Note 1128 — Chapter I · : THE HEDONISTS

If this is to be taken as literally true, we have this curious result: the entrepreneur, receiving for the products which he sells just exactly what he paid for producing them, makes no profit at all.

Both Walras and Pareto fully admit the paradoxical nature of the statement. Of course it is understood that it can only happen under a régime of perfectly free competition, care being also taken to distinguish between profits and interest, a thing that is never done, apparently, by English economists, who treat both interest and profit as constituent elements of cost of production.

But this is not so wonderful as it seems at first sight. It simply means a return to the well-known formula that under a régime of free competition selling price must necessarily coincide with cost of production.

This does not prevent our recognising the existence of actual profits. Profits are to be regarded as the result of incessant oscillations of a system round some fixed point with which it never has the good fortune actually to coincide. According to this conception they are but the waves of the sea. But the existence of waves is no reason for denying a mean level of the ocean or for not taking that mean level as a basis for measuring other heights. Some day, perhaps, equilibrium will become a fact, and profits will vanish. But if that day ever does dawn either upon the physical or the economic world, all activity will suddenly cease, and the world itself will come to a standstill.