Profit
In Classical Economics profit is the return to the proprietor(s) of capital stocks (machinery, tools, structures). If I lease a backhoe from a tool rental company the amount I pay to the backhoe owner it is "interest" (i.e. the return to loaned stock/money).
Profit is the difference between the wages that would have been required excavating by hand, and the smaller amount of wages required using the machine. And from this profit "interest" is paid.
In The Wealth of Nations Adam Smith said the following on profits and interest.
| “ | The diminution of the capital stock of the society, or of the funds destined for the maintenance of industry, however, as it lowers the wages of labor, so it raises the profits of stock, and consequently the interest of money. By the wages of labor being lowered, the owners of what stock remains in the society can bring their goods at less expense to market than before, and less stock being employed in supplying the market than before, they can sell them dearer. Their goods cost them less, and they get more for them. Their profits, therefore, being augmented at both ends, can well afford a large interest. The great fortunes so suddenly and so easily acquired in Bengal and the other British settlements in the East Indies, may satisfy us that, as the wages of labor are very low, so the profits of stock are very high in those ruined countries. The interest of money is proportionally so. In Bengal, money is frequently lent to the farmers at forty, fifty, and sixty per cent and the succeeding crop is mortgaged for the payment. As the profits which can afford such an interest must eat up almost the whole rent of the landlord, so such enormous usury must in its turn eat up the greater part of those profits. Before the fall of the Roman republic, an usury of the same kind seems to have been common in the provinces, under the ruinous administration of their proconsuls. The virtuous Brutus lent money in Cyprus at eight-and-forty per cent as we learn from the letters of Cicero. | ” |
Read more about this topic: Returns (economics)
Famous quotes containing the word profit:
“Like all men who are Napoleonic in their ambitions ... he has instincts about the nature of growth, a lover’s sense of the moment of crisis, and he knew ... how costly is defeat when it is not soothed by greater consciousness, and how wasteful is the profit of victory when there is not the courage to employ it.”
—Norman Mailer (b. 1923)
“If a man suffers ill, let it be without shame; for this is the only profit when we are dead. You will never say a good word about deeds that are evil and disgraceful.”
—Aeschylus (525–456 B.C.)
“What men have called friendship is only a social arrangement, a mutual adjustment of interests, an interchange of services given and received; it is, in sum, simply a business from which those involved propose to derive a steady profit for their own self-love.”
—François, Duc De La Rochefoucauld (1613–1680)