(This is long, but it answers your question, trust meh)
The motive of entrepreneurs investing resources into creating goods and services is profit. But to get that profit, they have to convince millions of people to hand over their hard-earned cash in exchange for whatever product is being offered by the entrepreneur. If the product fails to entice consumers to give up their money, then the entrepreneur will most likely go bankrupt. And there is no way to succeed at this task without being innovative; you have to create something new and/or better than what is currently available, otherwise there is simply no incentive for people switch over to your product.
This is the natural process in which a market cleanses itself of poorly invested resources, resources used in attempts to innovate in ways that prove unsuccessful. It's a process which serves the vital function of communicating to future investors what sorts of things
not to create. This is why foil bags are filled with potato chips and not dog shit; no one wants to eat shit, so entrepreneurs aren't going to waste time trying to sell it when they could be making money selling potato chips. You might point out that the market doesn't need to convey something as obvious as people not wanting to purchase dog crap, but just look at any example where a product was discontinued and replaced with better innovations from which society could derive more subjective utility.
Remember that coffee flavored Pepsi? Pepsi had to divert their scarce capital into creating and marketing the nasty stuff, and when the sales were poor, they ceased production and those resources that would have gone into producing more liquid coffee vomit were instead channeled into areas that Pepsi deemed more profitable. In essence, consumers ousted Pepsi Kona from office by voting for different products with their dollars.
However--and fortunately for us--unlike the government, the free market is not a hulking bureaucratic monstrosity. When Pepsi stopped making Pepsi Krappa, it rapidly shifted its focus into providing the customers what they
did want, which was determined by whether or not the alternative product actually sold well. If Pepsi had taken its time and waited months or even years before making these changes, its losses would have been enormous--not just for itself, but for all of society.
The reason the losses would have been passed on to society is because resources are global. If Pepsi had kept producing Pepsi Kona that wasn't selling, all of the resources required in its production are resources that didn't go into producing something that people were actually willing to purchase, with causes similar goods to become more scarce which leads to their prices increasing. So society pays more money as a result of Pepsi's inefficiency, money that could have been used to pay for more productive things.
But the market rarely allows such irresponsibility to occur for very long, its innate purging mechanism being highly effective at motivating companies into productive action via do-or-die circumstances. Without such a mechanism, malinvestment runs rampant, and the standard of living plummets.
Now, your theoretical system includes these imaginary saintly entrepreneurs whose motives are purely altruistic. Unfortunately, such pure motives don't change the fact that the great majority of humans are hard coded to make decisions that they believe will maximize personal gain at the lowest possible cost. You may object to this, but you're wasting your time; every attempt made at changing such a core aspect of human nature has met with the cumulative deaths of tens of millions of innocent people at the hands of tyrannical dictators. Once personal gain is looked on as intolerable greed, the logical course of action is to forcibly confiscate any and all private possessions whose ownership can be construed as unethical and greedy, and then to ration them out using whatever hazy criteria is being used to determine "need."
So humans won't change their nature, and attempting to make them do so will inevitably result in widespread atrocities. Therefore profit motive will be the primary function of the economy. This is fundamentally at odds with a non-profit motivated market, because if entrepreneurs aren't trying to make money, why would private institutions loan it to them? Would you loan money to someone who has made it clear to you that he has no intention of profiting from the investment, someone whose intentions aren't to provide society with its wants buy with that he considers to be its needs?
Even if capital weren't an issue, such an entrepreneur wouldn't last, since it is logistically impossible to determine what society as a whole needs. The end result would be the government telling people what they need and limiting them to only those things, there being no incentive to create additional products that are viewed as unnecessary and therefore greedy. This would in turn lead to an utter lack of innovation in every sector, since any demand for new products would be seen as catering to unsavory impulses and would most likely be banned in order to limit consumption of resources that the government already has trouble producing, storing, and allocating.
Bleh, this is too long. Here's a summary that includes some details I didn't touch upon:
- Profit-driven entrepreneurs are ousted, replaced by niceguyz who want only to make us happy and content.
- Companies refuse to loan these people money, since the investments are in society's theoretical needs and not its wants. Such investments are bound to fail in a private economy.
- Without entrepreneurial funding, all innovation stalls until the government begins allocating public resources into the investments of their sponsored entrepreneurs.
- This money coming from the government can either be printed or taxed. Either route disrupts free economic activity and reduces the standard of living.
- Because entrepreneurs believe they are acting in the public's best interests, they feel it is justified to enthusiastically encourage consumption of their products, so prices are made competitive.
- Already battered by reduced purchasing power, consumers must strictly budget, so they opt to buy the cheaper government produced goods, driving practically all private companies out of business. Even business offering fripperies must shut down as the tumultuous economy scares people into buying and hording only basic necessities.
- All economic production is now controlled by the public sector, which now faces the logistically impossible task of directing the flow of all resources to the areas in which they are needed, a task only possible when billions of people can collectively cast individual dollar votes that tell profiteers with the highly specialized knowledge required to interpret and respond to the activity in their markets (of which there are hundreds of thousands). To make matters worse, this process simply won't happen unless profit can be earned by actors in the market.
- All innovation ceases, as even basic needs can barely be met. And even if such needs could be fulfilled, there would be very little innovation while frills are seen unethical investments that consume public property at the expense of the poor.
- The standard of living plummets to 3rd world levels as centralized planning authorities struggle with futility to do something that is simply impossible, something that ruins and ends lives.