In a village/polity populated entirely by family/loved ones, there is lower incentive to produce low quality goods, since the only people using them would be allies/family, and their use of those goods diminishes the survival of the polity. Voluntarily producing lower quality goods and profiting more due to higher markup opportunities would be seen as a form of treason to one’s people.
EMPIRE: Individual with high quality production ability + lower-quality strangers = incentivized to lower production standards and privatize profit
COSMOPOLITAN FREE MARKET: Individual with high quality production ability + high-quality strangers = incentivized to maximize producer surplus (profits) since no long-term alliance
NATIONALISM: High quality production ability + high quality family/allies = incentivized to maximize production quality, lower incentive to profit (since profit is just a means to ensure privatized survival)
Why do people maximize profit? Because they can’t guarantee long-term alliances with those around them, and maximizing profit is the means to increase long-term survival. We don’t feel the strong need to profit with trade between friends/family. Why is that? Because long-term survival is more important.