RE: What is profit? (was: Re: [ox-en] Re: "At Cost")
- From: "Paul Cockshott" <wpc dcs.gla.ac.uk>
- Date: Mon, 22 Sep 2008 23:05:42 +0100
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Paul Cockshott wrote:
Adam Smith showed that all prices can be decomposed into
wages + profit, since costs are either wages, or purchased non-labour
inputs, whose price will in turn ultimately decompose into wages + profits
I understand the claimed reasoning based on work being added at each
link in the chain of production, but the summation of all that work is
certainly not the only cost of production.
What about the real costs that are not wages?
What about pollution? Isn't that a cost?
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Paul:
It is an effect certainly, but is not a cost. If it was a cost, firms would pollute a lot less.
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What about depletion of finite resources such as petrol, natural gas
or coal? Isn't the loss of these a cost?
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Paul:
Again the history of capitalism shows that these do not count as costs,
firms are quite willing to deplete oil reserves etc since they only
count current costs.
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What about the exclusion caused when using finite resources of space,
time, mass and energy? What I mean here is: Even if a plant is
productive, it must occupy space (land) across time, and it might need
things such as water, sunlight, effort, etc. that will then not be
available for alternate production.
If you are producing widgetX, you cannot simultaneously use the same
space during the same time, nor can you use the exact same drops of
fuel or the exact same inputs. You can use the same *TYPES* of such
things, but there is rivalry/exclusivity that requires a kind of
scheduling and/or allocation of these resources that should also be
considered a cost.
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Paul:
Landowners can charge a rent, but they can only do so on infra
marginal land. The value added tends to be determined by labour
requirements on the marginal land. In the case of the oil industry
the King of Saud controls a lot of infra margina land, and can
charg a high rent for its oil since the labour required to extract
it is so much less than for example marginal fields in 2000ft of sea
water off the coast of Brazil.
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What about risk? I wonder if that is a cost.
What about security, storage, wear on machines? Are these costs?
Sincerely,
Patrick
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Paul:
wear and tare on machines is certainly a cost, and has to
be included as depreciation. It is analogous to using fuel
but it is used more slowly. But the costs of the machines
themselves will decompose into wages + profit in the end.
Risk, in the sense of risk of fire or flood are again
costs, but they are stochastic ones, representing an occasional
acceleration of depreciation. Insurance costs ultimately
resolve themselves into the expenditure on replacement
plant and equipment following accidental damage.
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_________________________________
Web-Site: http://www.oekonux.org/
Organization: http://www.oekonux.de/projekt/
Contact: projekt oekonux.de