Free enterprise has emerged over the past three hundred years as the most important material development in history, fostering what one economist calls “The Great Enrichment.” There have always been skeptics and critics of free enterprise, but in recent years they have made alarming inroads in the public’s perception of business and the economy. One inroad involves lowering the moral status of business in society’s eyes.

Misconceptions about the role of business and businessmen has reduced trust in business to an all-time low in the United States. Embracing Environmental, Social, and Governance (ESG) policies, Diversity, Equity, and Inclusion (DEI), net zero emissions, or stakeholder capitalism has not succeeded in endearing business to folks on the political left. But it has alienated a lot of folks on the political right. According to Gallup, Republicans’ confidence in big business hit its lowest recorded level in 2022.

Embracing DEI and ESG, however, has also led to poor business decisions. We don’t need to dwell on the very public mistakes of Disney, Budweiser, and Target in embracing LGBTQ agendas. More important are the behind-the-scenes distortions and distractions, such as the DEI focus at Silicon Valley Bank (SVB) that led them to make elementary financial risk-management mistakes.

As Andy Puzder has written:

In its 2022 proxy statement SVB boasted that its board was 45 percent female and had “other diversity” including one black member, one LGBTQ+ member, and two veterans. Nothing wrong with that, so long as the board also had the high-level banking expertise needed to oversee management of a major bank. Unfortunately, it did not. A New York Post article entitled “Obama Official, Hillary Donors, Improv Actor: Meet SVB’s Board of Directors” reported that of SVB’s twelve-member board, only one member had the necessary banking expertise.

Furthermore, that sole member with banking expertise only joined the board in September of 2022—the same month SVB reported a $15.9 billion loss on its balance sheet due to rising interest rates and falling bond prices, which wiped out nearly all their equity value.

Rather than continuing a litany of grievances against ESG, let’s talk instead about what business can and should be: a virtuous vocation that blesses people. Business harnesses human creativity and energy to benefit mankind in unique and powerful ways. Far from being immoral, business and markets help people develop virtue as they create value and wealth for themselves and others. Consider the fundamental activity of business: organizing resources into more productive ends. One of the great and persistent myths about wealth is that it primarily consists of resources. Much geopolitical conversation today revolves around what resources countries have. How many rare earth metals? How much oil, natural gas, or coal? How much electricity? Yet the raw amounts of these resources matter little apart from human ingenuity and productive utilization.

Consider that many resource-rich countries are relatively poor: Russia, Venezuela, and many African countries. At the same time, small countries with limited domestic resources have been incredibly successful: Singapore, Hong Kong, Taiwan, South Korea, even Great Britain. Hong Kong is little more than a rocky island off the cost of China, yet it boasts first world living standards. Why?

Because under British rule, they had free trade and free markets, allowing them to import all the resources they needed, transform them into more valuable products, and export those products to the rest of the world. As a result, Hong Kong was full of entrepreneurship and innovation which supported a well-functioning democracy throughout the second half of the twentieth century until China took it over.

Human Ingenuity, the Ultimate Resource

Consider the world’s most important physical resource, oil. It would be hard to overstate the fundamental role of oil in the global economy. While estimates are imperfect, the world uses roughly 100 million barrels of oil every day. That means over a billion barrels of oil every two weeks. And actual usage is likely higher.

The price of oil fluctuates, but at $70/barrel, we are talking about $7 billion worth of oil used daily, or a couple of trillion dollars worth used annually. Yet, less than two hundred years ago, oil was worthless. In fact, worse than worthless. Discovering oil on one’s land was a quick way to diminish its market value because, in an agrarian society, the presence of oil meant less productive farmland.

What happened between 1825 and 2025 to make oil the most valuable resource in the world? Inventions. Human ingenuity and entrepreneurship made oil valuable. New technology and business came along that found ways to turn oil into energy (and literally hundreds of other products, including fertilizer, asphalt, Vaseline, and a huge assortment of plastics, waxes, cosmetics, and much more), meeting seemingly insatiable demand.

Human ingenuity and entrepreneurship also enable adaptation to resource constraints. Three decades ago, nearly all new household water lines consisted of copper piping. Copper was easy to work with, fire-resistant, and abundant. In the early 2000s, however, the price of copper rose rapidly. Yet within a few years, many plumbers had switched to using plastic PEX piping, which, while not as fire resistant, was cheaper and more flexible.

Instead of slowing home construction to a crawl, the increased scarcity of copper merely encouraged builders to shift to a substitute resource. This phenomenon of adaptation works beautifully in free markets with adjustable prices, private property, and the incentive of profit and disincentive of loss. Countries with heavy regulation and government control of the economy, however, do not adapt as well.

The ability to innovate and adapt means that fears about running out of resources are largely unwarranted. The economist Julian Simon argued that human beings were The Ultimate Resource. He famously bet the doomsdayer Paul Ehrlich that a basket of commodities would become cheaper rather than more expensive over time. Ehrlich and others worried that the world would run out of natural resources as the population and the global economy grew. Simon, in contrast, argued that human ingenuity would find alternatives and solutions to resource scarcity. Simon won the bet.

Profit as Value Creation

But let’s return to what businesses contribute to society. They are much more than jobs programs. They generate value. Many people criticize companies for earning large profits. But they should be thanking such companies instead.

Suppose Ford Motor Company wants to create a new vehicle, say the F-150 Lightning—a not-so-hypothetical example. Ford needs a variety of resources to assemble the vehicles. It needs engineers to design them, salespeople and marketers to sell them, and a host of other people to manage logistics. Ford also needs huge amounts of capital, not only to buy land, build a factory, and hire workers, but also to buy the raw materials for the vehicle: tires, plastic, electronics, batteries, glass, lights, etc.

All these resources have alternative uses. The land could be used for farming, or to build a mall or a subdivision. The engineers could design ships or planes or rockets instead of the electric truck. All the resources could be used in other ways. The market price Ford pays for these things represents their opportunity cost—that is to say, Ford must pay the value of the next best alternative use of these resources. If Ford didn’t, these resources would be bid away to other projects and other industries.

This means Ford “takes” resources worth a certain amount to society in order to make the F-150 Lightning. The cost side of Ford’s ledger is not simply their financial outlay. It also represents how valuable those resources could be to society if used in other ways. Then the question becomes: Was Ford justified in using these resources to make the F-150 Lightning?

The answer depends on what people will pay for the F-150 Lightning. If Ford’s cost per vehicle is $165,000 (which, by the way, is roughly what it did cost Ford) and people will pay $175,000 for F-150 Lightnings, then Ford has successfully created value. They have taken resources worth $165,000 to society and created a product worth at least $175,000. The difference between its revenue and its cost of $10,000 per vehicle, its profit, is an exact representation of how much value Ford created.

If, on the other hand, people will only pay $65,000 for the F-150 Lightning (which is roughly the average retail price), then Ford suffers a $100,000 loss on each vehicle. They have taken resources worth $165,000 and made them worth $65,000.

There is nothing virtuous about running losses or breaking even. Ford has destroyed a lot of value. Its electric vehicle division reported about five billion dollars in losses in 2024 and projects similar losses in 2025.

Though this reasoning may seem straightforward, it has profound implications. Notice how profit and loss encourage and enable pro-social value creation. Profit rewards firms for creating value—and it enables them to expand and to create more value. Losses punish firms for destroying value, discouraging them from continuing to do so. Eventually losses stop firms altogether when they run out of resources.

Of course, this example is highly stylized. We have ignored subsidies, taxes, and regulations—all of which played a role in Ford’s decision to produce the F-150 Lightning. We have not distinguished fixed, variable, and unit costs on vehicle production. Furthermore, we assume that Ford sets the truck price near its optimal level. Price is not the only thing that matters—the quantity that can be sold is also very important. Despite these caveats, the fundamental truth of what business does remains. It’s just harder to measure precisely.

What’s amazing about this process, though, is that business creates new value. Value that had not been there before. Value that people could not even have conceived just ten years ago. And this value does not arise from pure material production. It’s not a matter of simply producing more widgets or shoes or houses or cars. The things produced must matter to people.

Markets, trade, and business exist to enable people to satisfy their desires. They satisfy not just desires for status or comfort, but desires to build schools and churches, to play sports and music, to cure diseases, throw parties, and to fix problems. In short, profitable business supports human flourishing. It makes flourishing possible.

Heavily constrained markets don’t just make people poorer; they also stifle people’s creativity and frustrate their plans (noble and ignoble). That’s why, when it comes to the economy, promoting free markets and free enterprise ought to be government officials’ north star.