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To me, the problem with this argument is that there is, in fact, no connection between what is best for society and what is profitable. In theory, there should be, but it isn't an intrinsic thing, it's created deliberately and must be maintained.

When you have the money, you make the rules. That sums up the problem. Markets are not magical creatures, they exist within the context of social rules and norms. Selling human beings was once seen as rather profitable. Then society decided that selling human beings was wrong, even though it was profitable. You clearly understand this, we banned slavery, we didn't just ban investing in slavery-related businesses.

What I think you are missing is that there are a ton of things that are between "good for society" and something along the lines of slavery that is clearly a bad thing. The problem with these middle "bads" is that they aren't bad enough to be universally and energetically rejected.

This means that there is plenty of room for people with money to get these things made legal, or kept legal, and it is these things that often seem to be more profitable than other, more socially beneficial, activities (possibly because fewer people are morally willing and able to do them). I think of this sort of thing as "meta-competition" because it is competition among those with money to most efficiently turn their money into influence and power that can be used to allow them to make even more money.

As long as money can be converted to power, you can't assume, as you have done, that whatever is legal is socially beneficial (or at least not socially destructive).

> Then society decided that selling human beings was wrong, even though it was profitable.

More interestingly, society decided that slavery was wrong after it became unprofitable. The same goes for child labor.

"More interestingly, society decided that slavery was wrong after it became unprofitable."

Someone should really inform the human traffickers.

Free market economies routinely bury slave based ones. If slavery was more profitable, it would be the other way around.

Modern human trafficking is prevalent in industries that are themselves illegal, so there isn't free market competition.

The problem with slave labor is considerable expense is necessary to guard them, and the slaves not only do as little as possible but they will actively sabotage the work.

We, collectively as a species, managed to find a path in which slavery was no longer necessary - for the first time in human history.

Yes, the cost was huge - that's why stupid things like the Fugitive Slave Law and the Dred Scott Decision happened, leading to the failure of Whiggish Moderation and, well, you know the rest...

Not so much. See "Time On the Cross". Very profitable, cotton slave plantationing was - it was the feedstock to the massive growth in British textiles, the Silicon Valley of its day.

What drove slavery into the ... juggernaut it became was more that financial panics in the US ( and also even more globally ) destroyed so much cash value that slaves were all that was left of value when the tide went out.

I recommend the horribly-titled "A Nation of Deadbeats". It's narrative history, but wow its a good story. And at the same time, I bet financialization is completely critical to having the sort of standard of living we have now.

Child labor only became an issue when adult labor began to be idled.

> The things that are "best" for society also tend to make the most money. People pay for things because they want them, because it makes their lives better

The things that make the most money are the things most desired by the people with the most money to spend. That group of people can only be equated with "Society" if that group of people does in fact form the majority of the society. That's why a large middle class is so important, and why growing differences in income are so threatening.

The things that make the most money are the things that money has built the best marketing for.

People pay for things they want out of the choices they are aware of.

"Analysts" - politicians, Joe College, HN posters - tend to use an overly simplified economic model, based primarily on the "Turn Lemons into Lemonade" 3rd-grade economics primer they read as a child.

Certainly - and that's not even entering the argument that what people desire and what is good for them (us) are not the same thing; especially in the long term (which imho is the only sane way to consider whether something is good or bad for society).

"Things that are 'best' for society also tend to make the most money."

You can make an awful lot of money in the short term doing things that are horrible for society. Look at natural gas extraction by fracking - are we saying that polluting the water table, the air and ground in an is best?

Or look at the defense industry. The make a lot of money too. Is taking our great intelligence and devoting it to weapons and destruction best for society?

Best might be best for a small group, but is rarely best for society.

> Look at natural gas extraction by fracking - are we saying that polluting the water table, the air and ground in an is best?

Yes, it's better than the alternatives. Cleaner and less CO2 than coal, cheaper than solar/wind/nuclear. It has never polluted the water table. For North American energy, what's better?

> Or look at the defense industry. Since the power WWII superpower era, death and destruction has gone way down. Overwhelming force and vastly superior weapons are making large scale wars a thing of the past. We are actually living in the most peaceful time of human history, from a bodycount perspective.

I agree too much money is spent on defense, but thats a political problem not a banking/investment problem.

Your argument is that it's cheaper than solar, wind, and nuclear, and that makes it better?

Isn't that the opposite of things that are best for society making the most money, which was your original point? Wouldn't society be benefited almost infinitely more if it could harness an almost infinite supply of energy?

It has never polluted the water table? Oh really?

http://www.usatoday.com/story/money/business/2014/01/05/some...

That's the first hit on a google search.

I live in western PA. I follow this issue closely. I care about my and my families health.

Your article simple says there are reports of pollution. Pollution != polluting the water table. All fossil fuel extraction creates pollution.

Hundreds of studies of been done, both public and private about fracking's risk of getting close to the water table. It's never proven to be true. The only study that suggests its possible is the Duke study, but it doesn't prove that it has happened.

This is a hot button issue around here. The water is monitored closely, there are no fracking chemicals showing up in the water tables.

Or hoarding assets such as housing. That's why the baby boomers are all rich in the UK, while anyone under 30 hasn't a hope in hell of buying a house by themselves. The restrictive planning policies exaggerate the situation.

> People pay for things because they want them, because it makes their lives better.

More often than not, people pay for things because they must. Food is not optional, nor is clothing, shelter, or health care. For the majority of American population gasoline, auto insurance, and related transportation expenses are similarly non-optional. Similarly electricity and water. For much of the population you can add in child support or day care.

There is not much money, if any, left over for discretionary spending.

The point is that you seem to believe that all spending is voluntary. This is flatly not true, and smacks of willful ideological naïveté.

The distinction between want and need and likewise between discretionary spending and mandatory spending is completely irrelevant to the point I was making. I'm not even sure how to respond.

The point is that many people are wasting money on gasoline because they're forced to by the way infrastructure currently works, since you need a car to drive to work and you need to drive to work if you want to eat. Not because they actually prefer spending money on gasoline and hate public transit, say, and this is their vote for "I love cars and buying gasoline". Most individuals have very constrained choices, and the emergent effects of those choices are not in any necessary sense optimal for society. Jumping out of their short-term local optimum ("driving to work is better than losing my job, so I gotta drive") to other preferences ("it'd be nice if I could get to work without owning a car") is often non-trivial and requires large-scale coordination (such as through political or cultural change). On the other hand, they might love driving! But the mere fact that they spend money to drive to work doesn't prove it.

If you're interested in complex-systems theory, you can try out implementing various simple simulations yourself. It's actually pretty hard to come up with one, even with hilariously optimistic assumptions, where each agent individually optimizing actually leads to a globally optimal outcome! It's even pretty hard to come up with one that works in any reasonable sense at all: you quickly get swamped by system-endogenous effects and all sorts of weird oscillations and attractors that have nothing to do with the utility function. Fun times living in emergent-effects-land!

Sounds really interesting! Do you have any pointers on how to get up to speed on these topics?

> The distinction between want and need and likewise between discretionary spending and mandatory spending is completely irrelevant...

...when you don't have the mental apparatus necessary to perceive it. BTW, I'm not referring to intelligence.

It is difficult to get a person to understand something, when their ideology depends upon their not understanding it!

(With apologies to Upton Sinclair)

1. "rational" self-interest

2. (magic happens)

3. the greater good

What I've noticed is that two categories of people believe in such schemes: libertarians, and primary school children.

This doesn't happen in a vaccuum. You need the law, too. The Anarchist version of Libertarianism is mostly speculative fiction, although it can be good spec. fic. David Friedman's one of the best people I've ever read.

The "magic" is called "consumer surplus" and it's one of the few defensible things in macroeconomics. It's quite real.

The paradox is that explicitly trying to do things for the greater good very often backfires - although not always.

But as a "control law" - in the sense of running a distributed, massive system - self-interest produces measurably better results than Soviet-style central planning. This rests on information-theoretic foundations and it's early days yet. We're pathetic at macroeconomics, and it's a lot captured by both whim of the moment.

Of course, now we have a lot of hybrids, some that work much better than free markets, some that don't. That's quite new, assuming nothing bad happens to them.

> People pay for things because they want them, because it makes their lives better.

Nope. I could really want a cigarette, bottle of alcohol, or a large cheese burger with 2 patties, doesn't mean it would make my life better. In fact, it's likely to make my life worse. So, really there isn't a flaw in grandparent post's argument, the things 'best' for society really don't tend to make the most money.

Give me one example of a successful company that is bad for society and I'll give you 100 that are good.

p.s. not actually, I should be working.

p.p.s see my note on my above comment for a proper response to this.

Warren Buffet likes to argue that he does not make risky investments. With that in mind and under the light of how profits are made by the financial sector, it is pretty clear that when they make risky investments it is mostly with the client's money. The rest is just friction, like a toll booth.

This is the key point. The wealthiest people on Wall Street are glorified middlemen gambling with somebody else's money and skimming cream off the top.

> People pay for things because they want them

Stop right there. With jobs moving abroad and wage that is not going up, how would people pay for things they want.