Profit seeking
has a revelatory effect in the economy. Seeking profit opportunities by
examining them relative to each other, reveals what people want. This
continually directs resources towards the production of those particular goods
and services. The reason differential profits are possible in the real world is
because not all firms are equally innovative or even able to mimic the
innovation of others. In the real world innovation is an advantage, yielding
differential profits because there is a lag time before others can catch up.
The talents and creativity within firms is not equal and so part of the competitors’
strategy to catch up with the innovator is to lure away key personnel, along
with intensifying both market research and product research and development.
As a
consequence, profit seeking advances the tendency towards homogeneity, ironically
offsetting the tendency for product differentiation. Necessarily, the tendency is
for the rate of profit among close competitors to become equalized. Economy-wide
profit-seeking leads to the tendency for profits in all of the different fields
of endeavor to equalize in the market.
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