This may be a moot point, but is the main point of "capitalism" profit? Capital (money) profit? Psychic profit? Does Capitalism really "exploit" individuals labor for profit?
For some individuals, the subjective valuation of pure money profit is not high on their value scale, hence I question the motivations of "capitalism". IMHO, capitalism is just free exchange to ease and individuals uneasiness.
Well, I see no reason not to use Karl Marx's original definition of capitalism, which was private ownership of the means of production (capital). Of course private ownership means all non-criminal exchanges are freely and voluntarily entered into by all parties involved.
All profit is psychic profit, the psyche being both the body and the mind (Jung). People only act with the with the intent of gaining profit, so profit is necessarily the point of capitalism. Producers/suppliers seek to profit from sales to consumers and consumers seek to profit from purchases from producers. Producers and consumers are dynamically "exploiting" each other, each using the other as a means toward his or her own ends.
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There is no point or end game in capitalism. Think of profit as the air, water, and food for a business or corporation. It needs profit to survive. Assigning a monetary value to ones labor is what Marx considers capitalism. Therefore, capitalism exploits/assigns a value too labor.
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Something that makes some people more comfortable with profits is telling them that a firm's profits tends to go to zero as firm's compete for the production structure that best uses resources to their most valuable output as judged by consumers. You just have to constrast more mature markets to more recent ones (e.g. manufacturing vs IT). The profits and losses system is for the economy what a guide dog is for a blind man.
Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty
1) Profit is merely an excess of revenues over costs (that is, opportunity costs.)
2) It is inherent in human action. It only takes a pecuniary form when a medium of exchange comes into use.
3) Uncertainty means that what could be a profit could just as easily be a loss.
4) Returns on capital are not the same as profit. The latter is something an entrepreneur realizes by correctly anticipating future conditions in the market (that is, how they cope with uncertainty.)
-Jon
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Jon Irenicus: 2) It is inherent in human action. It only takes a pecuniary form when a medium of exchange comes into use.
I am having a little bit of difficulty understanding how profit (in any sense of the term) is inherent in human action. Digression?
Also, Assume barter exchange. There is no profit because the value (price) of exchange is determined at arbitrage. Does profit only occur with money as a form of exchange?
Jon Irenicus:4) Returns on capital are not the same as profit. The latter is something an entrepreneur realizes by correctly anticipating future conditions in the market (that is, how they cope with uncertainty.)
What's the former in relation to the entrepreneur?
It is really simple: man acts to substitute a less satisfactory for a more satisfactory state of being by acting. To the extent that he succeeds (that is, the action does indeed lead to greater satisfaction than alternative courses), he profits. To the extent that he fails, he suffers losses. So the incidence or not of money is utterly irrelevant. Profit exists in barter too, and in all action. It merely entails that the means accomplished the satisfaction of an end.
As for that, it's called interest returns. It's just conceptually distinct from profit, which is an entrepreneurial phenomenon. See this.
The main point of profit is to direct how the market works. For example, right now there is a lot of profit in the oil industry. All of these new profits allow the oil industries to drill less profitable wells, restore old oil refineries, and build new ones. That way, increased profit stimulates the oil industry to expand supply.
However, if people all of a sudden don't want oil, there will be virtually no profit in the oil industry, so entrepreneurs, stock holders, and employees will begin moving into other, more profitable industries (let's hypothetically say natural gas). That way, the supply of oil is reduced to an acceptable level and the supply of natural gas is increased to cope with new demand.
The profit motive and self interest is precisely what makes pure capitalism work and socialism, communism, syndicalism, fascism, and other leftist ideologies fail.
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My reason for asking about the role of profit is my continued debate with a Marxist. Marxism seems to be all about the exploitation of labor, but in essense doesn't labor exploit the capitalist? They bear no risk. Marxist comments below:
Since the main dynamic of this profit-driven economic system, capitalism, is the accumulation of capital to make more profit, how do capitalists make more profit you may ask? It is done through paying workers less much less than the wealth they create. So while capitalism may be portrayed as a system of "equal" and "free" exchange of commodities in the market, instead, inequality and exploitation are inherent to market based economic exchange.Simply put, humans need to eat, sleep, and (depending on the climate) need some form of fuel, clothing, and shelter. Although much of the commodities created under capitalism are not necessarily created to fulfill human needs. Instead, they are produced for a market. Not only are the majority forced to sell their labor on the market for the means (i.e., money) to purchase commodities, necessary or otherwise, available within the market, but also within the dynamic is the need for entrepreneurs/capitalists/rent seekers to make a profit through mass exploitation in order to accumulate more capital to continue this godawful economic relationship that benefits the few while immiserating the majority.
krazy kaju:The main point of profit is to direct how the market works. For example, right now there is a lot of profit in the oil industry. All of these new profits allow the oil industries to drill less profitable wells, restore old oil refineries, and build new ones. That way, increased profit stimulates the oil industry to expand supply.
Sure, the profits and losses system doesn't only direct firms (through e.g. returns to scale), but also entrepeuners into putting firms together in the first place. This isn't exactly on-topic, but I thought it might be of interest: a compilation of profits through industries.
ViennaSausage:how do capitalists make more profit you may ask? It is done through paying workers less much less than the wealth they create.
Of course. Whatever is produced must be split by the various parties that produced the damn thing. There is an awful lot of cooperation since that piece of steel is mined out of the earth, turned into a mp3 player, and taken to your hands. (at first, I was going to say "iPod" but then he is going to talk of the capitalists having all the power because the brand they created, so you need to be very careful how you word things to avoid useless, tangent discussions.)
Based on human nature, since everybody wants to maximize utility (ie. "get the best bargain"), how much everybody makes, tends to be based on supply and demand. If there's too many people wanting to drive the trucks to get those iPods to the consumers, and too few people that want to do the tiresome job of assemblying the things, and going through the training required to be able to perform the task, then truck drivers will earn less of the proceedings relatively to those manufacting them.
Entreupeuners isn't a very different category in this regard. You just have to look at a simple example such as an aspiring singer and an agent. If there are much less music agents than the amount of people that want to become famous singers, then agents will be able to negociate a bigger share of the revenues for themselves. On the other hand, if being a music agent is the next cool thing, then any wannabe singer could negociate great bargains for themselves.
ViennaSausage:So while capitalism may be portrayed as a system of "equal" and "free" exchange of commodities in the market, instead, inequality and exploitation are inherent to market based economic exchange.
See my signature. He is using two meanings for equality here. Just because a rock star and I both have the equal right to talk to a pretty girl in a bar, it doesn't mean that both of us have an equal chance of taking her home. People have different abilities, ambitions, and simply people like to do different things, so some will make more money than others. Unlike the girl example though, an economy isn't a zero-sum game: we don't take stuff from each other, we produce them. Just because I'm taking more money home, it doesn't mean you're taking less (actually, you probably don't want to talk of money in these terms, because you'll be forced to go through money supply, value of money, ...)
ViennaSausage:Simply put, humans need to eat, sleep, and (depending on the climate) need some form of fuel, clothing, and shelter. Although much of the commodities created under capitalism are not necessarily created to fulfill human needs. Instead, they are produced for a market.
I'm not sure how you can start to address something like this... I dislike this dichotomy of need and want as if you can objectively separate the two, but whatever, that would go into a discussion of its own. Since I don't know what he means by "under capitalism", and I wouldn't want to move into another discussion, I would just point out that what you advocate is a free market -- freedom of association and exchange. You'll probably want to introduce how money comes to be (because I suspect his view is very skewed) and how you don't support money by fiat.
Even though there is the risk you would be comparing the current system to a free market, I would be tempted to ask for an example of stuff "being produced for a market" and "not necessarily created to fulfill human needs". Unless, he is talking of subsidies, crop destruction and some of those government induced behaviors, and I don't think he is talking about these, I would love to know what he is thinking about there. (Maybe he is referring to stock trading, which would take you to explaining how savings is an important social service, so that resources may be invested rather than consumed, and people organize themselves into systems that promote the maximum realization of investing the resources society saves. Say how financial institutions may be colluding with government at presence, but that, at its most fundamental voluntary level, it is just a bigger, anonymous phenomena of what uncle Joe does when he asks for the family for money to open a wood shop.)
ViennaSausage:Not only are the majority forced to sell their labor on the market for the means (i.e., money) to purchase commodities, necessary or otherwise, available within the market, but also within the dynamic is the need for entrepreneurs/capitalists/rent seekers to make a profit through mass exploitation in order to accumulate more capital to continue this godawful economic relationship that benefits the few while immiserating the majority.
Again, I don't think he means fungible goods by commodities, and he completely lost me with the accumuluation of "more" capital as a goal... He needs to ditch those terms and just talk in folk language, because I think there is a lot of misunderstanding here, that simply boils down to semantics.
Anyways, in light of history, it's kinda of odd to talk of the free enterprise system as immiserating the majority, when history show us that yesterday and today, the planned systems do so much worse, it even hurts to do the comparison. That kinda of rethoric may have made some sense a couple of centuries ago -- interestingly enough though, Adam Smith and some other folks could have seen further without the benefit of all the events and revolutions we have gone through.
So while capitalism may be portrayed as a system of "equal" and "free" exchange of commodities in the market, instead, inequality and exploitation are inherent to market based economic exchange.
Except, the LTV is false. Boo hoo.
Instead, they are produced for a market.
...which is how goods fulfilling those "basic" needs are produced. Duh.
Not only are the majority forced to sell their labor on the market for the means (i.e., money) to purchase commodities, necessary or otherwise, available within the market, but also within the dynamic is the need for entrepreneurs/capitalists/rent seekers to make a profit through mass exploitation in order to accumulate more capital to continue this godawful economic relationship that benefits the few while immiserating the majority.
Nonsense. The only "dynamic" involved is that in order to induce another to produce a good and trade it, one must have something to offer in exchange. Yeah, the alternative is known as slavery, a bit like most Marxist systems in practice.
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