I love capitalism and believe in the profit motive inherent in it. I also love societal progress and believe in the selflessness existing outside of the profit motive that makes that progress sustainable and kind.
In a column last week ("Every entrepreneur is a social entrepreneur," Feb. 14), Daniel Prada '12 describes the "social entrepreneur" as one "who utilizes the mentality of the entrepreneur to focus on explicitly social, charitable ends, unlike other methods of entrepreneurship." In his piece, he defends "the pursuit of profit" and posits its benefits, as he details various entrepreneurs who, following their own self-interest, have improved society by satisfying consumers' subjective wants. In his final sentence, he encourages aspiring social entrepreneurs to "really help the world" by following their own incentives for profit and becoming "actual entrepreneur(s)."
His point is a valid one. I agree that, among progressives, capitalism is often rebuked more than it is respected, despite its awesome creative potential. However, his point is also simple. It ignores the flaws and nuances of the lauded profit motive, while devaluing the charitable social entrepreneurship that could address these same issues.
For example, rational economics, based on the assumption that human beings make shrewd, reasonable choices following their own interests, form the basis of Prada's argument. For the most part, this theory of rational choice holds. It guides good business decisions. But I believe, as do many behavioral economists, that this human rationality is not absolute. We, as imperfect humans, end up making mistakes. Richard Fuld Jr., the Lehman Brothers CEO who believed to the bitter end that his bank was sound, ended up losing — and this is a conservative estimate — around $250 million when he sat atop the largest bankruptcy in American history. Joe Cassano, the chief financial officer of American International Group's Financial Products Division, was fired after he oversaw the lending out of $80 billion in insurance on subprime mortgage bonds, $80 billion that AIG couldn't pay back when the time came. And Stan O'Neal, Merrill Lynch's CEO until 2007, dutifully watched as his company accumulated $41 billion worth of crappy mortgage bonds and derivatives, actions that led to his eventual firing.
Each one of these people, and countless others involved in the 2008 financial crisis, were, in essence, entrepreneurs. Following the profit motive, they creatively used unprecedented extensions of credit to engineer unprecedented amounts of money. And following the profit motive, they messed up, hurting themselves and other people. But I don't mean these mistakes to be the focus of my column. Social entrepreneurs, following their own beliefs in social justice, are imperfect, too. In attempting to solve the most difficult of issues, they may make overly complex plans and issue burdensome regulations. They may miss their goal entirely. Or they may worsen the situation while trying to address it.
Frankly, all of these mistakes, whether they are driven by profit or charity, matter a great deal. We can't ignore, forget or wish them away. However, to applaud the profit motive alone, as Prada seems to do, misses the point. Profits can drive bad decisions that may hurt people or leave millions without a home or a job through no fault of their own. On the other hand, to relentlessly condemn the free-market incentives that have created our modern economy, as Prada contends many progressives do, is overly simplistic. Capitalism has built the prosperity that allows us to pursue the work of social entrepreneurship in the first place. Its excess wealth fills the coffers of our nonprofits.
So what should we conclude? America and her people, throughout history, have constantly been waging this debate. Whether it is Franklin Delano Roosevelt vs. Herbert Hoover or Barack Obama vs. Mitt Romney, it is the same debate. On one pole stands our collective belief in the individual and the great, constructive power of his own self-interest. On the other stands our care for the larger community and our desire to maintain a certain amount of equity and kindness. As I see it, America's ultimate purpose throughout history is to reconcile these two lines of thought, to realize one without dismissing the other.
As such, when conservatives like Prada endorse the virtues of the profit motive while disparaging the value of social entrepreneurship, or when progressives like myself recount the values of social charity while denigrating capitalistic individualism, they are doing more than establishing a shallow argument. In fact, they are denying a full half of America's very essence.
Kevin Carty '15 is a political science concentrator from Washington D.C. He would love to hear any responses and can be reached at kevin_carty@brown.edu.
