Just because some economists claim that owners of firms want to maximise their reward for ownership, their profit, does not necessarily make it true. Although we might observe that many owners of firms try to maximise their profit, this does not mean owners of firms, or firms, cannot have other objectives. A financially sound firm needs some profit to secure its continuity, but that does not necessarily mean it has to maximise its profit.
Instead of teaching students one school of thought in which profit maximisation is a prevalent belief, it would be better to teach them the importance of some amount of profit to the continuity of the firm, while at the same time discussing other objectives owners might have, like providing employment in a community, providing services, manufacturing a product based on circular principles, contributing to the welfare of people, doing something the owner likes, while making an income.
How can you use this in the classroom?
Show examples of a diversity of firms which do not have profit maximisation as their primary objective. I will give you some examples:
- Beerbods, main product: beer subscriptions
- Patagonia, main product: clothes
- Fairphone, main product: mobile phones
- Guts, main product: tickets for concerts, performances, …
- Riverford, main product: organic produce
- Mud Jeans, main product: jeans
- Co-op, main product: groceries1
When I took economics as a KS5 student, I was taught that companies could have other objectives than, or next to, making a profit. I kindly ask you to bring that kind of thinking back into the classroom, since I believe the world is better served with people who think of more than profit.
- For more inspiration you can look on the B-corp site.