentions in their quest to invent the airplane?The consequence of their actions has led to tremendousimprovement in transportation. Similarly, for the economy, as anoutcome of the “selfish&#34; intentions of producers, income isgenerated and jobs are created, which lead to economic prosperity.Another important role of profit is to help evaluate the efficiencyin the use of resources. It is an integral part of the learning processof the market (Nilsson 2003). In capitalism, business businessesaim to earn the most profit they can. Their intentions are notnecessarily to create jobs or provide health care for employees.However, in the process of maximizing profit, jobs are created andfringe benefits are received by employees. Therefore, the moralityof profit seeking is not relevant to the judgment of capitalism. Theresults of profit motive are the chain reactions of increasingemployment, increasing income, and the increasing governmentrevenue through taxation, which lead to economic prosperity andthe overall benefit of the society. If consumers receive the goodsand services they want at an affordable price, it does not matterwhat the intentions of the producers were to begin with. In acapitalist society guided by effective laws and institutions, profitmotive cannot come at the expense of everything else.Due to profit motive, there is investment and business survival in acapitalist society that requires innovation. The activities associatedwith a market system have led to an enhancement in the overallwell-being of humankind. It is irrelevant whether Bill Gates had aselfish money-making motive for his work with computers. ElonMusk, whose net worth is over US $19 billion, would certainly becriticized by many for being one of the 1% who is filthy rich(Forbes 2018).They would not see the inventor, engineer, and/orinvestor who have made significant contributions in the areas ofspace technology and transportation engineering, as well as thetechnological enhancements in which people are conductingbusiness. No one should care about the intentions of the Wrightbrothers. Does it matter that Steve Jobs just wanted to be abillionaire or that those inventors during the Industrial Revolutionjust wanted material gain? Think about the &#34;selfish&#34; motive of allthose involved in the discoveries in medicine and the advancementin technology and scientific improvement. Rather, think about howdigital technology and medical advancement have transformed theworld for the better. Remember that these discoveries andinnovations required huge funding. In capitalist societies, profit isthe source of income and prosperity. Bowles(2007) stated, Thetransition to capitalism also required a change in motivation so that&#34;profit seeking&#34; became legitimate and the primary motive forentering into production. It is the profit motive that not only givescapitalism its coherence as an abstract system but also explains itsdynamism through time. (12) The growth in the value of product per person is generallyunderstood to arise out of more capital, economies of scale andspecialization, better management and business, innovation withregard both to the end product and the techniques of production,greater mobility of factors, and improved quality of labor. All ofthese in turn yield additional income, which in the benign spiral,makes possible more and higher quality inputs for further growth.(174) Benefits of innovation include increased production, lowerprice, and increase in quality of goods. Donlan (2008)demonstratedby using Henry Ford's experience, which was the beneficial chainreaction of increased productivity. Using a new method of buildingthe Model T vehicle, the company adopted a sort of assembly-lineproduction. After one year, vehicles were produced eight timesfaster than the conventional method. To reinforce the point, heshowed how, in 1914, Ford had 13,000 employees to make260,720 cars. Combined, all other companies in the car industrymade 286,770 cars using 66,350 workers. Ford was able to dropthe price of its Model Ts from US $825 to US $275. Cars werenow very affordable to many people. As a result, between 1914and 1916, the company's profit doubled from US $30 million toUS $60 million, despite increasing workers' wages to US $5 a day,which was twice the going pay rate in the area. &#34;The principalfactor distinguishing high-paid labor from low-paid labor isproductivity, and productivity is the product of investment. High-paid labor always involves labor of the mind, nowadays assisted bycomputers, which organizes and motivates the labor muscle andmachines&#34; (Donlan 2008, 188–189). “High productivity generateshigh profits, and high profits lead quickly to unequal distributionsof wealth and income that favors the owners of capital&#34; (p. 192).Donlan (2008) explained that because the wealth of the nation risescontinually and because scientists, engineers, and manufacturersare continually providing more and better goods, the averageAmerican standard of living rises accordingly. Americans whosestandard of living does not rise as fast as the average fall towardpoverty compared to the average. And those poor people whosestandard of living rises with the average remain poor bycomparison-but they have more stuff. (194) Donlan (2008)further stated that investment seeks the highest return, whichmeans the aim of investment is to put capital to work, enhancingthe productivity of ordinary labor. Returns on investment can bereinvested . .Capital formation-the accumulation of wealth-mustbe the first concern for a country interested in growth throughinvestment. (195) Janos Kornai (2000) emphasized that comparedto other economic systems in the capitalist society, technologicaldevelopment is faster because of the greater incentives to pursueinnovations. Capitalism and entrepreneurship clear the way forenterprise and initiation in the economy, resulting in improvedefficiency in production and increase labor productivity. Accordingto Robert Lampman (1967),The greatest achievements of moderneconomies has been the raising of living standards of the commonman and the reduction of the share of the population in poverty...the growth in the value of product per person is generallyunderstood to arise out of more capital, economies of scale andspecialization, better management and business, innovation withregard both to the end product and the techniques of production,greater mobility of factors, and improved quality of labor. All thesein turn yield additional income, which, in the benign spiral, makespossible more and higher quality inputs for further growth. (174)The outcome, not the motive, matters. As Horwitz (2008)explained, &#34;Where profits are concerned, the consequences andoutcomes outweigh the motive and intentions (##).&#34;

Accepted Answer

The profit motive is the motive for financial gain from economic activities in the economic market.…