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RE: What is profit? (was: Re: [ox-en] Re: "At Cost")



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Stefan Meretz:


When competition is "perfect" then commodities are sold at their value. 
The commodity value is the amount of necessary work to produce the 
commodity at given level of societal productivity.


Paul Cockshott:

You have to take into account that markets are noisy systems, prices are
always random variables dispersed around values.


Paul Cockshott
Dept of Computing Science
University of Glasgow
[PHONE NUMBER REMOVED]
www.dcs.gla.ac.uk/~wpc/reports/



-----Original Message-----
From: owner-list-en oekonux.org on behalf of Stefan Meretz
Sent: Sat 9/13/2008 11:54 AM
To: list-en oekonux.org
Subject: What is profit? (was: Re: [ox-en] Re: "At Cost")
 
On 2008-09-11 02:47, Patrick Anderson wrote:
Profit disappears when Competition is Perfect, but Competition is
usually not Perfect, so Profit is usually not Zero.

Profit and Competition are inversely related, while Profit and
Monopoly are directly related.  A Perfect Monopoly would enjoy
Infinite Profit, right?

OMG, Patrick, this is simply wrong! What are saying here?

This is wrong?  In what way?

Profit is surplus value related to the invested capital. Although it 
seems that the capital is the source of the surplus value, it is not 
the case -- it is the labour power. The labour power has to be paid. 
This payment in the societal average determines the value of the labour 
power. The amount of value the labour power produces above its own cost 
is the surplus value.

When competition is "perfect" then commodities are sold at their value. 
The commodity value is the amount of necessary work to produce the 
commodity at given level of societal productivity.

The commodity value at which the commodity is sold includes the paid 
labour power and the surplus value. If you include the fixed capital 
(machines, material etc.) to be invested in advance, then you get the 
profit.

Then there are some cases for extra profit. Extra profit is a profit 
above a situation of "perfect competition". Two examples.

First: Due to technical advances one company is able to reduce the 
amount of time to produce a commodity below the societal average. Now 
the surplus value increases, because the amount of products, which are 
necessary to pay the labour power, decrease. Given fixed costs remain 
constant (which is not the case, if a new technology is introduced), 
then the profit increases. However, all competitors are coerced to 
follow this this technology step, so that they can produce at the same 
productivity rate. Consequence: A new societal level of productivity 
establishes soon, and the extra profit of the advanced company 
vanishes.

Second: A company is the monopoly company in some market. Now they can 
dictate prices. They can not only realize the costs of the labour power 
used, not only realize the surplus value a the given level of 
productivity, but they additionally can realize extra or monopoly 
profit due to the absense of competitors.

Conclusion: Profit is the result of perfect competition, but extra 
profit disappears under this situation. Extra profit and competition 
are inversely related. Under no circumstances infinite profit is 
possible due to finite amount of value/money to pay this profit.

This is very standard economics as far as I can tell.

Well, this does not mean that they are right.

If profit and competition are not inversely related, then what is
their relationship?

They are related in the sense, that competition is a general 
precondition of capitalism. Thus one can say, that profit is the result 
of perfect competition besides many other factors. But one can also 
say, that competition does only indirectly influences the profit 
height, because profit is generated in the sphere of production and not 
of circulation.

If profit and monopoly are not directly related, then what is their
relationship?

Profit is independent of monopoly.

If you owned the only well in the middle of a desert, wouldn't you be
able to charge me an infinitely high price?

This is a robinsonade I criticized some mails before. Economy is a 
societal phenomenon, thus isolated scenarios explain nothing.

If I had 50% ownership of that well, wouldn't I be able to drink "at
cost", without paying profit?  If not, then who would I pay the
profit to?

Profit is not explainable as a difference of prices -- see above.

Ciao,
Stefan

-- 
Start here: www.meretz.de
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